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Rising home prices, high mortgage rates and a shortage of homes are presenting challenges
April 11, 2025
Key takeaways:
- It costs more than $50,000 to buy a typical home than to rent in 2025, widening from nearly $47,000 in 2024.
- The income needed to afford a house keeps rising, reaching 5% higher in 2025 than 2024, compared with an only 0.2% increase for renting.
- The gap is widening most in Salt Lake City and Austin, but shrinking most in Cincinnati and Providence.
It keeps getting more expensive to buy a home than rent in the U.S.
Buying a median priced home now requires an income $52,473 higher than renting a median priced home in 2025, which is up from $46,808 in 2024, according to a report from real-estate website Redfin, which analyzed the first three months of 2025 ending in February.
The analysis is based on the recommendation that homebuyers spend no more than 30% of their income on monthly mortgage payments, Redfin said.
It has become increasingly challenging for American renters to make the shift to homeownership thanks to the triple whammy of rising home prices, high mortgage rates and a shortage of houses for sale, Redfin Senior Economist Elijah de la Campa said in the report.
The cost of buying a home has been rising faster than renting, growing 4.5% year-over-year to $423,892 in the three months ended in February, compared with the median asking rent rising0.2%to $1,604, Redfin said.
The gap has widened in part because of newly-builtapartments since the pandemic that have helped stabilize rent prices.
“Rents have stabilized below their record high because an influx of newly-built apartments ushered in by the pandemic construction boom has given renters more options,” Redfin said.”That has made it harder for landlords to boost rents.”
Still, it is possible the gap may shrink in the months ahead due to rising rents.
The gap between what someone must earn to buy versus rent may shrink in the coming months, but only because rents are expected to rise as the number of new apartments hitting the market tapers off due to a construction slowdown,de la Campa said.
A closer look at where the buy versus rent income gap is present
There are a parts of the country where the gap is even more on display.
For instance, in Salt Lake City homebuyers need a yearly income of$140,412 to buy a typical home, which is more than double the income needed to afford a typical rental, Redfin said.
After Salt Lake City, homebuyers in Austin needed 143% more income than to rent, followed byLos Angeles (141%), San Diego (127%), and New York (76%).
“In most of these places, asking rents are falling while home prices are rising, which is why the gap is widening,” Redfin said.
On the other hand, homebuyers in Cincinnati only needed an annual income of$80,752 to afford a typical home, which is around 39% more needed for renting.
Cincinnati is followed by Providence, where homebuyers needed 58% more income than to rent, and thenLouisville (43%), Baltimore (64%), Washington D.C. (88%) andSacramento (98%).
The increase in rents is definitely having an impact on the for-sale market a lot of people are looking to buy instead of rent, and many of those people are first-time homebuyers in their mid-to-late twenties, said Cody Brownfield, a Redfin Premier real estate agent in Cincinnati, in the report.
There are a lot of new apartment complexes here, but not enough to keep up with demand, which is one reason rents have been rising,” he added. “Plus, a lot of new apartments are expensive because theyre in luxury buildings, so many people figure they can get more bang for their buck by buying.
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