Here's the price difference between renting and owning a home
The cost difference between owning a home and renting an apartment has reached its widest gap in more than 15 years as home prices rise and interest rates on home loans soar, according to a recent industry analysis.
On average, owning a home costs $1,176 more per month than renting from a professionally managed apartment complex, according to an analysis published this month from the National Multifamily Housing Council (NMHC). That's the biggest buy-versus-rent gap since fall 2006, the industry group said in its report.
The gap is so wide because, between 2019 and 2022, rents grew an average 6.3% every year while median home sale prices grew 17.4%, NMHC said. Mortgage rates also climbed in recent history, NMHC said, nearly tripling from January 2021 to November 2022 before easing slightly.
Still, the average 30-year mortgage this week stands at 6.42%, more than double its prepandemic level.
Across the nation, the median sales price for homes fell about 11% during the second half of last year, but that wasn't enough to offset how high mortgage rates were climbing, Chris Bruen, NMHC's senior research director, said in the report.
The Federal Reserve's monthslong battle with soaring inflation has helped push mortgage rates skyward, thus increasing borrowing costs for buyers. What's more, demand for homes skyrocketed in 2022 and builders couldn't keep up with the pace, driving prices for existing homes even higher.
NMHC's report lands just as the nation enters its frenzied spring homebuying season. Real estate agents anticipate house hunters will ramp up their efforts to buy a home in the coming weeks while homeowners will be hesitant to put their property up for sale, deterred by the prospect of signing a new mortgage at an elevated rate. Places like Chattanooga, Tennessee; Grand Rapids, Michigan; and Louisville, Kentucky are expected to see increased attention as buyers who are priced out of bigger cities, but can now work remotely, look for more affordable places to live, according to Realtor.com.
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Economists say mortgage rates — especially if they continue to climb — will play a huge role in what options homebuyers have state to state.
"Higher rates could mean more price drops in the months to come, but don't expect prices to fall dramatically," Bright MLS Chief Economist Lisa Sturtevant said in a statement last week.
The median existing home sale price hit $363,000 last month, down $20,000 from January, according to National Association of Realtors data.