Renters hoping to buy a house may be better off renting for longer, as the housing market remains frozen by elevated mortgage rates and prices.
Aspiring homeowners were dealt another blow in August, as both rates and home prices showed no signs of cooling. With mortgage rates trending upwards on the back of a decision by the U.S. Federal Reserve to leave interest rates unchanged for now, buyers continue to face high borrowing costs when purchasing a home. The 30-year mortgage rate was at 7.19% as of Thursday, and real-estate economists say rates could go up to 8%.
Home prices also showed little signs of slowing, as the median price of an existing home hit $407,100 in August, the highest price for the month of August since the National Association of Realtors began tracking prices in 1999.
As a result, renting has become far cheaper than buying a starter home in the majority of the largest metros in the U.S., a new report from Realtor.com showed.
Buying a starter home in the top 50 metros in the U.S. cost 60% more than renting a starter home in August, the report said, which is around $1,111 more. Rents, unlike home prices, have been trending downwards.
“When you factor in the impact of record-high mortgage rates and high home prices, it’s understandable that many would-be home buyers are choosing to remain on the sidelines,” Danielle Hale, chief economist at Realtor.com, said in a statement.
“The downward trend in rental prices reduces the sense of urgency, giving renters more time to save for a home,” she added. “In the period ahead as rents soften, we expect more households will remain renters for longer.”
The median rent in August across the nation was $1,752, according to Realtor.com. Rents are down 0.6% from a year ago.
A separate chart from real-estate platform Cadre noted that the price gap between renting and buying has hit the widest point since 2000.
The market where the gulf between renting and buying was the biggest was the Austin-Round Rock-Georgetown metro in Texas, the Realtor.com report said. The monthly cost of buying a starter home was 136.3% more than monthly rent.
That was followed by the San Francisco- Oakland-Berkeley, where the gulf was 101.6%, followed by Columbus, Ohio, where the difference was 101.1%.
(Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp. )