Key Details:
- A new Zillow Home Loans analysis reveals mortgage payments have dropped below rent in 22 of the 50 largest U.S. metros, assuming a 20% down payment and before taxes and insurance.
- Between falling mortgage rates and the resulting drop in mortgage payments, combined with rising inventory and an increase in price cuts, housing markets across the U.S. are giving buyers more options and bargaining power, with a greater potential for savings.
Monthly mortgage payments are now lower than rent in 22 major U.S. metros, thanks to falling mortgage rates and slower growth in home prices.
That’s according to a new Zillow Home Loans analysis showing that homeownership is actually cheaper than renting nationwide. The typical mortgage payment is down to $1,827 a month, compared to the typical rent payment of $2,063—a savings of $236 a month for new homeowners.
The savings are even larger in the three metros with the biggest savings for homebuyers:
- New Orleans—where new homeowners can save nearly $450 a month
- Chicago—with a $434 savings for homeowners
- Pittsburgh—where the typical rent is $323 more than the typical mortgage payment
Aside from the cost savings, homes for sale also tend to be larger than rentals, to say nothing of the other advantages of homeownership.
Zillow’s cost calculations are based on home purchases with a 20% down payment and do not include taxes and insurance (or other costs associated with either buying or renting).
This analysis shows homeownership may be more within reach than most renters think. Coming up with the down payment is still a huge barrier, but for those who can make it work, homeownership may come with lower monthly costs and the ability to build long-term wealth in the form of home equity — something you lose out on as a renter. With mortgage rates dropping, it’s a great time to see how your affordability has changed and if it makes more sense to buy than rent.
22 U.S. metros where the typical mortgage payment is less than rent:
- New Orleans, LA (with a monthly savings of $446 for homeowners)
- Chicago, IL ($434)
- Pittsburgh, PA ($321)
- Miami, FL ($314)
- Memphis, TN ($290)
- Cleveland, OH ($265)
- Detroit, MI ($213)
- Tampa, FL ($191)
- Oklahoma City, OK ($188)
- Houston, TX ($182)
- Birmingham, AL ($153)
- Indianapolis, IN ($152)
- St. Louis, MO ($139)
- Louisville, KY ($89)
- Cincinnati, OH ($81)
- Orlando, FL ($81)
- New York, NY ($72)
- Hartford, CT ($70)
- San Antonio, TX ($66)
- Philadelphia, PA ($24)
- Virginia Beach, VA ($10)
- Buffalo, NY ($8)
Pros, Cons & Other Considerations
Beyond the monthly rent or mortgage payment, both renters and homeowners have additional costs to budget for:
Homeowners:
- Taxes
- Homeowner’s Insurance
- Utilities (generally more than renters)
- Ongoing home maintenance costs
Renters:
- Renters’ insurance
- Utilities
- Parking
- Pet fees (deposit and monthly fees)
Aside from those costs, both renters and homeowners need to understand the pros and cons of each before shopping for homes or signing their next lease agreement.
Generally speaking, for someone who could qualify for a mortgage and who plans to live in the same home or location for several years, buying a home makes more sense than renting.
A few reasons for that:
- Mortgage payments can decrease over time—Homeowners with private mortgage insurance eventually pay that off, and refinancing at a lower rate can also make the monthly mortgage more affordable. Rents typically increase with every lease renewal.
- Mortgage payments build a homeowner’s equity in their home—increasing their financial stake in it, while renters cannot build equity; their rent builds equity for the rental property owner.
While rent growth has returned to long-run norms after recovering from pandemic-era highs, prices are still rising. The typical rent today is up 3.4% year over year and nearly 34% higher than before the pandemic.
On the other hand, the for-sale market is giving buyers more opportunities to save on their home purchase, with more than one in four sellers cutting prices, thanks in part to rising inventory.
Active listings are up 22% year over year, giving buyers more options to choose from and more time to consider them. That increase in bargaining power is why this fall, specifically the first week in October (Sept 29–Oct 5) is the best time to buy a home this year.
