WASHINGTON (TND) — The dream of homeownership remains increasingly difficult for most Americans to achieve due to rising costs. Renting may be the best option for those looking for a house to call their own.
A new study from Bankrate found renting is 37% cheaper than buying a typical home in all 50 of the largest U.S. metropolitan areas. As of February 2024, the typical monthly mortgage payment was $2,703 while the average rent was $1,979.
We’ve seen home prices go up, mortgage rates go up, [and] inventory is low. So it’s a very competitive market that is pushing home prices up but renting isn’t necessarily affordable either. And so, Americans are having to sort of pick, the lesser two of the evils,” explained Alex Gailey, an analyst for Bankrate.
In Bankrate’s report, experts noted home rental rates surged in 2021 and 2022 after pent-up demand for housing increased with easing COVID-19 restrictions.
The price gap widens further in certain areas like the San Francisco Bay Area, where the typical monthly rent averages around $3,024 compared to the typical monthly mortgage payment of $8,486, a 180.7% difference.
“These are places that are very in demand. These markets are very competitive. There’s limited supply when it comes to homes and there are a lot more people who want to live in these areas renters and would-be homeowners or homeowners in general,” Gailey noted.
We also see these areas have higher cost of living it costs more to buy groceries, it costs more to pay for gas it costs more for everyday living expenses. So, that’s really driving why we are seeing those bigger cost differences between owning a home and renting.
However, places like Detroit only have a 2% difference between renting and owning.
In 21 U.S. metropolitan areas, the monthly cost of owning is at least 50% more expensive than renting.
However, for those who can afford to buy a home, experts say to buy.
Don’t worry about trying to time the housing market time in the housing market is more important because this is a long-term investment,” Gailey said. “With a fixed-rate mortgage, then your principle will stay the same over time, and so that monthly mortgage payment will stay very, relatively stable, which allows a level of financial stability with owning compared to rents increasing over time.
A huge majority of Americans, 78%, say owning a home is part of the American Dream, according to Bankrate’s Home Affordability Report. The roadblocks to achieving that dream are lack of income, home prices, and not being able to afford a down payment and closing costs. There are also the added costs of upkeep and maintenance.
Mortgage rates hover over 7% and the median home sale price is around $393,000.
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