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REPORT: Renting is now cheaper than owning a house in America’s 50 biggest metro areas
REPORT: Renting is now cheaper than owning a house in America’s 50 biggest metro areas
A recent Realtor.com report found that renting has emerged as more cost-effective than buying homes across all 50 metro areas in the United States as home prices soar and mortgage rates escalate.
Realtor.com, a company operated by News Corp. subsidiary Move Inc., determines the monthly expense of home ownership by aggregating the median listing prices of studio, one-bedroom and two-bedroom residences in a given market, with weighting based on listing volumes. This calculation assumes an eight percent down payment on the home and a mortgage rate of 6.78 percent, including taxes, insurance and homeowner association fees. (Related: Mortgage rates surge to 20-year high, causing massive drop in home sales.)
Based on the method used, the rent-buy disparity is most pronounced in the Austin-Round Rock-Georgetown metro area in Texas, where the median rent registers at $1,530, substantially lower than the $3,695 monthly outlay for home ownership in February. In other words, buying a home in this metro is 142 percent more expensive than renting. Seattle-Tacoma-Bellevue and Phoenix-Mesa-Chandler metros follow suit, where rent is $2,422 and $1,528 more economical per month than purchasing a home, respectively.
Meanwhile, in the New York-Newark-Jersey City metro area, the median rent stands at $2,852, significantly undercutting the $4,995 monthly expenditure associated with buying a home.
In turn, the February monthly rent report from Realtor.com reveals that renting is far more convenient than buying a house.
"With rents continuing to fall and the cost of buying a home remaining high, renting a home is now a more cost-effective option in all major U.S. markets," said Danielle Hale, chief economist at Realtor.com.
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Zillow: Monthly mortgage payment for a typical American home have nearly doubled since January 2020
Renting in 90 percent of these metros was already more economical a year ago. However, as home prices and mortgage rates continue to increase, the percentage rises to 100 percent. This marks the first time such a scenario has occurred since Realtor.com began tracking in 2021.
A recent report from real estate giant Zillow supports the findings of Realtor.com.
According to the Zillow report, the monthly mortgage payment for a typical American home has nearly doubled since January 2020, skyrocketing by a staggering 96 percent in just four years. The report reveals that an average buyer now faces a monthly payment of nearly $2,200, assuming a 10 percent down payment on a house.
This figure far exceeds the previously accepted benchmark of 30 percent of median income, once considered the threshold for "affordable" housing in America. Moreover, the situation is made worse by the fact that 30-year fixed-rate mortgages have surged to around seven percent.
Orphe Divounguy, a senior economist at Zillow, stated that "home shoppers now need to earn $106,000 to afford the median home in the United States," compared to the $59,000 salary required in 2020. To date, home buyers need 80 percent more income to purchase a home.
Visit HousingBomb.com for more stories on the real estate market.
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The cost of a monthly mortgage payment for a typical U.S. home has NEARLY DOUBLED in just four years.
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