Renting vs. owning: The difference is ‘higher than at any time since the turn of the century’

Rate this post

The real estate market may be slowing down, but owning a home is still an expensive proposition. Two graphs show exactly what the cost is.

Just over a year ago, the monthly cost of ownership and rent were virtually identical, according to a post on the John Burns Real Estate Consulting blog. “Now, owning a home costs $ 839 a month more than renting. That spread is almost $ 200 more than at any time since the turn of the century,” wrote Danielle Nguyen, John Burns’ senior research director.

For all residential properties, renting a home would cost approximately $ 1,962 a month, according to Redfin data, in April 2022. But if a homeowner had paid a 7% down payment for a home, he would be stuck with a mortgage that would cost them $ 2,114 a month, $ 152 more.

“With demand now shifting to rent, home builders who were previously reluctant to sell to rental home investors are now asking for offers from investors,” Nguyen added. “Strong investor demand will provide additional support to current home prices.”

The historical gap between the property and the rental can be seen in the following graph:

Looking to the future, however, Nguyen told MarketWatch: “High house prices and rising interest rates could affect home buyers.” Now fewer people can opt for a home, he said. In fact, first-time buyers are increasingly priced out of the country’s most popular real estate markets.

According to John Burns, this penalty for home buyers is tougher in some parts of the country. In places where home prices accelerated the most, such as Raleigh-Durham, Nashville, Denver, Tampa, and Phoenix, owning a home was much more expensive than renting.

John Burns Consulting assumed the purchase of a home at 80% of the current average price. They also assume that the buyer paid a 5% down payment with a 30-year fixed rate mortgage.

To put it in context: a year ago, rent would have pushed you back $ 1,705 a month, compared to a monthly mortgage payment of $ 1,451, the National Association of Realtors said in a blog post on January

The cost of owning a home has risen because house prices have risen since the start of the COVID-19 pandemic, as people moved from crowded cities helped by their ability to work remotely. Rising construction costs and scarce inventories also helped drive up prices.

The typical value of a home on May 31 was nearly $ 350,000, according to Zillow Z.
In January 2020, just before the pandemic began to spread across the country, the typical house was valued at $ 251,000.

As of March 2022, the average household accounts for about 38.6% of someone earning an average income of $ 68,000 per year, compared to 30.2% in March 2021, according to the Atlanta Federal Reserve.

The Dow Jones Industrial Average DJIA,
Nasdaq Composite COMP technology COMP,
the S&P 500 SPX,
they clung to positive territory on Tuesday after suffering heavy losses on Monday.

Do you have thoughts about the housing market? Write to MarketWatch Journalist Aarthi Swaminathan at

Source link

Leave a Comment