Home News Rising Mortgage Rates Complicate Decision on Buying Versus Renting

Rising Mortgage Rates Complicate Decision on Buying Versus Renting

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Median monthly mortgage payments were almost 1.5 times higher than median monthly asking rents in the second quarter, the largest on record since 2009, according to data tracked by the industry Home Loan Bankers Association. It was the difference. trade group.

housing prices And rents have risen sharply over the past year and a half. But the rise in relative purchase costs is largely a result of the additional interest paid by buyers as they peg their mortgages at the highest interest rates in recent years.

Average 30-Year Fixed Mortgage Rates rose to 5.66% this weekAlmost double what it was a year ago, according to Freddie Mac research. Low interest rates over the past few years have ushered in an era of more affordability, Many first-time buyers to the market.

In the fourth quarter of 2020, median mortgage payments and median rents were essentially the same at just under $1,200. Since then, June rent has risen 10% to $1,314, according to Census Bureau data, and mortgage payments have risen 58% to $1,893, according to MBA mortgage application data. . The ratio between the two was 1.44.

MBA housing economist Edward Seiler said:

by some means, Housing is the most affordable in decades Rising interest rates collided with soaring house prices.Rising purchase costs are boosting some prospects as inflation hits every aspect of daily life bite the bullet and keep borrowingeven if their landlord wants more money.

Melissa Ciani and her family signed a deal to buy a new-build home in Forney, Texas earlier this year, but the need to relocate from Alabama delayed the completion date by several months. I decided not to buy it and rent it instead. The rent is more than they expected to pay, but still less than their mortgage payments, Mrs. Siani said.

“The combination of home prices and interest rates makes it hard to afford,” she said of buying a home. Her family will be in Texas for about three years. “Hopefully the market calms down a bit for our next move,” she said.

Despite forecasts of a cooling housing market in 2022, U.S. house prices are still hitting record highs despite a surge in mortgage rates in recent months. WSJ’s Dion Rabouin explains what’s driving demand, if there are signs of a slowdown, and what that means for the economy. Photo Synthesis: Ryan Trefes

Falling affordability is weighing on the housing market. About 16% of buyers who had signed a contract to buy a home in July backed out, according to one study.


analysis.Home price growth slows in June, second-hand home sales also decline has been declining for months.

“The clients I worked with could have afforded a more expensive home at a lower interest rate,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida. We re-priced the house they wanted. ”

Alec and Ashley Xenakis returned to renting at least temporarily when they moved to Tucson, Arizona, in August. They sold a house in the Denver area, but interest rates had risen significantly since getting a sub-3% mortgage last year, so buying a similarly priced house would cost him over $1,000 a month. I noticed that it costs

So they can sign a 9-month lease on the townhome and continue renting on a monthly basis. They plan to buy his $600,000+ home that he sold for in the mid-$400,000 range. But they are in no hurry.

“Rates will go higher, but I don’t think they will stay this high forever,” Xenakis said.

The affordability challenge may have eased slightly. According to MBA, the median mortgage payment he dropped to $1,844 in July. Additionally, median mortgage costs for 25th percentile buyers are still below median mortgage costs, despite rising like the rest of the market.

Many Americans are well-positioned to buy even if they have to cut budgets to make up for rising mortgage costs. Wages rose as overheating increased the force demanded by workers.

With mortgage payments typically fixed for years to come and rents rising over time, you might think the higher cost of purchase is justified, Sailer said.

“People are starting to accept interest rates. It’s no longer a fight or a fight with people,” said Sam Polland, senior loan officer at Intercoastal Mortgage LLC in Potomac, Maryland.

Write a letter to Ben Eisen [email protected] and Nicole Friedman [email protected]

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