Why More Americans are Opting for Rental Properties Over Homeownership: CBRE

A significant affordability gap, with average monthly mortgage payments for new homes currently 35% higher than apartment rents, is driving a growing number of Americans to choose renting over homeownership, according to the latest research from CBRE.

Average mortgage payments, including taxes, have surged by 75% since late 2019, creating a steep financial barrier to homeownership for many households. While the premium to purchase a home is anticipated to decline over the next several years due to changes in interest rates and home prices, as well as continued strong rent growth, it is expected to remain wide enough to keep many people in the rental market for longer.

CBRE forecasts annual growth of 3.1% in multifamily rents over the next five years, exceeding the pre-pandemic average of 2.7%. This above-trend rent growth is expected to outpace home price appreciation and, along with lower mortgage rates, slightly narrow the cost gap between buying and renting. CBRE expects the premium to buy versus rent to ease to 32% from 35% by the end of 2025.

“The difference between mortgage payments and rental costs poses a substantial challenge for individuals and families trying to transition from renting to homeownership,” said Matt Vance, Americas Head of Multifamily Research at CBRE. “Many are finding that renting not only offers financial advantages, but also provides the flexibility and lifestyle benefits they value, allowing them to adapt to changing circumstances and priorities.”

Local Market Insights:

Across all U.S. markets, the cost-to-buy premium is expected to shrink over the next five years, driven by falling interest rates, subdued home price growth, and strong rent growth. However, certain markets remain outliers:

• Austin and Los Angeles currently have the highest cost-to-buy premiums in the country, with homeownership costing nearly 2.5 times the average rent. While these premiums are projected to decline in the coming years, homeownership in these markets will still be more than twice as expensive as renting.
• Conversely, high-growth markets such as Phoenix, Salt Lake City, and Nashville are poised to see the most significant compression in cost-to-buy premiums. This trend will be fueled by strong renter demand and a slowdown in multifamily construction pipelines, which will drive faster rent growth in these areas.