It may be more affordable for renters to purchase a starter home rather than continue to rent, according to a new Realtor.com study.
In more than half of the largest U.S. metro areas, the monthly cost of purchasing a starter home was 20.6 percent lower than renting a similar-sized unit, according to the study.
Markets that favored buying included Birmingham, Ala., Pittsburg, and Cleveland.
In January, the median rental price reached 19.8 percent year over year. This beat monthly homeownership costs in most large markets, despite current buying conditions.
With the increase, the median rent in the 50 largest metros was at $1,789.
These findings come while the nation is grappling with rising mortgage rates and record-high median home prices.
According to Ivy Zelman, CEO of Zelman & Associates, buying a single-family home rather than renting an apartment has been more affordable for the last 13 years.
Zelman said when it comes to single-family rental properties, however, the cost equation can become more complicated but ultimately yields the same results.
She said Zelman & Associates performed a case study in September 2021 that found, on average, single-family built-for-rent communities were 12 percent more expensive than comparable single-family sales products.
Despite these findings, experts say that in big tech cities, renting remains a more affordable option.
In these cities, renting is making a comeback as first-time buyers continue to struggle with limited housing inventory and high home prices.
Rental prices are continuing to increase the most in the Sun Belt, including cities such as Miami, Tampa, Fla., San Diego, and Las Vegas.
In these areas, rent grew by more than 25 percent year over year.
While many hopeful first-time buyers in other markets have turned to rent in light of limited inventory and tough competition, experts still say buying is the best financial option for building wealth long-term.
Renting could be slightly more affordable in the current market, experts say, or a borrower may lack an adequate down payment amount or credit score, but overall buying is a better choice because homeowners can build equity in their home.
In January, the study showed that the median listing price for a starter home in the 50 largest metros was $295,360, and monthly costs were $1,867.
The costs were rising 11 percent year over year, while the rent costs are at 19.8 percent for the same period.
According to Realtor.com, all rental unit sizes had higher yearly gains in January. Studio apartments were up 21 percent, and one- and two-bedrooms were up 19.2 percent. Experts recommend interested first-time buyers contact an experienced mortgage lender to determine their local market outlook, and whether they are able to ditch renting to comfortably afford a starter home — and start building equity.