Renting a starter home in Austin saves you $1,917 a month over buying — and 5 more cities where it's a blowout

“People need to balance smart money decisions with quality of life choices,” Todd J. Drowlette, real estate broker, investor and star of A&E’s The Real Estate Commission, told Moneywise.

Drowlette added that it’s often “smarter to rent over buying a starter home” because buyers may stretch their budgets and have little left for repairs or upgrades. “I often recommend skipping the starter home, saving up and buying the forever home a few years later.”

Meanwhile, a recent Realtor.com rental report found that, on average, the cost of renting a zero-to-two bedroom starter home was more affordable than buying one in all of the nation’s 50 largest metros.

Austin, Texas came out on top with the biggest monthly percentage difference in savings between buying and renting. The report put median asking rent at $1,378 and median buy cost at $3,295, totaling a monthly savings of $1,917 for renters — or $23,000 annually — followed by several other major markets with rental savings in the thousands.

Renting can save you money — but that advantage may be shrinking

With the median U.S. rent sitting at $1,390, Austin’s monthly 139% savings percentage for renters over buyers topped the nation, but it wasn’t the highest dollar amount.

West coast markets like Los Angeles/Long Beach/Anaheim ($2,049) and Seattle ($1,961) offered greater savings for renters, but their overall savings percentages were lower than Austin’s given the higher overall costs of buying and renting there.

San Diego, meanwhile, saved $1,688 for renters, while the Dallas/Fort Worth/Arlington market hit $1,194 and Nashville notched $1,158.

Reasons for the renter advantage in these markets vary. Texas and Nashville renters, for example, benefit from an oversupply of housing. A weakened job market in Seattle, meanwhile, helped push rents down as people exited the city.

“Instead of putting a significant portion of their savings toward homeownership costs, renters have the flexibility to put those savings toward other personal goals,” Blake J. Thomas, vice president of operations at Quinn Residences, which builds single-family rental communities, told Moneywise.

Thomas added that the rental industry is “seeing the continued growth of the ‘renters by choice’ phenomenon, where individuals and families who are financially capable of buying a home are choosing to rent for the freedom and convenience that comes with it.”

Real estate investor Jerry O’Reilly told Moneywise that those conveniences can prove vast beyond the headline monthly savings, including avoiding the time consuming nature of home maintenance, the ability to save on daily transportation if you rent close to work, as well as savings on various local taxes and potential amenity fees that some homeowners pay.

He added that for those with tight budgets who would just scrape by as homeowners, “renting and saving additional cash is the wisest course of action. Borrowing emergency funds to do repairs or replacements decreases any homeownership advantage over renting.”

That said, the Realtor.com report did caution that the savings gap for renters over homeowners is slowly closing. And an Apartment List report added that, as August rents rose by 0.1%, “year-over-year rent growth has been inching up and the vacancy rate is inching down, signaling a modest tightening of rental market conditions.”

What to consider before deciding whether to buy or rent

Ultimately, the question of whether to buy and build equity or rent and save money has no right answer.

“It’s less ‘renting is right, buying is wrong’ and more ‘here’s what each option costs you today versus what it builds for you over time,’” Realtor.com Senior Economist Jiayi Xu told Moneywise.