Home News Soaring mortgage rates discourage home buying even as rental costs jump

Soaring mortgage rates discourage home buying even as rental costs jump

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rent Soaring to a record high 16 consecutive months in June. Still, more than three-quarters of the 50 largest US metropolitan areas preferred renting over buying starter homes last month, according to a new report.

Realtor.com Chief Economist Daniel Hale told FOX Business that “the cost of starter homes has actually risen so much that rents have risen, but they have become more affordable in more markets.” Told.

If mortgage rates weren’t high, rents would rise faster than initial home prices, closing the gap between rents and first-time purchases earlier this year.

–Realtor.com Chief Economist Danielle Hale

Median US rents reached a record $ 1,876 in June, up 14.1% from a year ago, according to recent Realtor.com data. All unit sizes, including studios, one-bedroom and two-bedroom apartments, saw double-digit annual growth.

According to the data, studios increased by 15.1% compared to a year ago, and one-bedroom and two-bedrooms increased by 13.8% and 13.6%, respectively.

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and At the same time, monthly starter home ownership costs across the country averaged 29.9%, or $ 561, higher than June rent. The cost of owning a starter home in January was only 4.4% higher than rent.

It’s getting more expensive Raise a house and According to the report, “prioritize renting over first-time purchases and tilt the scale of affordability for homes.”

A “rental” sign posted in front of an apartment in San Francisco, CA on June 2, 2021. (Photo by Justin Sullivan / Getty Images / Getty Images)

Mortgage rates have become “the biggest driver of widening the year-over-year gap between first-time purchases and rentals.” According to mortgage buyer Freddie Mac, last week’s benchmark interest rate was 5.51%.

The 30-year average mortgage rate surged by more than 2 percentage points from January to June. According to Realtor.com data, Freddie Mac’s reporting rate for January was 3.45%. In June, the 30-year average fixed mortgage rate rose to 5.52%.

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“In fact, according to our analysis, if not Higher mortgage rateThe gap between rent and first-time purchases would have narrowed earlier this year as rents rose faster than initial home prices, “Hale said.

Instead, the affordable gap between rentals and purchases widened by more than $ 480 from January to June.

Last month, 38 of the 50 largest metros in the United States offered rents from 24 markets in January that were lower than their monthly starter ownership costs.

Crystal Gera, 32, takes pictures outside her apartment in Miami’s Coral Way district. ((AP Photo / Rebecca Blackwell) / AP Newsroom)

Only 11 metros preferred their first purchase over a June rent.

According to Hale, the good news is that price growth is slowing.

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“Rental and for-sale home prices have slowed in recent months,” Hale said. “This is not the same as saying that housing and rent are getting cheaper, but that means that the increase is shrinking, which is a step in the right direction. Having a flexible travel timeline. For people, we expect it to slow further in the future. “

The top 10 metros that preferred renting are:

  1. Austin, Texas: The monthly cost of a starter home in June was 97.8%, or $ 1,822, above rent.
  2. San Francisco, CA: 79.9% ($ 2,535)
  3. Seattle, WA: 78.3% ($ 1,801)
  4. New York, NY: 70.0% ($ 2,092)
  5. San Jose, CA: 65.4% ($ 2,175)
  6. Portland, Oregon: 61.6% ($ 1,128)
  7. Los Angeles, CA: 60.5% ($ 1,846)
  8. Boston, Massachusetts: 57.3% ($ 1,698)
  9. Houston, Texas: 53.3% ($ 773)
  10. Phoenix, Arizona: 52.2% ($ 929)

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