It is still more affordable renting a starter home than to purchase one.
Owning a home is often considered the American Dream, but a new report shows that renting may actually be more affordable than buying in December of this year. According to the report, despite rent growth, renting a starter home is more affordable than buying in a majority of U.S. cities. With a combination of a strong job market and a decrease in home prices, the study found that renting has become the more affordable choice in many areas. This is great news for those looking to move but not quite ready to take the plunge into homeownership. With more options available, renters can find a more suitable home for their budget and lifestyle needs.
Overview of December rental report
The rent increase rate witnessed a drastic dip to 3.4% in December 2022, which is one-fifth of what it was in the same period of the previous year. Simultaneously, the 30-year fixed mortgage rate surged to 6.36%, making renting a more cost-efficient option than buying. The yearly cost of a starter home in December 2022 was 38.1% higher than a year before, amounting to $2,657. This is more than 10 times the rent increase rate observed during the same time frame. In December 2021, when the mortgage rate was half of what it became in the later year, the cost to purchase a home in rent-favoring markets increased at roughly half the rate of rent.
Benefits of renting over buying
One of the main reasons that renting is more affordable than buying is because of the benefits that come with being a renter. Most homeowners will have more costs than renters. Aside from the initial down payment, homeowners need a mortgage and insurance policies. These costs will differ depending on the home and where it is located. Other additional costs that homeowners face include property taxes, repairs, maintenance, and insurance. While homeowners need to make these additional expenses routine, renters do not incur any of these extra costs. Renter’s insurance policies cover them against damage and theft, so they do not need to pay extra for home insurance. Property taxes are included in rent and are not an extra cost. Home maintenance, repairs, and maintenance are also not an issue for renters.
Analysis of job market and home prices 
The report also looked at the job market in December to see how it affects home prices. When the job market is strong, it results in more demand for homes. This increased demand can drive up home prices. If the job market is weak, fewer people are looking for work, which means fewer people are looking to buy homes and home prices stay reasonable. The report found that the job market was very strong in December.
Advantages of renting a starter home
Renting a starter home can be an great alternative to buying a more expensive home. With a large deposit and mortgage, renters may be able to afford a home with a smaller deposit and rate. Renting a starter home can also be beneficial for those who do not have the money to put down on a home. Leasing a starter home may allow renters to see if they like the lifestyle or location before they make the larger investment in a home.
Cities where renting is more affordable
Another reason that renting is more affordable than buying is because it is more cost effective in many cities. The report found that renting is cheaper in 98 of the 100 largest cities in the U.S.. A recent Realtor.com study found that out of the 50 largest cities in the United States, there are five where it is more beneficial financially to purchase a home than to rent.
- Memphis, Tennessee: -$411
- Pittsburgh, Pennsylvania: -$348
- Birmingham, Alabama: -$270
- St. Louis, Missouri: -$83
- Baltimore, Maryland: -65
During December 2022, a tenant from the top 50 cities would have to pay an average of $792 less each month than a homeowner of a starter home. Furthermore, 45 out of the 50 largest metropolitan areas show that renting is the more cost-effective option when compared to the purchase of a starter home. This is an impressive increase when compared to the same period a year ago, when renting was the more economical decision in 30 cities.
Benefits of having more rental options
Owning a home is an expensive decision. College students, military personnel, and those who are saving for a larger down payment will find that renting provides them with more flexibility. Rental options allow renters to find the right home for their needs. With more options, renters can choose from a variety of neighborhoods and types of homes. Some renters prefer to live in close proximity to parks, shops, restaurants, and other amenities. Even those who prefer to stay close to home can benefit from a variety of rental options.
Considerations when searching for a rental
Before renters can find the right home for their needs, they need to decide what they are looking for in a rental. The report found that the most important factor that renters consider when searching for a rental is location. A second factor that renters look at is the price of a home. Someone who is renting a one-bedroom apartment in a city where rent is affordable may look at a home with a two-bedroom price and decide that they are not ready for a bigger place.
Tips for finding the right rental
Before renters can start looking at rentals, they must decide where to start. The report found that renters in most cities will find a rental through online listings. The best way to find rental listings through online sites is to search by neighborhood, city, or neighborhood/suburb. This will help renters find homes in the same area, but it also allows them to search for homes that are outside the neighborhood. When renters are ready to start looking for rentals, they should build a list of potential places to look. This will help them keep up with their search, prevent missing a rental listing, and stay organized. Renters can also create a rental wish list to stay on track with their wants and needs.
Summary of the December rental report
Overall, renting in December was more affordable than buying in general. In the U.S. Renter’s insurance was the most expensive expense that homeowners face each year, while maintenance and repairs are the most expensive part of owning a home. Having more options allows renters to find the right home for their needs. Renters should remember that location is the most important factor that renters consider when searching for a rental, and they should build a wish list of homes that meet their needs and wants.
