Renting is often seen as more affordable than buying a home, but this is not always true.
In 2023, there are five major cities where buying may be more affordable than renting. To understand why, let’s take a look at some recent housing market trends:
Though home prices are still high nationwide, they’ve started to fall from their recent peak in many cities. In fact, the median price of U.S. homes was lower in February than a year ago, ending a decade-long streak of year-over-year price increases. In contrast, rental rates tend to be more sticky than home values (i.e., slower to adjust to new market conditions) and have been slower to come down as a result.
This means that despite higher home prices and mortgage rates, there are still some U.S. cities where buying a home is the more affordable option—partly due to rents remaining stubbornly high. In 2023, those cities are:
|City||Median Monthly Rent||Median Monthly Housing Cost for Buyers|
|St. Louis, MO||$1,211||$1,128|
1. Memphis, Tennessee
- Median monthly rent: $1,258
- Median monthly housing cost for buyers: $847
You can save the most by buying instead of renting in Memphis, Tennessee. Here, the monthly housing cost for buyers is only $847, or just 20% of the average monthly wage of $4,110.
Note: The federal government defines affordable housing as spending no more than 30% of your gross income on housing costs. So the average homebuyer in Memphis falls well within that benchmark.
In contrast, the median monthly rent in Memphis is $1,258, which accounts for 30% of the average monthly wage, putting renters on the edge of what is considered affordable.
On average, Memphis homebuyers save about $400 monthly on housing costs compared to renters.
2. Pittsburgh, Pennsylvania
- Median monthly rent: $1,445
- Median monthly housing cost for buyers: $1,097
In Pittsburgh, Pennsylvania, the average homebuyer saves about $350 on housing costs compared to renters. Here, buyers spend a median of $1,097 on monthly housing costs, which comprise about 23% of the average monthly wage of $4,672.
By contrast, Pittsburgh renters spend a median of $1,445 on rent each month, which accounts for 31% of the average monthly wage, putting their housing costs slightly above what’s considered affordable.
3. Birmingham, Alabama
- Median monthly rent: $1,149
- Median monthly housing cost for buyers: $879
Birmingham, Alabama, residents make a median monthly wage of $4,310, which goes pretty far in a state that ranks fourth for the lowest cost of living. But again, homebuyers save on housing costs the most.
Birmingham homebuyers spend a median of just $879 on monthly housing costs, whereas renters spend a median of $1,149 on monthly rent. That’s a difference of $270.
Still, homebuyers and renters in Birmingham can access affordable housing. The average homebuyer spends just 20% of their gross income on housing, and the average renter spends 27% of their gross income on housing.
4. St. Louis, Missouri
- Median monthly rent: $1,211
- Median monthly housing cost for buyers: $1,128
In St. Louis, Missouri, housing costs are slightly lower for homebuyers than renters. Here, homebuyers spend a median of $1,128 per month on housing costs or 24% of the average gross monthly income ($4,639), while renters spend $1,211 monthly on housing costs or 26% of the average gross monthly income.
That’s a difference of only $83 per month, but it’s a vote in favor of buying nonetheless.
5. Baltimore, Maryland
- Median monthly rent: $1,749
- Median monthly housing cost for buyers: $1,684
Baltimore, Maryland, is the most expensive city on our list regarding housing costs. But again, it’s slightly more affordable for homebuyers than for renters.
Homebuyers spend a median of $1,684 on monthly housing costs, which accounts for 31% of the average gross monthly wage ($5,375). Renters spend a median of $1,749 on monthly rent, which makes up 33% of the average gross monthly wage.
Thus, on average, housing costs are slightly above what is considered affordable for homebuyers and renters. However, residents are still better off buying than renting.
Targeting Cities With the Highest Potential for ROI
Ultimately, most people decide whether to buy or rent based on their personal circumstances. For example, someone starting a family who wants to put down roots may be more inclined to buy a home, while a single college student who plans to graduate and move away in a few years may be more likely to rent.
That said, in the five cities listed above, the higher affordability of buying over renting may motivate more residents to buy. For real estate agents and investors, this is valuable information. Why? Because it can provide a hint as to where you should or shouldn’t focus your business efforts.
For example, agents looking for more opportunities to close deals may want to target cities where residents are more motivated to buy. In contrast, rental landlords may focus on cities where residents are more incentivized to rent. Knowing which cities are more affordable to buyers vs. renters can help shape your business strategy.
Keep in mind that cities with bigger populations tend to be less affordable to homebuyers due to housing demand often outpacing supply. Hence, the five cities listed above aren’t the rule but exceptions to the rule. Most other metropolitan areas tend to favor renters.
One way for real estate professionals to identify profitable cities is to use PropStream. Our data platform can provide comprehensive data on property prices and expected rental income so that you can identify cities with the highest potential for ROI, help you quickly find seller leads and generate lead lists, identify motivated sellers, and much more. Give it a try with our 7-day free trial and get 50 leads on us!
Note on sources:
- Data on median monthly rent and median monthly housing cost for buyers taken from Realtor.com
- Data on average monthly wages taken from the U.S. Bureau of Labor Statistics (BLS)