Markets where it is cheaper to buy a house than to rent in 2022

Buy versus rent in 2022

Between soaring mortgage rates and the torrid pace of home price growth, homebuyer affordability has been hit hard in 2022. These conditions may push potential buyers away, with some even waiting until next year.

But buyers should keep in mind that renting isn’t always more affordable than buying. Although renting is still cheaper in some major metropolitan areas, there are many places where buying offers a better opportunity for those looking to buy a first home.

Of the 50 largest housing markets in the United States, the most affordable for first-time home buyers were scattered across the Midwest and South.

Where buying a house is cheaper than renting

Affordability can be a huge barrier to buying your first home. The surge in mortgage rates since the last two years of historic lows has amplified this problem.

However, it is still more affordable to buy your first home than to rent in some of the biggest markets in the country. The Midwest and Southern sprawls gave start-up homebuyers the biggest financial edge in June.

Housing markets where buying is cheaper than renting

subway station Difference between buying and renting (%) Difference between buying and renting per month ($)
Pittsburgh, Pennsylvania. -33.0% -$522
Birmingham, Alabama. -29.5% -$377
Saint Louis, Mo. -20.7% -$284
Cleveland, Ohio -13.8% -$198
Baltimore, Maryland -9.0% -$164
Louisville, Ky. -5.0% -$63
Virginia Beach, Virginia. -3.5% -$55
Indianapolis, Ind. -2.8% -$36
Cincinnati, Ohio -0.9% -$14
Kansas City, Mo. -0.9 -$12

For its report, collected data on the 50 largest housing markets in the United States. He compared the costs of renting and buying bachelor, one-bedroom and two-bedroom units, assuming a 7% down payment, a 30-year fixed mortgage rate of 5.52% (average of Freddie Mac for June), HOA fees, taxes and home insurance. .

What to do if your region is not on the list

If none of the cheaper real estate markets listed below are within your search radius, taking more time to save will help lower your monthly mortgage payments, according to Joel Berner, senior economic research analyst at . On top of that, he implores first-time home buyers to be patient.

“The national inventory of homes for sale is increasing, listing price growth is stabilizing and price reductions are increasing. The market is returning to equilibrium after the pandemic-induced demand shock that led to dramatic price increases and record inventories. With mortgage rates at their highest level since the 2008 financial crisis, having a large down payment will be essential,” Berner said.

Where it is cheaper to rent

Data from revealed that 38 of the 50 largest metropolitan areas in the United States had lower monthly rental costs than homeownership in June.

“If it weren’t for higher mortgage rates, the gap between rents and first-time buyers would have narrowed in the first half of this year as rents rose faster than starting home prices.”

-Danielle Hale, Chief Economist at

Nationally, the gap between home buying costs and rent widened in 2022. Overall, first-time home buyers paid an average of $561 more per month. months than the median renter ($2,437 vs. $1,876) in June. This monthly deviation from $171 ($1,815 vs. $1,644, respectively) in 2021.

Housing markets where renting is cheaper than buying

subway station Difference between buying and renting (%) Difference between buying and renting per month ($)
Austin, TX 97.8% $1,822
San Francisco, California. 79.9% $2,535
Seattle, Washington. 78.3% $1,801
New York, NY 70.0% $2,092
San Jose, California. 65.4% $2,175
Portland, Oregon. 61.6% $1,128
Los Angeles, California. 60.5% $1,846
Boston, Mass. 57.3% $1,698
Houston, TX 53.3% $773
Phoenix, Arizona. 52.2% $929

Home values ​​and rental prices have risen at breakneck speed over the past 18 months, but the added factor of rising interest rates has further weighed on affordability for potential buyers.

“Our analysis shows that without higher mortgage rates, the gap between rent and first purchase would have narrowed in the first half of this year, as rents have risen faster than starting home prices,” according to Danielle, Chief Economist of Vigorous.

“Many of the areas that have favored rentals are among the larger tech cities, where real estate tends to be at a premium. While more markets offered relative affordability to rentals in June than in January, rents continue to increase across the country,” she added.

What are today’s mortgage rates?

This year, historically high inflation has pushed mortgage rates above 5%. Rates could continue their upward trend if the Federal Reserve takes aggressive action to offset inflation as expected.

Chances are you can get a lower mortgage rate if you do it as soon as possible.

If you’re ready to buy, talk to a local mortgage lender to verify your borrower’s eligibility, the best type of loan for you, and the latest interest rates you qualify for.

The information contained on The Mortgage Reports website is provided for informational purposes only and does not constitute advertising for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent company or affiliates.