Cities where you'll save the most by renting instead of buying a home

Renting a home is significantly cheaper than buying one in every major U.S. metro area in August, according to a new analysis.

But where will residents save the most money by renting instead of buying?

Real estate company Zillow analyzed 50 of the largest metro cities, comparing two households with identical incomes making different housing choices.

For homebuyers, Zillow assumed a homeowner would make a 10% down payment and purchase a home with a fixed-rate 30-year mortgage and bear all costs of homeownership: mortgage payments, property taxes, insurance, and closing costs at both purchase and sale.

Meanwhile, the renter would pay a monthly rent payment and renter's insurance.

Renting costs less in every major U.S. market

By the numbers:

The data found that the typical U.S. rent was $1,948 a month in August, compared with $3,014 for a typical new homeowner's monthly mortgage payment, taxes and insurance. 

That's a difference of $1,066 a month, or $12,792 a year.

In fact, the monthly savings from renting over buying was not limited to one region or price point. In each of the 50 largest U.S. metros, the typical rent was lower than the typical monthly payment for a new homeowner. 

The analysis also found that buying generally required a higher income. A household needs about $77,919 in annual income to afford the typical U.S. rental, compared with more than $120,500 to afford a typical mortgage with 10% down.

Renting even more favorable in high-cost, coastal markets

Dig deeper:

The savings for renting were largest in high-cost coastal markets. Renters in San Jose saved an average of $7,883 a month (94,596 a year) compared with buyers, 

This was followed by San Francisco at $5,413 per month, Los Angeles at $4,441 and San Diego at $4,235.

RELATED: Home prices fall in most major US cities as housing market cools: See where

Despite these findings, the least affordable metro areas for rents still resided in high-cost coastal markets: New York (40.6%), Miami (36.9%), Los Angeles (34.0%), Riverside (31.2%) and San Diego (30.5%).

Meanwhile, the most affordable metro areas for rents were Austin (18.3%), Raleigh (18.3%), Salt Lake City (18.3%), Minneapolis (19.7%) and St. Louis (19.8%).

Cities where you’ll save the most money annually by renting

1. San Jose, California
2. San Francisco, California
3. Los Angeles, California
4. San Diego, California
5. Seattle, Washington

See the full report here.

Typical US rent rises

Big picture view:

The typical U.S. rent rose 2.5% from a year earlier, while the monthly cost for buyers increased more quickly. Since the beginning of the pandemic, rents have increased by 38.5%, the data found.

Zillow said renting may offer a financial advantage for households planning to stay in a home for five years or less, though the decision also depends on factors such as flexibility, maintenance costs and the stability of homeownership.

Real EstateU.S.