Record-high home prices and mortgage rates that remain at a 20-year high have made homeownership out of reach for more first-time homebuyers, and if the answer to “buy versus rent” comes down to just the monthly costs, renting is unquestionably less expensive right now.
In the D.C. metro area, renting is $630 a month less expensive than buying compared to ownership costs, including mortgage payment and insurance. That is just the average.
“There are instances where these numbers can be considerably higher or lower. The cost difference between buying a town house in downtown D.C. and renting a two-bedroom on the outskirts of the city is probably going to be a lot more pronounced,” said Jacob Channel, senior economist at LendingTree.
The D.C. metro ranks 17th among metros for the cost-advantage of renting versus owning, ranking lower on the list than other metros, mainly because rent is also very high in the region. In San Jose, the cost difference between owning and renting is an average $1,341. It is $1,303 in San Francisco, and $1,289 cheaper to rent in New York City.
Renting is less expensive than owning in all 50 of the largest metros, according to LendingTree’s analysis.
For renters who aspire to own, more than 40% of the mortgages Fannie Mae purchased in the fourth quarter of 2023 were mortgages taken out by first-time buyers.
Ownership always has advantages over continuing to rent. Owning is a solid long term investment. There are tax benefits. Owners have more freedom to make changes and are not beholden to landlord rules.
There are also advantages if you choose to continue renting.
“I think sometimes we get a little bit too caught up in thinking of homeownership as this ultimate ideal,” Channel said. “There are benefits to renting outside of lower costs, namely freedom. If you want to leave, you don’t have to worry about selling it, so if you’re not planning to stay put very long, renting makes sense.”
Renters also have no maintenance expenses and have no concerns about coming up with a mortgage purchase down payment.
Those who choose to rent indefinitely are not only those who can’t afford to buy. The share of millionaire renters — households with at least one million dollars in investable assets — has tripled since 2020, according to a RentCafe report.
The homeownership rate in the U.S. has declined from 67.9% in 2020 to 65.7% in the fourth quarter of 2023. Homeownership peaked in 2004 at 69.2%.
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