It is now cheaper to rent than to buy property.
Thanks to rising house prices and mortgage rates, renting a two-bedroom residence is cheaper than buying that property for about 89% of Americans, according to an analysis by The Economist.
Back in 2020, that was true for only 16% of Americans.
For about a decade until 2020, the typical house mortgage payment was about 12% cheaper than renting a similar property with the national average deposit of 13%.
Since then, however, house prices have spiked 40%, and mortgages have risen from 3.1% to 7.3% for the average 30-year fixed-rate mortgage. This has caused nominal mortgage payments to more than double.
Housing costs are currently at a record high, up 3.9% year over year in September. The median house price was $278,200 back in August, 2019, according to the National Association of Realtors. By August of this year, the median price had skyrocketed to $407,100.
Meanwhile, rents have only risen about 20% since 2020.
The housing crash that many potential home buyers hope for does not look likely to happen. About 35% of Americans are hoping the market will crash in the next year, according to LendingTree’s latest consumer survey.
However, house prices are expected to continue increasing into 2025, and mortgage prices are expected to dip but not by much, according to economists with Goldman Sachs.
Rent prices will likely remain about the same due to many newly built apartment buildings and low demand.
Because of all this, homeowners are reluctant to sell their homes and lose the lower mortgage rates they locked in during less expensive years.
Another issue for buyers is an inventory shortage of homes.
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“We’ve got a big hole to dig out of,” Realtor.com chief economist Danielle Hale said Wednesday on Fox Business.
“We do expect to see single-family construction tick up next year by about 0.4%. So not a huge gain, but construction right now is on the upper end of what we’ve seen it do over the last, really since 2012,” Hale said.
Meanwhile, spiking inflation is making it harder for Americans to save for a down payment on a house even if they want to buy property at today’s record-high prices.
More than half of Americans, 53%, say they either have just enough money or cannot meet their expenses, up from 44% in 2019, CBS News polling from September showed.
About 75% of people described the economy as poor, according to a poll last month from the Associated Press-NORC Center for Public Affairs Research.