While home price values have been growing fast, rents are rising faster still, to the extent that buying a so-called starter home is more affordable than renting in over half of the U.S.’s largest metro areas.
That’s according to a report from realtor.com, which revealed that median rental costs jumped 19.8% in January compared to the year prior.
That’s faster than the cost of most starter homes, realtor.com said. In contrast, the monthly cost of buying a home with up to two bedrooms rose by just 11% from a year ago.Meanwhile, apartment costs for all unit sizes continue to increase: Studios are up 21% annually, and one-bedroom and two-bedroom units are both up by 19.2%.
In January, the monthly cost of buying a starter home was more affordable than renting a similar-sized apartment in 26 of the 50 largest metros realtor.com tracks.
“U.S. rental markets are more than making up for lost time, with January data showing national rents continued to surge by double digits over the last year and at a faster pace than for-sale home prices,” said Danielle Hale, realtor.com’s chief economist. “So much faster, in fact, that even as monthly starter home costs increased in many of the markets that favored buying, rents for a similar-sized unit were 20% higher.”
Rental and homebuying costs are both climbing. But several factors may tip affordability in favor of first-time buying, Hale said. Rents are forecasted to outpace listing price growth in 2022. Also, the majority of property owners recently surveyed say they plan to raise rental asking prices this year.
However, “the buy-versus-rent decision ultimately depends on personal circumstances like where you live, your financial situation, and how long you want to live in your next home,” Hale said. “As mortgage rates continue climbing, those looking to buy their first home in 2022 are more likely to find lower costs now than later in the year, but home selection is expected to improve as we move toward spring when many homeowners target listing their home for sale.”
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