Renting vs. owning: The difference is “higher than at any time since the turn of the century”

The real estate market may be slowing down, but owning a home is still a costly proposition. Two charts show exactly how expensive it is.

A little over a year ago, the monthly cost of owning and renting were virtually the same, so a Blog post by John Burns Real Estate Consulting. “Today, owning a home costs $839 more per month than renting it. That difference is almost $200 higher than at any time since the turn of the century,” wrote Danielle Nguyen, senior research manager at John Burns.

So for residential real estate, renting a home would cost about $1,962 per month Data from RedfinAs of April 2022. But if a homeowner had put down a 7% down payment on a home, they’d be on a mortgage that would set them back $2,114 a month — $152 more.

“With demand now shifting toward rentals, homebuilders who were once reluctant to sell to rental investors are now soliciting bids from investors,” Nguyen added. “The strong demand from investors will provide additional support for today’s real estate prices.”

The historic gap between ownership and renting can be seen in the chart below:

Looking ahead, however, Nguyen told MarketWatch, “High house prices and rising interest rates can impact home buyers.” Fewer people may qualify for a home now, she said. In fact, first-time buyers are increasingly being priced out of the country’s hottest real estate markets.

According to John Burns, this penalty is harsher for homebuyers in some parts of the country. In places where home prices have risen the most, such as Raleigh-Durham, Nashville, Denver, Tampa and Phoenix, owning a home was much more expensive than renting it.

John Burns Consulting undertook a home purchase at 80% of the current average price. You also assume that the buyer pays a 5% down payment on a 30-year fixed-rate mortgage.

To put that in context, a year ago renting would have paid you back $1,705 a month compared to a $1,451 monthly mortgage payment, the National Association of Realtors explained in a Blog post in January.

The cost of owning a home has increased because home prices have increased ascending Since the start of the COVID-19 pandemic, as people moved from crowded cities, her ability to work remotely has helped. Rising construction costs and shortages in inventories also contributed to price increases.

The typical value of a home on May 31 was nearly $350,000. to Zillow
In January 2020, just before the pandemic began to spread across the country, the typical home was valued at $251,000.

As of March 2022, the median home accounts for about 38.6% of a person earning a median income of $68,000 per year, up from 30.2% in March 2021, according to the Atlanta Federal Reserve.

The Dow Jones Industrial Average DJIA,
Tech-heavy Nasdaq Composite COMP,
and S&P 500 SPX,
clung to positive territory on Tuesday after suffering big losses on Monday.

Do you have thoughts about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at Renting vs. owning: The difference is “higher than at any time since the turn of the century”

Brian Lowry

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