(CNN Business) — Rents hit another record high in June, putting further pressure on renters. However, since the costs associated with buying a home have increased so much this year, renting is still a better option.
In June, the national median rent hit a new high of $1,876 a month, up 14% from a year ago, according to Realtor.com’s rental report. While June marked the 16th straight month of all-time highs, it is the fifth straight month of moderate growth, pulling back from a 17% year-over-year rent increase in January.
June’s median rent was $561 a month, or 30% less, than the typical monthly cost of a starter home, according to the report. The difference is considerably larger than the $78 a month less renters paid than buyers in January, when mortgage rates were lower.
But since then, median mortgage interest rates have risen more than two percentage points, from 3.22% in January to 5.51% last week.
Although home prices also hit multiple record highs in the first half of the year, Realtor.com’s analysis found that mortgage rate hikes were the biggest driver of the growing affordability gap between renting and first-time homeownership. time.
“Were it not for the rise in mortgage rates, the difference between rent and first purchase would have narrowed in the first half of this year, as rents grew faster than initial home prices,” said Danielle Hale, chief economist at Realtor.com.
Rising mortgage rates added about $416 a month to the typical costs of a starter home in June, compared with a year ago, the analysis found.
“As housing affordability continues to be a challenge for many Americans, it’s key to be aware of how higher costs affect your budget, whether you’re renting or buying for the first time,” Hale said.
buy vs. rent
Among America’s 50 largest cities, 38 were considered relatively affordable to rent compared to an initial home purchase, up from 24 in January.
In some cities, the difference between the monthly cost of buying a home and that of renting is considerable, strongly favoring one or the other.
The most rental-friendly markets are dominated by the country’s biggest tech hubs, while the first-time home buyers are concentrated in the Midwest and South.
Austin, Texas is the city that most favored renting over buying. The monthly cost of purchasing a first home was $1,822 more, or 98% more, than the median rental price in June. Other cities where renting was much more compelling than buying last month included San Francisco; Seattle, New York; San Jose, California; Portland, Ore.; Los Angeles, Boston, Houston and Phoenix.
The cities where buying a first-time home was more favorable than renting last month were Pittsburgh, Birmingham, Alabama, Saint Louis, Cleveland, Baltimore, Louisville, Kentucky; Virginia Beach, Virginia; Indianapolis, Cincinnati, and Kansas City, Missouri.
“Many of these metropolises are also attracting out-of-state homebuyers, which in turn is driving up the overall cost of living,” said Joel Berner, principal economic research analyst at Realtor.com. “For first-time buyers prioritizing lower home prices, you can still find options in these areas, but be sure to factor the higher costs of other expenses into your budget.”