The Only US City Where a Starter Home Costs Less Than Renting

Newsweek

6 days ago

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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Pittsburgh is the only major U.S. metropolitan area where a starter home still costs less than renting, according to a new study by Realtor.com, after years of price increases have caused homeownership to become unaffordable to many Americans.
In June, buying a starter home in the Steel City was $111 cheaper than renting, considering an estimated $1,472 for renting a 0-to 2-bedroom home, which would cost about $1,361 to buy, 7.5 percent less.
In any other major U.S. metro area, renting is currently much cheaper than buying a starter home—even as this advantage is starting to shrink.
Why Is Renting So Much Cheaper Than Buying?
June marked the 23rd straight month of year-over-year median rent decline for 0-2 bedroom homes across the country's 50 largest metros, according to Realtor.com, while asking rent stood at $1,711, $6 more than the previous month.
This is obviously good news for renters, but if we look at the historical data, it is actually not as great as it looks. The U.S. median rent is actually just $48 cheaper (-2.7 percent) now than in the peak seen in August 2022.
The advantage of renting is greater when compared to the cost of buying a home, which has yet to come down significantly from its pandemic heights.
"During the pandemic era, housing prices surged significantly. In addition, today's elevated mortgage rates and increasing insurance premiums have made owning a home become more expensive," Realtor.com economist Jiayi Xu told Newsweek.
"On the rental side, there is a boom of new multifamily construction," Xu said. "With a steady stream of new rental supply entering the market over time, rents have remained stable—or even declined—due to abundant inventory, making renting a far more affordable option."
Photo-illustration by Newsweek/Getty
Realtor.com calculated that the cost of buying a starter home in the U.S.'s 50 largest metros in June was $908 (53.1 percent) higher than renting one. To determine this number, they considered the median list price of a 0-2 bedroom home, a 9 percent down payment, homeowners association (HOA) fees, taxes, and homeowner insurance for buyers; the cost of renting was based on the median rent in each metro.
While the scale is definitely tilted toward renting—especially as mortgage rates still hover around the 7 percent mark, prices are still increasing in many parts of the country, and other housing costs are rising, the advantage of renting is shrinking already in some metros.
"The advantage of buying has diminished over the past 12 months, as lower home prices initially attracted a wave of buyers—driving up competition and pushing prices higher," Xu said.
What Makes Pittsburgh the Exception?
Pittsburgh tends to have home prices well below the national average—for a number of reasons. One is that Pittsburgh somehow managed to be a so-called "unicorn city" during the pandemic homebuying frenzy, when so many markets across the country quickly became overheated and prices jumped through the roof.
"It avoided the housing boom cycle during the pandemic and was able to maintain its stability," Xu said. "In fact, according to a recent Realtor.com report, it is one of just three major U.S. metros where a typical household can afford a home while spending less than 30 percent of its annual income," she said.
That makes Pittsburgh one of the few major U.S. metros where homebuyers are not cost-burdened.
"The Pittsburgh market has continued to be a steady real estate market throughout history. Throughout the pandemic, Pittsburgh was incredibly resilient. We have a lot of reasons why this was the case," David Dean, president of the Pennsylvania Association of Realtors and a Pittsburgh native, told Newsweek.
"We have a tremendous infrastructure with the medical industry in the city. The real estate industry was able to pivot toward supporting a steady market than other places were. We embraced technology quickly to be able to show properties and complete the transaction without ever being face to face," he said.
A car with headlights on crosses the Roberto Clemente Bridge from downtown Pittsburgh as the sunrise light begins to illuminate the bridge in April 2024.
A car with headlights on crosses the Roberto Clemente Bridge from downtown Pittsburgh as the sunrise light begins to illuminate the bridge in April 2024.
Getty Images
Another reason for the city's lower prices is Pittsburgh's aging housing stock.
"According to 2023 ACS data, the median year homes were built nationwide is in 1981, compared to 1961 in Pittsburgh—indicating that much of the housing inventory in the metro is significantly older and often in need of renovation, which helps keep prices down," Xu said.
"Though many homes are dated, they offer an opportunity for buyers to invest in renovations and achieve homeownership at a more accessible price point."
According to Dean, there is a very large inventory of affordable homes in the Pittsburgh market. "People who want to age in place can, but those who want to right size, are able to put their homes on the market for other buyers," he said.
"Pittsburgh has become a destination for those who want to take advantage of living in a metro area because they find they can afford a much larger property for their investment," he added. "We're seeing prices increase across the economy and homeowners are enjoying the return on their investment in a home."
Home prices have been inching up in Pittsburgh in recent months, with the median sale price of a home in the city, according to Redfin, up 1.9 percent year-over-year in June, at $270,000. But experts believe that this increase is temporary, and won't chip away at the city's housing affordability.
"On average, we have seen some price increases this past year but I believe it is mostly relative to the inventory," Michelle Senko, president of the Realtors Association of Metropolitan Pittsburgh, told Newsweek.
"I strongly believe Pittsburgh will remain affordable because of the complementary factors surrounding the property values; a variety of dynamic communities, modest cost of living and industrial growth remaining stable."