Renters Gain Significant Financial Advantage Over Homeowners Nationwide
The cost gap between renting and buying has widened considerably across the U.S., with renters saving thousands annually, according to a new Zillow analysis.
Renting a home in the U.S. was, on average, $1,066 per month cheaper than buying one in August, a difference that has expanded as homeownership costs escalate faster than rental prices. The typical monthly asking rent across the nation stood at $1,948, while a new homeowner's mortgage payment, taxes, and insurance averaged $3,014, resulting in an annual savings of $12,792 for renters.
Over the past six months, the cost for new homeowners has increased by $140 monthly, compared to a mere $32 increase for renters, indicating ownership costs are rising more than four times as fast. Zillow's analysis shows that renting is now more affordable than buying in all 50 of the largest U.S. metropolitan areas.
The financial disparity is particularly pronounced in expensive coastal cities. In San Jose, California, the typical rent was $3,815 in August, while new buyers faced an estimated monthly cost of $11,698, a difference of $7,883 per month, or $94,596 annually. San Francisco renters paid $3,409 monthly compared to $8,822 for buyers, a monthly advantage of $5,413. Los Angeles saw a gap of $4,441 per month, with renters paying $2,941 versus $7,382 for buyers. San Diego renters spent $2,994 monthly, while buyers' estimated costs were $7,229, a difference of $4,235. Seattle also reported a substantial $3,511 monthly gap.
New York City renters saved an estimated $31,548 annually, with typical rents at $3,615 and new homeowner costs at $6,244 per month. New York also emerged as the least affordable major rental market relative to local incomes, with a median-income household needing to allocate 40.6% of its income to rent.
Other major cities also showed significant savings for renters. Boston renters saved approximately $2,829 per month, Salt Lake City $2,640, Portland, Oregon $2,540, and Denver $2,504. This renter advantage extends beyond expensive coastal areas; in Austin, the $1,622 typical rent was $2,054 less than the estimated $3,676 buying cost. Phoenix renters saved $1,634 monthly, Dallas $1,522, and Philadelphia $1,420.
Even in Pittsburgh, which exhibited the smallest gap among the analyzed metros, renting remained $536 per month, or $6,432 annually, cheaper than buying.
Zillow's calculations are based on a 10% down payment, a 30-year fixed-rate mortgage at 6.67%, and include estimated property taxes and homeowners insurance, though they do not account for closing costs or maintenance.
The income required to afford these housing options also highlights the divide. A household needs an estimated annual income of $77,919 for the typical U.S. rental, compared to over $120,500 for the typical mortgage payment with a 10% down payment—a difference exceeding $42,000.
Despite the growing affordability gap favoring renters, rental prices themselves remain high. The typical asking rent has increased 2.5% year-over-year and is 38.5% higher than before the pandemic. Single-family rents have seen an even steeper climb, up 47% since the pandemic began to $2,289 per month in August, while multifamily rents rose 30.2% to $1,774.
However, there are signs of relief for some renters. In August, 39.2% of rental listings on Zillow offered concessions like free rent, an increase from the previous year. Rents decreased month-over-month in eight of the 50 largest metros, notably in Boston, which saw a 0.7% drop. Conversely, rent growth remains strong in parts of California, with San Francisco experiencing a 10.8% surge year-over-year, the highest among the top 50 metros.
Zillow's analysis also explored the potential financial benefit of investing the money saved by renting. Based on the national monthly difference and the 4.68% yield on the 10-year Treasury, a renter could earn an additional $322 in the first year. Assuming stable costs, accumulated savings and investment returns could reach approximately $72,000 after five years. In San Jose, investing the monthly savings could yield an additional $2,381 in returns in the first year alone.
This widening gap underscores how current elevated home prices and borrowing costs have shifted the traditional financial calculation between renting and owning, even as renters continue to face housing costs significantly above pre-pandemic levels.