Make New York Post a Preferred Source For Americans dreaming of ditching their landlord and buying a home, the price of ownership is increasingly difficult to swallow.
Renting a typical home in the US was $1,066 a month cheaper than buying one in August — a gap that has widened as homeownership costs rise far faster than rents, according to a new Zillow analysis.
The typical US asking rent stood at $1,948 a month, compared with $3,014 for a new homeowner’s monthly mortgage payment, taxes and insurance.
That leaves renters with a whopping $12,792 annual advantage over buyers.
Over just the past six months, the typical monthly cost for a new buyer has jumped $140, while rent increased by just $32 — meaning ownership costs rose more than four times as much in dollar terms.
Renting is now cheaper than buying in every one of the 50 largest US metro areas, according to Zillow.
The difference is particularly eye-popping in pricey coastal cities.
In San Jose, Calif., the typical rent was $3,815 in August, while a new buyer faced an estimated monthly payment of $11,698 — an extraordinary $7,883-a-month difference, or $94,596 over a year.
San Francisco renters faced a $3,409 monthly bill compared with $8,822 for buyers, leaving them $5,413 ahead each month.
In Los Angeles, the gap was $4,441 a month — $2,941 to rent versus $7,382 to buy — while San Diego renters paid $2,994 compared with a $7,229 estimated monthly cost for buyers, a difference of $4,235.
Seattle also posted a sizable $3,511 monthly gap, with typical rents of $2,278 compared with $5,789 for a new homeowner.
New Yorkers, meanwhile, aren’t exactly getting a bargain by renting — but buying is considerably more expensive.
Typical New York metro rent hit $3,615 in August, up 4.2% from a year earlier. A new homeowner would face an estimated $6,244 monthly payment, leaving a $2,629 gap between renting and buying — equivalent to $31,548 a year.
New York was also the country’s least affordable major rental market relative to local incomes. Zillow estimates a median-income household would have to spend 40.6% of its income on a new rental, compared with 36.9% in Miami and 34% in Los Angeles.
Boston renters saved an estimated $2,829 a month compared with buyers, while the difference was $2,640 in Salt Lake City, $2,540 in Portland, Ore., and $2,504 in Denver.
The renter advantage stretched well beyond expensive coastal markets.
In Austin, the typical $1,622 rent was $2,054 below the estimated $3,676 cost of buying. Phoenix renters saved $1,634 a month, Dallas renters $1,522 and Philadelphia renters $1,420.
Even in Pittsburgh — which had the smallest gap among the metros included in Zillow’s analysis — renting was still $536 a month, or $6,432 a year, cheaper than buying.
Zillow’s calculation assumes a new buyer puts 10% down on a typical home and takes out a 30-year fixed-rate mortgage at 6.67%, with estimated property taxes and homeowners insurance included.
The analysis does not include some other costs associated with ownership, such as closing costs and maintenance.
The financial divide extends to the salaries Americans need to comfortably afford each option.
Zillow estimates a household needs an annual income of $77,919 to afford the typical US rental, compared with more than $120,500 to afford the typical mortgage payment with 10% down — a difference of more than $42,000.
The typical asking rent rose 2.5% from a year earlier and is now 38.5% higher than at the beginning of the pandemic.
Single-family rents have climbed even faster, soaring 47% since the pandemic began to $2,289 a month in August. Multifamily rents rose 30.2% over the same period to $1,774.
Nearly four in 10 — 39.2% — rental listings on Zillow offered a concession in August, such as free rent or another landlord incentive. That share was 2.5 percentage points higher than a year earlier.
And rents actually fell month over month in eight of the 50 largest metros, led by Boston, where they dropped 0.7%.
But rent growth remains particularly hot in parts of California.
San Francisco rents surged 10.8% from a year earlier, the largest increase among the 50 biggest metros, followed by San Jose at 7.6%, Virginia Beach at 6.6%, Milwaukee at 5% and Chicago at 4.9%.
Zillow also calculated what could happen if renters invested the money they saved instead of spending it.
A renter who invested the national $1,066 monthly difference at the 4.68% yield on the 10-year Treasury would earn an additional $322 during the first year, according to the analysis.
Assuming rents and buying costs remained unchanged, the accumulated savings and investment returns could total about $72,000 after five years.
In San Jose, where the rent-versus-buy divide is largest, Zillow estimates investing the difference could generate another $2,381 in returns in the first year alone.
The widening gap underscores just how much today’s combination of elevated home prices and borrowing costs has changed the traditional financial calculation between renting and owning — even as renters continue to grapple with housing costs that remain well above pre-pandemic levels.
