Every Major U.S. City Where It’s More Expensive to Rent Than Buy

It’s no secret that prime rates of interest and a low provide of properties on the market have pushed costs up, grounding the housing market to a close to halt. Conversely, the rental market has thawed significantly after scorching-hot lease rises in 2021 and 2022.

Take into account these knowledge factors. Based on the Nationwide Affiliation of Realtors, months of supply for existing homes sits at just 3.0, down from 4.6 firstly of the pandemic. The S&P CoreLogic Case-Shiller Residence Worth Indicies hit an all-time in December. And the typical 30-year mortgage rate of interest has been hovering round 7%.

Nevertheless, based on Zumper’s year-over-year data, lease progress has stalled. Two-bedroom lease progress has fallen to simply barely above 0%, and one-bedroom lease progress has turned unfavorable.

With the 2 markets diverging, this leaves potential consumers with a easy query: The place are mortgage funds cheaper than renting?

BiggerPockets crunched the information to supply the reply for cost-conscious dwellers. Utilizing Zillow’s metro space January knowledge for each residence costs and lease, we assumed a 7% rate of interest to calculate a month-to-month mortgage fee to match to lease within the 50 largest metro areas in the US.

However, the mortgage fee is essentially depending on the down fee. Based on the Nationwide Affiliation of Realtors, the typical down fee for first-time buyers is 6%, whereas it’s 17% for repeat consumers. This makes intuitive sense, as repeat consumers have possible constructed up fairness of their current properties, notably those that purchased within the decrease interest-rate surroundings.

The 2 maps present the place it’s dearer to purchase (blue dots) and dearer to lease (pink dots) for each first-time consumers and repeat consumers. The dimensions of the dot represents how way more costly it’s for the given state of affairs in that metro space.

Use these nearly as good indicators of what it takes to enter a market and the way straightforward it’s to money circulation once you’re there. Observe that in markets the place it’s cheaper to purchase than lease, you’re extra prone to money circulation.

Mapping the Markets

Observe By BiggerPockets: These are opinions written by the writer and don’t essentially symbolize the opinions of BiggerPockets.