Renting Looking Like the Wisest Choice
A new report from Realtor.com adds some intrigue to a housing market where buyers struggle with the decision of buying a home vs renting.
They found that in June, according to their stats, the the US median rental price hit an all time high of $1876 per month. However, the cost of buying a home was $561 higher than that rental average.
Across the country, from California to New York to Florida, the monthly difference in cost between a starter home rose by 25.5% or $483 during the first 6 months of 2022. In 38 of the 50 largest US metros, the monthly cost of buying a home was higher than renting a home in the month of June.
In some cites however, buying prices actually fell thus making a home purchase a little easier in those locales.
US FED About to Raise Rates
This week, with the US Fed on the verge of hiking interest rates another 75 basis points at least, it’s expected mortgage rates will rise. In fact, they’re already heading up this week in anticipation of the increase.
If mortgage payments rise again in July and August, it makes the case for renting and for owning and managing rental property even stronger. Statistics show rent prices are at a record level and rent growth is strong, even if not at record levels. With the home ownership market crushed at the affordable level, more Americans will need to continue renting — bolstering the outlook for rental property investment.
Of course Americans prefer single family houses to apartments, due to room for work at home, raising kids, and to capture greater peace of mind and a backyard to relax in. The value proposition for a house rental has never been more inviting.
“With rents and for-sale home prices both hitting record-highs in June, the rising cost of financing a home purchase stands out as the clear driver of rental affordability relative to typical starter homeownership costs. In fact, our analysis shows that if not for higher mortgage rates, the rent versus first-time buying gap would have shrunk in the first half of this year, as rents grew more quickly than starter home prices,” said Realtor.com® Chief Economist Danielle Hale.
Huge Differences in Rent/Buy Cost
In San Francisco, the monthly difference in buy vs rent was an astonishing $2535, despite the Bay Area’s ultrahigh rental prices which are leading to homelessness even among the well employed. The story in nearby San Jose is the same. And in New York, NY, the monthly difference is up to $2092. Los Angeles saw buying $1846 more expensive than renting, and in San Diego it was $1241 higher to buy.
In cities such as Baltimore, Cleveland, Louisville, St Louis, Virginia Beach, and Pittsburgh, the situation actually favors buyers since the purchase cost is much less than renting. That could result in big interest in the housing market in those cities, leading rising house prices.
Home Prices Falling?
With home prices expected to fall however, (some suggest strongly), the difference between buying vs selling is likely to swing back in favor of buyers. Rents typically don’t drop suddenly and given the lack of availability and intense demand, prices could remain steady perhaps into 2023.
If interest rate rises are meant to lower home prices, rent prices, energy costs, and food costs, (inflation at 9.1%), it will take some steep rate rises to cool it.
Economic reports show Americans have strong savings, good employment, and many have sizable down payments ready. Right now in July 2022, home buyers believe it is a good time to buy, so this points to solid demand for single detached homes. Huge immigration numbers will help keep apartment rental vacancies lower too. Multifamily starts across the US have been strong, so supply of rentals may help to moderate rent prices, thus making renting an even better financial choice.
For now, rental owners and property managers can rest easy that demand is strong, renters have money and jobs, and can’t buy a house or townhouse. The US is inevitably headed to being a renter nation, with supply of homes always lagging demand. New house construction is dropping off severely this summer.
This has encouraged corporate buyers to be quite active in the rental property market, including the built to rent market and multifamily sector. New HOA and community associations are evolving out of this creating great new business opps for property management companies.
Learn more about a versatility property management solution that helps optimize rental management, thus helping to keep rents lower and rental owners satisfied with their asset performance.
Property Management Tips
Property Management Software | Rising Rates and Home Prices | Property Management Companies Near Me | Reviews of Property Management Software | Property Management California | Property Management Australia | Texas Housing Market | Landlord Apps | Best Cities for Rentals in California | Apartment Ads | UK Property Market | Demo Property Software | Switch Property Software