Mortgage rates have dropped to their lowest levels since 2023 in 22 of the 50 largest U.S. metros — even as rent prices continue to rise, according to a new analysis from Zillow released on Monday.
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Monthly mortgage payments are now cheaper than rent in 22 of the 50 largest U.S. metros — a shot of cold comfort for renters aiming to jump into the market this fall, according to an analysis from Zillow released Monday.
While mortgage rates have fallen to their lowest level since 2023, rent prices have inched upward, rising 3.4 percent annually and a whopping 34 percent since before the pandemic, according to Zillow’s analysis.
“This analysis shows homeownership may be more within reach than most renters think,” Zillow Home Loans Senior Economist Orphe Divounguy said in a statement Monday. “Coming up with the down payment is still a huge barrier, but for those who can make it work, homeownership may come with lower monthly costs and the ability to build long-term wealth in the form of home equity — something you lose out on as a renter.”
Among large U.S. metros, New Orleans, Chicago and Pittsburgh offer the greatest monthly savings for homeowners compared to renters, assuming a 20 percent down payment and a 6.5 percent interest rate. In New Orleans, the typical rent payment is $1,652, while the monthly mortgage payment is $1,206, resulting in $446 in savings. In Chicago, homeowners save around $434 per month, and in Pittsburgh they save $320.
In contrast, cities like Philadelphia, Virginia Beach, Virginia and Buffalo, New York offer the smallest savings for buyers over renters, with monthly differences of just $24, $10, and $8, respectively. Still, the national trend favors homeownership, with the typical rent payment sitting at $2,063, compared to a typical mortgage payment of $1,827.
When deciding between renting and buying, it’s essential to factor in additional costs, such as taxes, insurance and maintenance for homeowners, versus insurance, utilities and possible extras like pet rent or parking for renters. It’s also essential to factor in the length of stay.
Homeowners can see their mortgage payments decrease over time by paying off private mortgage insurance or refinancing at a lower rate, while rent prices can increase with each lease renewal. Moreover, mortgage payments help build equity in the home, growing homeowners’ financial stake as time goes on.
Zillow Home Loans has introduced a new tool, BuyAbility, which helps prospective buyers determine if their mortgage payment would be lower than their rent. The tool also estimates how much buyers can afford and their chances of getting pre-approved for a mortgage.