A new study from Zillow Home Loans has found that a monthly mortgage payment is actually less expensive than rent nationwide, as well as in 22 of the 50 largest U.S. metro areas.
According to Zillow’s data, the typical rent payment nationally is $2,063 a month. In comparison, the typical mortgage payment (assuming a 20% downpayment and before taxes and insurance) is $1,827, a difference of $236. The recent downward trend in mortgage rates — the 30-year fixed rate averaged 6.2% as of Sept. 12, lowest since February last year — has substantially slashed monthly mortgage payments, which have dropped by $100 since they hit their peak in May.
Rent growth, meanwhile, has relaxed from its pandemic-era zenith and returned closer to a historical baseline, but remains on the upswing. The typical rent, per Zillow’s figures, is 3.4% more expensive than one year ago and almost 34% more expensive than it was pre-COVID.
Among the nation’s largest cities, New Orleans offers the largest monthly savings for homeowners compared to renters. The typical mortgage payment in Louisiana’s largest city is $1,206, compared to a typical rent payment of $1,652, giving homeowners with mortgages a $446 savings over renters.
Next is Chicago, where, per Zillow, the typical monthly mortgage payment is $1,640 and the typical rent is $2,074 — a savings of $434. Pittsburgh has the third-largest monthly savings for buyers, with a typical monthly mortgage payment of $1,092 and a typical rent payment of $1,413, a difference of $321.
Other metros with populations over 1 million people where it is currently cheaper to buy than rent include Miami; Memphis; Cleveland; Detroit; Tampa; Oklahoma City; Houston; Birmingham, Alabama; Indianapolis; St. Louis; Louisville, Kentucky; Cincinnati; Orlando; New York; Hartford, Connecticut; San Antonio; Philadelphia; Virginia Beach, Virginia; and Buffalo.
“This analysis shows homeownership may be more within reach than most renters think,” said Orphe Divounguy, senior economist at Zillow Home Loans. “Coming up with the downpayment 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.”
