T
he rising cost of homeownership is prompting Americans to opt for renting, as new research by CBRE reveals that monthly mortgage payments are 35% higher than apartment rents. This significant affordability gap has grown by 75% since late 2019, making it difficult for many households to afford buying a home. Although the premium is expected to narrow over the next few years due to shifting interest rates and strong rent growth, it will likely remain wide enough to keep many Americans in the rental market.

    CBRE projects annual multifamily rent growth of 3.1% over the next five years, exceeding pre-pandemic averages. This above-trend growth will slightly reduce the cost gap between renting and buying, but the premium to buy is still expected to be around 32% by the end of 2025.

    "The disparity between mortgage payments and rental costs creates a significant hurdle for individuals and families looking to transition from renting to homeownership," said Matt Vance, Americas Head of Multifamily Research at CBRE. "Renting offers financial advantages and lifestyle flexibility, allowing people to adapt to evolving priorities and circumstances."

    The cost-to-buy premium is expected to decline across the US over the next five years due to lower interest rates and robust rent increases. However, some markets will remain more expensive for homeownership than renting. Austin and Los Angeles currently have the nation's highest cost-to-buy premiums, with homeownership costing nearly 2.5 times the average rent. Phoenix, Salt Lake City, and Nashville are positioned for significant reductions in their cost-to-buy premiums due to strong renter demand and a slowdown in new multifamily construction.