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Tags: home ownership | renting | inflation | largest metropolitan areas in the united states

Renting Now Beats Owning Your Own Castle

Renting Now Beats Owning Your Own Castle
(Dreamstime)

By    |   Wednesday, 27 July 2022 11:22 AM EDT

Even with rents soaring to astronomical levels nationwide, renting a home is now more affordable than owning one.

This is the case in 75% of U.S. cities, new research from Realtor.com shows.

Throughout 2022, as higher mortgage rates have driven up home prices, the cost of buying a home has rapidly increased. But back in January, a Realtor.com report found buying a starter home was more inexpensive than renting in just over half of the largest metro areas.

But now, some of the nation’s priciest housing markets, including San Francisco, New York City, and Austin, heavily favor renting a home compared to purchasing one, June 2022 data from Realtor.com shows.

San Francisco has a monthly cost difference of $2,500 between renting and buying a home, with the monthly purchasing costs for a home standing at $5,705. The data additionally shows it is 80% more costly to buy a starter home than to rent, a sign of just how notoriously expensive the area’s housing market is.

New York, which has seen a cooling housing market recently, still has a monthly cost difference of almost $2,100 between renting and owning a home. Even as renting is more advantageous than buying, leases are coming in at very high prices. The average rent for an apartment in Manhattan reached a record $5,000 in June, in a sign of just how chaotic the market is.

Still, New Yorkers, or would-be New Yorkers, are intent on owning the dream; the New York metro area has seen a 43.2% increase in home purchases year over year (Y/Y), compared to a 21.1% increase for rent year over year (Y/Y).

The cities of Austin and Seattle are tied with a $1,800 monthly cost difference, with the two cities seeing a respective increase on buying costs rise 37.7% and 36.2% year over year (Y/Y).

Midwest Reverses the Trend

Although three-quarters of American metro areas favor renting over buying, the June 2022 Realtor.com data showed there are notable exceptions—most notably in the “flyover” sections of the country.

The Midwestern metro areas of Pittsburgh, St. Louis and Cleveland all favor buying over renting, at a respective price differential between buying and renting at -$522, -$284 and -$198. With median rents higher than monthly buying costs in these cities, it is notably more manageable to purchase a home.

While having the largest dollar difference between buying and renting, the Pittsburgh housing market is not as chaotic as New York’s. The year over year cost of renting versus buying in Pittsburgh, is 9.4% and a 3.8%, respectively.

House Hunting Hell

With home prices spiraling in the spring and summer, today, in 2022, Americans are increasingly viewing owning a home as unattainable. Nearly eight-in-10, 78%, of Americans are considering withdrawing from the housing market altogether due to higher mortgage rates.

Furthermore, a combined 66% of respondents say rising interest rates will cause them to pause looking to purchase a home (34%) and applying for a mortgage (32%) respectively, a Forbes Advisor survey revealed.

In two more figures reinforcing how difficult buying a home is, a record low percentage of Americans believe current market conditions make homebuying ideal, with just 30% of respondents saying now is the right time to buy.

If you think the difficulties in the housing market are overwhelming to the point of a breakdown, you’re not alone. Fifty percent of Americans, including 61% of Millennial homebuyers, cried at least once during their search to buy a home, according to a Zillow study released in June.

“These survey results find, even when they are ultimately successful, a large share of buyers in today’s competitive market experience heartache and stress,” says Zillow home trends expert Amanda Pendleton.

Finally, in an interview with Newsmax Finance, Chief Economist at Nest Seekers, Erin Sykes, says despite renting being more affordable in the majority of American cities, some relief is imminent for buyers.

“We have begun to see real-time price drops throughout even the hottest markets,” Sykes says. “However these won’t be reported in monthly round ups until August due to reporting lags. That said, with the interest on a 30-year mortgage hovering around 5.5% and opportunity to capitalize on dropping price, I believe that buyers hold a stronger hand than renters at present.”

© 2022 Newsmax Finance. All rights reserved.


StreetTalk
Even with rents soaring to astronomical levels nationwide, renting a home is now more affordable than owning one.
home ownership, renting, inflation, largest metropolitan areas in the united states
706
2022-22-27
Wednesday, 27 July 2022 11:22 AM
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