Rent vs. Buy

Here's how much money homeowners save over renters in Austin

It pays to own instead of rent.

Photo courtesy of AmCap

We already know how many years it takes to save up a down payment for a home in Austin, but getting that money together equals even bigger savings down the road than previously thought.

A recent study by real estate site Zillow ran the numbers in 36 of the largest U.S. metros and compared how much Americans spend on rent compared to mortgage payments, and the news for many Texas homeowners is especially good.

In Austin, homeowners spend 7.4 percent less on their monthly housing than renters do. Other Texans are saving more, but the study still shows that homeownership is less of a strain than renting for Austinites.

According to Zillow, the median monthly mortgage bill (minus taxes and insurance) in Austin is $1,230.13, which translates to a homeowner spending only 19.2 percent of their income on their home. Renters, however, shell out 26.6 percent of their income on rent.

In Houston, homeowners spend 14.8 percent of their income on an average mortgage payment of $814.05, compared to the residents who spend 28.7 percent of their earnings on rent — a difference of 13.9 percent.

There's a 12.3 percent difference in San Antonio, where homeowners spend 15.7 percent of their income on an average mortgage of $766.37, compared to renters who sign away 28 percent of their income each month.

Dallas-Fort Worth has a smaller gap at 11.6 percent, with homeowners spending 16.4 percent of their income on a $965.74 mortgage, while renters pay 28 percent of their income.

The country's biggest discrepancies can be found in New Orleans and Miami-Fort Lauderdale, Florida, which tied at a 16.9 percent gap. In the Miami area, homeowners spend 23.8 percent of their earnings on a $1,122.56 mortgage bill, while renters spend 40.7 percent of their income on rent. In New Orleans, paying the mortgage sets homeowners back only 15.8 percent of their income, compared to 32.7 percent of a renters.

Meanwhile, San Jose and San Francisco in California have gaps going in the opposite direction. Homeowners in San Jose spend 45.8 percent of their income on their $4,766.46 mortgage, while renters spend 34.2 percent — an 11.6 percent gap. And homeowners in San Francisco spend 41.6 percent of their income on a $3,741.22 mortgage bill, while renters spend 38.3 percent, for a difference of 3.3 percent.

Now, the original intent of this Zillow study was to see what level of education is typically needed to afford owning a home in each market, but we found the mortgage and rent numbers way more interesting. But if you're still wondering, a high school diploma or GED is all that's needed in each Texas city.

zillow reports rent

real estate report

How Austin fits into Zillow's predicted housing market growth in 2025

Photo by Justin Wallace on Unsplash

Potential homebuyers in Austin may see improving mortgage rates and home prices in 2025, according to Zillow.

It looks like a few more people are about to turn their online home shopping daydreams into reality in 2025. Zillow, the famous real estate listings website, says in a press release that next year will likely bring "a gradual but bumpy decline in rates, impacting sales and price growth."

It attributes the forecast to "erratic and dramatic mortgage rate movements" throughout 2024, which will continue to affect the market. The website's housing market predictions report estimates that 2025 will see about 100,000 more sales than 2024, that home value growth will be "low and slow" at 2.2 percent, and that inventory and new listings will continue recovering from pandemic weakness.

On a local scale, Zillow's latest data shows Austin has already experienced a 3.4 percent drop in annual average home values from 2023 to 2024, which will continue fluctuating in 2025.

As of November, Zillow's home value index says the average home in the Austin metro is worth $443,995. That figure is greater than the Austin Board of Realtors' median home sales price in Austin-Round Rock-San Marcos, which came out to $435,000 last month, reflecting an estimated 2.4 percent increase for just the month of November year-over-year from 2023.

Pick the right season to buy
Potential buyers may see better opportunities for purchasing a home during the fall and winter, which is a typically slow season for home sales. Across 36 out of the 50 biggest U.S. metro areas, Zillow's heat market index showed a drop in competition from October to November.

"There's a strong sense of déjà vu on tap for 2025. We are once again expecting mortgage rates to get better gradually, and opportunities for buyers should follow, but be prepared for plenty of bumps on that path," said Zillow chief economist Skylar Olsen in the release. "Those shopping this winter have plenty of time to choose and a relatively strong position in negotiations."

Zillow suggests buyers may have the ability to negotiate "from a position of safety" during the slow winter months. This is especially true for Austin-area buyers, who only saw 10.4 percent of homes sell for more than their listing price in October. The website says buyers can take advantage of opportunities to buy contingent on inspections or repairs, and they may avoid bidding wars during this time.

"While the number of options available to shoppers today are lower than they will likely see in the spring, there's also less competition in the field," the report says. "The [national] share of homes that sold for more than list price was below 28 percent in October (the latest data available), continuing a downward trend that began in July."

Buyers will head to the Southwest
Eyes are also turning to the American Southwest as the top region for homebuyers in 2025, as 13 major metro areas – including Austin and San Antonio – are now considered “buyer’s markets” where buyers have more negotiating power than sellers.

However, this prediction depends on the gravity of falling mortgage rates. Homebuyers should also keep a close eye on mortgage rates in 2025, which could drop unpredictably like they have been for the last three weeks in a row. If the rates dip further than expected, that doesn’t bode as well for buyers.

“It is anticipated that a significant mortgage rate dip would bring more buyers than sellers back to the market, increasing competition and tilting negotiating power in favor of sellers,” Zillow says.

Small-home living is gaining traction
As Austin and other major cities are battling for more high density housing, buying trends are also leaning towards smaller (and more affordable) homes.

Zillow even goes as far to say that the “pandemic-era need” for large houses is officially a thing of the past.

"The term 'cozy' is appearing in more listing descriptions — 35 percent more in 2024 compared to 2023 — reflecting current design trends that have shifted away from cavernous open floor plans, toward contained spaces that have their own style and purpose," the report says.

housing market zillow