Surprising New Report Shows It’s Now More Economical To Rent Than Buy in Most Major Cities

The housing market has been quite difficult for many Americans lately. But surprising new data shows that the balance continues to tip in favor of renters, as it’s more economical to rent than buy in major cities.

See: The State of Renting vs. Buying a Home in 2023 — What’s the Best Option for Your Budget?
Find: The Average American Spends This Much on Rent — See How You Stack Up

The new Realtor.com’s September Rental Report, released Oct. 23, showed that an uptick in construction rates of multi-family homes helped push down rents for 0-2 bedroom properties for the fifth consecutive month.

Danielle Hale, Realtor.com chief economist, explained that record-high construction of multi-family homes, which are overwhelmingly built for rent, has contributed to softer rent growth. “At the same time, rental demand has been high as high mortgage rates and home prices shut some households out of the purchase market,” she said.

Hale added that absorption — or the number of newly built homes that are lived-in within three months — is up compared to pre-pandemic norms in all four regions, and it remains highest for the lowest-rent categories.

“Steady demand has prevented rents from falling too much. They’re down only $29 or less than 2% (1.6%) from their 2022 peak,” Hale added. Yet, it’s important to note that overall, rents are still $338 higher — a whopping 24% increase — than they were at the same time in 2019.

Where Are Rents Cheaper?

The report found that the South is home to the top three metros with the most significant year-over-year rent declines. The cities include Austin, Texas, which saw a 7.3% decrease in prices; Dallas, Texas, with a 6.2% decrease; and Orlando, Fla., with a 5.4% decrease.

“Rents tend to be lowest in the South and Midwest. Cities like Oklahoma City, Louisville and Columbus each see typical 0-2 bedroom rents of around $1,200 or less,” said Hale. “In large part because these areas are affordable, they’re attracting a lot of interest from renters, and we’re seeing rents grow fastest in many of these lowest-price areas.”

On the other hand, among the top 10 metros experiencing the fastest year-over-year rent growth, four are in the Midwest. These include Milwaukee, Wis., with a 3.9% increase in price, Cincinnati, Ohio, with a 3.6% increase; Cleveland, Ohio, with a 3.2% increase;  and Indianapolis, Ind., with a 3% increase.

Will Rent Prices Continue To Decrease?

Hale said that Realtor.com’s expectation is that rents will continue to decline modestly nationwide, but this won’t necessarily be true in every single market.

Already, September data showed that two types of markets saw rents grow fastest, said Hale. “The first group is affordable markets and includes areas like Louisville, Richmond, and Birmingham, where rents grew by more than 4% over the prior year,” she said. “The second group of markets that saw fast rental growth are major East Coast cities. In areas like New York, Washington, DC and Boston, rents were up 4% or more compared to the prior year.”

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