Record-high house prices, near-record mortgage rates and record-low inventory have made it challenging for many people, especially first-time homebuyers, to buy a home. The upside? Now is a great time to rent.
A recent Bankrate study found that renting is now cheaper than buying in all major U.S. cities. As of February, the typical monthly mortgage payment for a median-priced home ($412,778, per Redfin) was $2,703, while the typical rent was $1,979. That’s a difference of nearly $725 monthly, or more than $8,600 yearly. For some people, that extra $8,600 can go a long way when stashed in an emergency fund.
In some metro areas, such as Detroit, Pittsburgh and Philadelphia, the gap between renting and buying is smaller, with a buy-to-rent ratio of only 2%. In other metro areas, like San Francisco, San Jose and Seattle, the gap is sizable, with the buy-to-rent ratio as high as 180.7%.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Top five metros with the biggest gap between renting and buying
| Metro | Monthly Rent | Monthly Mortage Payment | Buy-to-Rent Ratio |
| 1. San Francisco-Oakland-Berkeley, CA | $3,024 | $8,486 | 180.7% |
| 2. San Jose-Sunnyvale, Santa Clara, CA | $3,255 | $8,539 | 162.3% |
| 3. Seattle-Tacoma-Bellevue, WA | $2,191 | $4,930 | 125% |
| 4. Salt Lake City, UT | $1,673 | $3,161 | 89% |
| 5. Austin-Round Rock-Georgetown, TX | $1,753 | $3,269 | 86.5% |
Top five metros with the smallest gap between renting and buying
| Metro | Monthly Rent | Monthly Mortgage Payment | Buy-to-Rent Ratio |
| 1. Detroit-Warren-Dearborn, MI | $1,395 | $1,423 | 2% |
| 2. Pittsburgh, PA | $1,415 | $1,488 | 5.2% |
| 3. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD | $1,829 | $1,988 | 8.7% |
| 4. Cleveland-Elyria, OH | $1,377 | $1,537 | 11.6% |
| 5. Buffalo-Cheektowaga, NY | $1,295 | $1,556 | 20.2% |
Key insights from Bankrate's Rent vs. Buy study
- It’s cheaper to rent than to buy in all of the top 50 metros.
- In 21 U.S. metros, the monthly cost of owning is at least 50% more expensive than the monthly cost of renting.
- Nearly 4 in 5 Americans (78%) say owning a home is part of the American Dream.
- Nationwide, the typical home costs nearly 37% more to buy than to rent on a monthly basis.
- The national average interest rate for 30-year mortgages was 7.33% as of April 17, 2024.
Not sure if renting or buying is best for you? Consider these pros and cons.
Pros and cons of renting
Pros
- Lower upfront costs
- Landlord covers maintenance and repairs
- No property taxes or HOA fees
- Utilities may be included in the rent
- Rental insurance is cheaper than homeowners insurance
Cons
- Rent can increase over time
- Won’t build equity
- Rental market is competitive
- Rental lease may not be renewed
- No tax benefits
Pros and cons of buying
Pros
- Can build equity over time
- Helps boost credit
- Fixed monthly mortgage payments (with a fixed-rate mortgage)
- Tax incentives
- Remodel and renovate to your style
Cons
- Higher upfront costs
- Property value can fall
- Competitive housing market
- Maintenance costs
- Takes time to build equity
- Property taxes, homeowners insurance and possible HOA fees
- High mortgage rates
Check out our mortgage calculator below, in partnership with Bankrate, to compare rates.
Related Content
-
Confused by Annuities? Making Sense of the Different TypesMany investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
-
Talkin' 'Bout My Generational Wealth: Baby BoomersWith retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
