Renting is Cheaper than Buying, Even Among Rising Rent Prices

by | Mar 15, 2023 | Financial Featured

During the pandemic housing prices increased dramatically across the country. This was perhaps the result of record low interest rates and a limited housing inventory, as many housing projects were put on hold during uncertain times.

Understanding the Pandemic’s Impact on the Housing Market 

As the risks from the pandemic decreased, housing prices continued to rise as the cost of goods and services increased. In an effort to counteract this increase, the Fed raised interest rates. These raised interest rates had the intention of slowing the increase in the cost of homes, as borrowing money became more expensive.

This increase in rates helped to stymie runaway housing costs, as housing prices plateaued by December of 2022 after 11 continuous months of a slight decline.

In 2019, the median price of a home throughout the United States was $280k. In the following 3.5 years, that number has increased to almost $400k.

Increase in Rent

While housing costs continued to climb, rents also increased. In 2019, the average cost of a rental in the United States was just under $1500. Now, the average price that a tenant is expected to pay is $1900.

As individuals try to determine whether it is better to rent or purchase, they assess whether or not their monthly mortgage payment would be more or less than their monthly rent. Another aspect that helps potential home buyers, beyond comparing their monthly payment, is the size and quality of the home they are able to rent or purchase.

One year ago, renting was more expensive than purchasing your own home in 60% of locations. Since that time, buying a home has become more expensive than renting in 95% of cases.

Although rents increased significantly faster than home prices during the pandemic, we now find ourselves in a market where it is cheaper to rent a home than to purchase one. This fact does not bode well for sellers, which may act in driving down home prices further.

If you were an individual who was able to maximize on the low interest rates of 2020 and 2021, or you were able to invest in real estate before the housing boom, you are at a significant advantage. If you would like to maximize on your home investments, consider working with a reputable company to rent your properties.

Due to rentals being less expensive than purchasing, it is logical to assume that landlords will increase their rental prices in the coming year to become more comparable to purchasing a home.

Real Estate Market Going Forward

Moving forward, the real estate market is in a sensitive state. While many experts expect the market to cool, they are hopeful that there will not be a housing crash.

The last time there was a housing crash was in 2008, when home prices dropped 9.5%. Foreclosures increased by 81%, and the housing market crash led to a recession across the country.

Experts believe that the housing market will slowly level out, and that the corrections that have been made by the Fed will act as a balancing agent so that a potential crash can be avoided.

This expectation is most likely to occur in markets that were not as impacted during the pandemic. There are certain markets that will be more impacted than others; these markets had a larger influx of individuals during the pandemic, but a shortage of homes available. These cities include San Jose, San Diego, Austin, and Phoenix.


As the housing market cools off, potential home buyers may want to hold off and observe the market. By continuing to rent, their monthly expenses will not increase, and they will be able to better determine the best time to move forward with purchasing a home.

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