Home Agent Owning Becomes More Expensive Than Renting As Rates, Prices Surge

Owning Becomes More Expensive Than Renting As Rates, Prices Surge

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Homeownership is 31 percent more expensive than renting, nationally. With demand shifting and the market for home purchases cooling, homebuilders now court investors, a report notes.

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The cost of owning a home has surged past the cost of renting one in April, a new report shows, as higher mortgage rates and sky-high home prices pushed the cost of homeownership higher and higher.

The report, released earlier this month by John Burns Real Estate Consulting, shows that owning a home now costs $839 more per month on average than renting it, while they were roughly equal just a year ago, and when buying was far cheaper than renting two years ago, when rates were low.

The disparity between rental costs and ownership costs is almost $200 higher than it was at any point since the turn of the 21st century, the report notes.

While rents have risen with home prices to historically high levels, the disparity between rents and home prices is largest in areas where home prices have risen the most. The disparity was the largest in Raleigh-Durham, North Carolina, where costs to own have ballooned by 51 percent, while rental costs have gone up 9 percent, researchers found.

Other newly hot cities show large disparities as well, such as Phoenix, Arizona, where homeownership costs have increased 47 percent year-over-year compared to rental costs rising only 13 percent — and in Nashville, Tennessee, where ownership costs increased by 49 percent, while rental costs only went up by 9 percent. Nationally, renting is currently about 31 percent cheaper than owning.

The report used data collected between April 2021 and April 2022. To conduct their analysis, researchers analyzed listing prices for rental units and added the cost of rental insurance to determine rental costs. To determine the cost of home ownership, they set a default price at 80 percent of the current median-priced existing home at a 30 year mortgage, with a 5 percent down payment.

With countless would-be buyers likely priced out of homeownership for the time being, demand will continue to increase in the rental sector, making it increasingly attractive for investors, who have already purchased one in three homes sold, during the first quarter of 2022 in some sunbelt cities.

With demand shifting and the market for home purchases cooling, homebuilders, who may have once been reluctant to sell to investors, are now courting them, the report notes.

Email Ben Verde

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