In a housing market that’s seen dramatic shifts over the past few years, one question continues to puzzle first-time buyers and young families alike: Is it better to rent or buy a single-family starter home?
According to a new report from Realtor.com, the answer—at least in many parts of the U.S.—may surprise you. It turns out that renting a starter home can be significantly cheaper than buying one, potentially saving you over $1,000 a month.
The Rising Cost of Homeownership
Buying a home has always been seen as a cornerstone of the American Dream, but that dream is becoming harder—and more expensive—to achieve.
A new analysis by John Burns Research & Consulting shows that in 2024, the average monthly cost of owning a starter single-family home is $1,111 higher than renting a similar property. To put that into perspective, the historical average difference is just $233, meaning this year’s market is creating one of the largest rent-versus-buy gaps in modern history.
The report defines a “starter home” as one priced at 80% or less of a metro area’s median sales price, making it the typical entry point for first-time buyers or young families looking to put down roots.
What’s Driving the Gap?
Several key factors are pushing ownership costs above the cost of renting:
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Soaring Mortgage Rates
Mortgage rates have climbed significantly, with the 30-year fixed rate sitting around 7% in early 2024. Higher rates mean higher monthly payments, which have priced many potential buyers out of the market. -
Record-High Home Prices
Even with fewer bidding wars than during the pandemic-era frenzy, home prices remain high due to limited supply. Inventory for starter homes is especially tight, driving prices up further. -
Limited New Construction
While some builders are working to meet demand, there aren’t enough new affordable homes hitting the market to bring prices back down to more manageable levels.
Where Renting Wins (Big)
In certain cities, the financial difference between renting and buying is especially dramatic.
For example:
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Austin, TX tops the list, where renting saves you a whopping $1,900/month compared to buying—a nearly 89% premium for ownership.
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In Seattle, WA, owning costs $1,653 more than renting.
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Denver, CO follows closely, where buying costs an additional $1,298/month.
Even traditionally affordable markets like Phoenix, AZ and Salt Lake City, UT show a significant rent-versus-buy gap.
What You Gain From Renting
Beyond the obvious monthly savings, renting offers additional financial flexibility—especially for those who may not plan to stay in one location long-term.
Other advantages include:
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Lower upfront costs (no down payment, closing costs, or property taxes)
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No responsibility for repairs or maintenance
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Flexibility to relocate for work or lifestyle changes
Renting might also offer lifestyle benefits, such as access to newer properties or better neighborhoods that might be otherwise unaffordable to buy in.
But What About Long-Term Wealth?
While renting may save you money today, it’s important to consider the long-term benefits of homeownership.
Homeowners build equity over time—something renters miss out on. According to the Aspen Institute, as of 2022:
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The median net worth of a homeowner was around $400,000
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The median net worth of a renter was only $10,400
This massive gap shows how homeownership continues to be one of the most reliable ways to build generational wealth in America.
Where the Gap Is Narrower
If you’re set on buying, some markets still offer relatively affordable paths to ownership. In cities like:
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Cincinnati, OH – Buying costs only $4/month more than renting
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Pittsburgh, PA, and St. Louis, MO – The gap is also much smaller compared to national averages
These regions may present better opportunities for budget-conscious buyers looking to break into the market.
Additionally, some homebuilders are offering mortgage rate buy-downs, helping reduce interest rates to around 4–5% to make owning more accessible.
So, Should You Rent or Buy?
There’s no one-size-fits-all answer, but here’s a quick framework to help guide your decision:
Renting Might Be Better If You:
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Plan to move within the next 3–5 years
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Want to save money on monthly expenses
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Don’t have the savings for a down payment
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Prefer flexibility and low commitment
Buying Might Be Better If You:
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Plan to stay in your home for 5+ years
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Are financially ready for a down payment and maintenance costs
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Want to build long-term equity and net worth
Final Thoughts
In today’s market, renting a starter home is often the more affordable short-term option—but that doesn’t mean homeownership is off the table forever. Use this time to strengthen your financial foundation, watch interest rates, and explore markets where the gap is smaller.
Whether you rent or buy, being informed is the best first step toward making a smart, confident decision for your future.
Source: Realtor.com – In These Cities, It’s Now Way Cheaper To Rent Than To Own a Single-Family Starter Home