According to a new analysis by Realtor.com, a listing platform, the monthly cost of buying a starter home was more affordable than the monthly cost of renting a similar-sized unit in just over half of the 50 largest U.S. metro regions in January, according to the survey.
Some of the most favorable markets for first-time homebuyers include Birmingham, Alabama ($533 a month less than renting), Cleveland ($516 less than renting), and Pittsburgh ($585 less than renting).
As defined in the report, a starter home was defined as one with no more than two bedrooms, and monthly costs included the mortgage payment as well as taxes, insurance, and homeowners association fees. The methodology assumed that the down payment was 7 percent and that the mortgage rate was 3.45 percent.
According to the survey, this trend is being driven by soaring rental prices across the country. The median rental price in the United States increased by 19.8 percent year on year in January.
This is the sixth consecutive month in which rental prices have increased by double digits or more. According to Realtor.com, rentals are expected to continue to outpace listing prices in 2022.
Which would you prefer: paying rent to a landlord or accumulating equity in your own home?
In spite of this, housing prices have been steadily rising as well. The monthly cost of purchasing a property with up to two bedrooms jumped by 11 percent in January compared to the same month the previous year.
Realtor.com according to a press release from Danielle Hale, Chief Economist, those looking to purchase a home will discover lower expenses now than later in the year as mortgage rates continue to rise. (See Money’s top selections for the best mortgage lenders for more information.)
In key technology hubs, housing prices continue to surpass rental costs.
In some parts of the country, rent prices continue to be cheaper than the cost of a first house, bucking the national trend.
According to the Realtor.com analysis, eight of the top ten metro areas that favored renting were located in major technology hubs such as Austin, Texas, and San Francisco. The monthly expenditures of first-time homeownership in these ten metro regions were 41.6 percent ($978) higher than the monthly costs of renting.
It was found that the average monthly cost of owning was 24.8 percent ($536) more expensive than the average monthly cost of renting in 24 of the 50 major metro areas in January.
In major tech centers, the present housing market is characterized by a lack of available inventory and high asking prices.
Furthermore, according to Realtor.com, inventory in major tech centers is typically comprised of a large proportion of condominiums, which are frequently subject to expensive homeowners association fees, which can dramatically increase monthly housing expenses.
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