Key takeaways
On average, purchasing a home now costs $1,091 more per month than renting the same property. Although this gap has narrowed from the $1,349 peak in October 2023, it remains significantly higher than the historical national average of $233.
Across the top 20 single-family rental (SFR) markets, the spread between purchasing and renting a starter home ranges from $4 in Cincinnati to $1,900 in Austin.
Rising unaffordability has made it harder for people to buy homes, leading to more demand for SFR homes. This means tenants are staying longer, and landlords are seeing steady rent growth with renewals.
Keep an eye on the rising housing supply in the market, as this may cause new lease rent growth to rise more slowly, especially in Sunbelt markets.
The question of how rents can be down quite a bit in the sunbelt states despite this data is that we often see major dislocations in financial markets these days. Similar to meme stocks, the boom and bust in lumber prices and other hard to pin down issues rentals are seeing a perfect storm of bad factors.
We believe that will end this winter and for the sunbelt February will be the long-term bottom in rental rates, especially for single-family homes. Right now though there’s no question that the rental market is extremely soft. This data implies that rents need to rise unless interest rates come down. There isn’t a ton of room for that, especially with starter level rentals, but that will clash with a lack of supply before long. It’s difficult to see where this will end except probably with a large amount of stripped-down housing inventory and unhappy renters. That means quality homes will continue to outperform dramatically.
