Americans See Suburban Dream Homes Sliding out of Reach
Owning a beautiful home in the suburbs with white picket fences was once a cornerstone of the American dream; but in this economy, many U.S. residents are opting for renting such properties instead.
With the median list price of a typical U.S. home at $440,000 last month, according to Realtor.com data, and the national average 30-year fixed mortgage rate at 6.8 percent, many buyers have been pushed to the sidelines of the market, delaying any purchase to a later, better time.
Renting, on the other hand, is much more affordable. A recent study by Bankrate found that, nationally, an average mortgage payment costs 38 percent more per month compared to the average rent. Big cities like San Francisco; San Jose, California; and Seattle have the largest gaps between renting and buying affordability.
American suburban houses in Racine, Wisconsin, in 2014.
American suburban houses in Racine, Wisconsin, in 2014.
Getty Images
The market is taking notice of this significant shift in the U.S. housing market, where a growing number of Americans are looking to rent instead of buy.
According to a recent report by Realtor.com analyzing data from the American Community Survey, the supply of rental properties in suburbs surrounding major metropolitan areas has surged in recent years, both because of new construction and because many homes once occupied by the owners are now being rented out.
Why Is Renting Surging in the Suburbs?
Realtor.com senior economist Jake Krimmel found that suburban rentals increased between 2018 and 2023 in metros that saw a boom in new constructions—such as Austin, Texas; Nashville, Tennessee, and Denver—as well as in those with low construction rates—such as Boston, Philadelphia, and Washington, D.C.
"In general, the suburbs have boomed during and after the pandemic, due in large part to people wanting more space and also because the large generation of millennials were beginning to settle down and start families," Krimmel said in the report. "With all this demand for the suburbs, we saw a lot of new construction activity there."
Suburban areas close to red-hot markets which exploded during the pandemic saw the biggest increases in renter-occupied homes, however. Bastrop County in Texas, some 30 miles from downtown Austin, reported a surge by nearly 50 percent between 2018 and 2023. Williamson County, near Nashville, saw a 25-percent increase in the number of rentals in five years.
Suburbs near major metros still suffering from more acute inventory shortages and with lower pace of constructions still reported significant increases. Prince George's County and Howard County, near Washington, D.C., saw the number of rentals go up by 11 percent and 12 percent, respectively, between 2018 and 2023.
"In short, demand for suburban living is up, and supply in many markets has met that demand," said Krimmel. "But even in metros that didn't build a lot in response to this demand, we still see a rise in suburban rentership."
Built-to-rent construction has also increased over the past few years, with roughly 100,000 new build-to-rent properties being developed across the U.S. at this time. The top five metros with the highest number of build-to-rent units are Phoenix (17,000 units), Dallas (15,000 units), Houston (9,000 units), Atlanta (8,000 units) and Charlotte, North Carolina (4,000 units.)
Is Renting Really That Much More Affordable?
Not only renting a property is much more affordable than buying one—it is also becoming increasingly cheaper over time. May marked the 22nd consecutive month of year-over-year decreases, according to Realtor.com, with the median rent nationwide at $1,705 per month in the 50 largest metros in the country, down 1.7 percent year-over-year.
President Donald Trump's policies targeting international students are also likely to bring down rents in cities hosting prestigious institutions such as Harvard, experts say.
"A decline in international student enrollment could weaken the global and even domestic talent pipeline feeding into high-growth industries and potentially soften rental demand in these markets," Realtor.com economist Jiayi Xu said in a report.
But experts warn that in the long run, homeownership might still be a better investment than renting. "The thing you have to consider is that rent could definitely go up in the long run, whereas mortgage rates will probably fall in the long run," Daryl Fairweather, chief economist at Redfin, told Bankrate. "Eventually, you'll pay it off and own it outright."
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