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The warning lights on the U.S. real estate market are blinking even brighter after a study revealed that it costs twice as much to buy a home as it does to rent one. It’s the first time the cost of ownership has crossed that threshold since 2006.

The study was originally published by John Burns Research & Consulting, or JBREC. Perhaps the most sobering aspect of JBERC’s study is that the firm based its calculations on the cost of an entry-level home. The study focused on homes in that market segment because they are the properties that first-time buyers are most likely to afford. Unfortunately, the price of owning an entry-level home continues to exceed the reach of all but the wealthiest buyers.

The study measured the cost of owning an entry-level home. It based its calculations on a buyer making a 5% down payment and paying a 30-year fixed mortgage at 6.69%. According to JBREC’s research, the total monthly obligation for the median-priced home would be $3,545.

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At the same time, Redfin estimates the median rent in the U.S. is $1,633. That large disparity between owning and renting makes it easy to understand why so many would-be buyers are opting to remain on the sidelines. It’s simply too expensive. First, there is the “30% rule” that most lenders use when processing loan applications.

The rule dictates that the total mortgage payment should be equal to or less than 30% of the borrower’s monthly income. That means a borrower needs to earn around $10,000 per month to afford the $3,545 estimated mortgage payment on an entry-level home. By contrast, renters only need to earn around $4,800 per month to afford the median rent in the U.S.

The Federal Reserve has estimated that the median income in the U.S. is $77,000, or about $6,500 per month. That puts the median rent of $1,633 right in the wheelhouse of anyone earning the U.S. median income. Availability is another factor. There has been a severe shortage of affordable housing in the U.S. for decades, but that’s not the case for apartments and rentals.

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Developers and real estate investment trusts have been aggressively building new apartments in many U.S. markets. According to Newsweek, this abundance of supply is also creating opportunities for renters to negotiate lower prices. Newsweek cited Austin, Texas where rents have fallen by 9% to their lowest levels since 2021, as an example of a tenant-friendly market.