Race Bannon’s Post

Buying a house in the United States is considerably more expensive than renting right now, and the real estate market is expected to stay that way for at least the next five years, according to a new analysis. The gap between buying and renting will continue to be a big hurdle for aspiring homeowners for at least five years, the analysis found -- mortgage payments are still expected to cost 11% more than rent in the year 2030. #rentingvsbuying #multifamily #apartmentliving #apartments

Getting on the property ladder has rarely been tougher for first-time buyers. But a tight housing market isn’t turning out to be a bonanza for landlords either. The cost of buying a home versus renting one is at its most extreme since at least 1996. The average monthly new mortgage payment is 52% higher than the average apartment rent, according to  CBREanalysis. The last time the measure looked out of whack was before the 2008 housing crash. Even then, the premium peaked at 33% in the second quarter of 2006. In theory, buying and renting costs should be roughly matched, according to Matt Vance, head of multifamily research at CBRE. Although owners benefit when house prices go up, they also put more cash into their homes than tenants for things such as repairs and refurbishments. From 1996 to mid-2003, the average cost to buy or rent did indeed work out more or less equal. After the global financial crisis, though, rock-bottom interest rates and plenty of housing supply meant it was 12% cheaper on average to buy a home than to rent one during the 2010s. The current hefty ownership premium reflects the surging cost of debt, as rates on a 30-year mortgage reach 8%, as well as high house prices since pandemic lockdowns raised the value of domestic space. A person taking out a 30-year mortgage today on a $430,000 home with a 10% down payment would fork out around $3,200 in monthly repayments, 60% more than if they had bought the same house three years ago. Rents have risen by a less-blistering 22% over the same period, though this was still moderately ahead of wider U.S. inflation. Rising house prices make it hard for renters to scrape together a 10% down payment, let alone afford spiraling mortgage costs. “There is a lot of shadow demand for homes, with a bunch of first-time buyers waiting on the sidelines for the payment-to-paycheck calculation to work for them,” says Odeta Kushi, deputy chief economist of First American Financial Corporation. A collapse in prices would restore the market to balance, but seems unlikely barring a major recession. Those who bought their properties when rates were low have locked in cheap financing: Around 80% of outstanding U.S. mortgages have an interest rate below 5%. This gives homeowners an incentive to stay put, squeezing the supply of houses for sale. On paper, these owners might appear to benefit from the current situation, but they, too, face costs. They can’t easily move, and downsizing to take advantage of record house prices might not add up, given higher mortgage rates. With homeownership out of reach for many tenants, landlords would normally be able to push rents higher. But the supply of homes to rent isn’t as tight, with a glut of newly built apartments depressing rent growth. Demand from tenants is also weaker than it was during the pandemic, as most people who were planning to move have already done so over the last two years. 

Thinking about whether it's better to own or rent a home? Currently, renting is the better choice financially, except for those who already have a large mortgage that is below market. "Around 80% of outstanding U.S. mortgages have an interest rate below 5%." "The cost of buying a home versus renting one is at its most extreme since at least 1996. The average monthly new mortgage payment is 52% higher than the average apartment rent, according to CBRE analysis. The last time the measure looked out of whack was before the 2008 housing crash. Even then, the premium peaked at 33% in the second quarter of 2006. A person taking out a 30-year mortgage today on a $430,000 home with a 10% down payment would fork out around $3,200 in monthly repayments, 60% more than if they had bought the same house three years ago. Rents have risen by a less-blistering 22% over the same period, though this was still moderately ahead of wider U.S. inflation. With homeownership out of reach for many tenants, landlords would normally be able to push rents higher. But the supply of homes to rent isn’t as tight, with a glut of newly built apartments depressing rent growth. Demand from tenants is also weaker than it was during the pandemic, as most people who were planning to move have already done so over the last two years. Fannie Mae thinks vacancy rates in U.S. multifamily buildings will reach 6.25% in 2024, above the 15-year average of 5.8%. In a dysfunctional U.S. housing market, even one that should be tailor-made for landlords, perhaps only lifelong renters are getting what they want."

The cost of buying a home versus renting one is at its most extreme since at least 1996. The average monthly new mortgage payment is 52% higher than the average apartment rent, according to CBRE analysis. The last time the measure looked out of whack was before the 2008 housing crash. Even then, the premium peaked at 33% in the second quarter of 2006. From 1996 to mid-2003, the average cost to buy or rent did indeed work out more or less equal. After the global financial crisis, though, rock-bottom interest rates and plenty of housing supply meant it was 12% cheaper on average to buy a home than to rent one during the 2010s. The current hefty ownership premium reflects the surging cost of debt, as rates on a 30-year mortgage reach 8%, as well as high house prices since pandemic lockdowns raised the value of domestic space. A person taking out a 30-year mortgage today on a $430,000 home with a 10% down payment would fork out around $3,200 in monthly repayments, 60% more than if they had bought the same house three years ago. Rents have risen by a less-blistering 22% over the same period, though this was still moderately ahead of wider U.S. inflation. A collapse in prices would restore the market to balance, but seems unlikely barring a major recession. Those who bought their properties when rates were low have locked in cheap financing: Around 80% of outstanding U.S. mortgages have an interest rate below 5%. This gives homeowners an incentive to stay put, squeezing the supply of houses for sale. With homeownership out of reach for many tenants, landlords would normally be able to push rents higher. But the supply of homes to rent isn’t as tight, with a glut of newly built apartments depressing rent growth. Demand from tenants is also weaker than it was during the pandemic, as most people who were planning to move have already done so over the last two years. Fannie Mae thinks vacancy rates in U.S. multifamily buildings will reach 6.25% in 2024, above the 15-year average of 5.8%. This will hurt institutional investors, who have poured billions of dollars into U.S. rental property in recent years. Apartment stocks are also underperforming. Since the buy-to-rent premium returned in early 2021. #wsj #housing #affordability #economy #interestrates #renting https://lnkd.in/exqwZrFA

Renting will be cheaper than buying a home for years to come, real estate firm says Renting will be cheaper than owning a home for a long time, according to CBRE. CBRE said that as buying costs soar, rental demand tends also to climb. The average mortgage payment was 38% higher than the average apartment rent at the end of 2023. Many would-be buyers feel that owning a house feels increasingly out of reach, and the supply shortage across the country means that, according to CBRE, it'll be more economical to rent than own for a long time. A real estate services firm note shows that the average monthly mortgage payment was 38% more than the average apartment rent at the end of 2023. The two expenses were closely aligned until 2019, and monthly mortgage payments plus taxes have skyrocketed 75%.

It’s getting even harder to afford a house. In high-cost US housing markets including Los Angeles, Honolulu, Seattle, San Jose and San Francisco, the premium for buying versus renting is surging, according to Zillow Group Inc. In California’s San Jose metro area, for instance, where the typical home costs $1.4 million, a buyer with 10% down faces a monthly mortgage payment of $8,771, more than $5,000 higher than monthly rent. Across the US, monthly rent was $81 cheaper in August than the monthly mortgage payment on a home for sale with a 30-year mortgage, assuming 10% down and a 7.18% interest rate on a house listed for about $350,000. That’s the biggest gap nationally in data going back to 2015, with soaring borrowing costs making it more expensive to purchase a home, even before taking into account taxes, insurance, and maintenance costs. Historically, those able to afford the upfront costs of buying a home — including a down payment or closing costs — were able to lock in a cheaper monthly housing bill than renters. That changed for the first time in September 2022, according to Zillow’s data. It’s yet another sign of how unaffordable real estate has become, with mortgage rates topping 7.5% for the first time since 2000. Existing homeowners are reluctant to move because they’re locked in at lower rates, and new buyers are struggling to find properties they can afford, pushing mortgage applications to a multi-decade low. With the real estate market largely frozen, many first-time buyers are stuck renting while they wait for housing costs to come down, according to Nicole Bachaud, a senior economist at Zillow. “Affordability is worse than it's ever been largely driven by the rapid increase in interest rates,” she said. “We now have a very large gap between mortgage payments and rent payments.” To be sure, homeowners’ monthly payments vary widely based on the size of their downpayment and loan terms. Those with a larger downpayment — the average earlier this year was 13% — can secure a lower monthly bill, for example. But in some of the country’s hottest housing markets, even those who can put down 20% are finding that buying is still more expensive than renting.

Should You Move or Add a Home Addition? In the current real estate landscape, where home prices are soaring to unprecedented heights amidst dwindling inventory, many homeowners are facing a dilemma: should they stay and renovate or sell and move? Complicating matters further, the prospect of forfeiting favorable mortgage rates adds another layer of apprehension to the decision-making process. However, amidst these challenges, there exists a viable solution that not only addresses these concerns but also offers a multitude of benefits – namely, building a home addition... Learn More: https://bit.ly/3VZ2bHA

Should You Move or Add a Home Addition? In the current real estate landscape, where home prices are soaring to unprecedented heights amidst dwindling inventory, many homeowners are facing a dilemma: should they stay and renovate or sell and move? Complicating matters further, the prospect of forfeiting favorable mortgage rates adds another layer of apprehension to the decision-making process. However, amidst these challenges, there exists a viable solution that not only addresses these concerns but also offers a multitude of benefits – namely, building a home addition... Learn More: https://bit.ly/3VZ2bHA

The 2023 residential real estate market in the United States, including Seattle, experienced the lowest sales activity in well over a decade. However, 2024 is appearing to be a year of recovery as interest rates for 30-year fixed rate mortgages decreased from the historic high of 8.6% in October 2023 to about 6.6% as of today. Despite low demand from Buyers, the lower supply of homes for sale in the Puget Sound area supported 6.25% home price appreciation in King County for single-family homes in 2023. Many analysts expect mortgage interest rates to decline in 2024, albeit with some volatility, to approximately +/-6%, which could improve affordability. However, as mortgage rates decrease home prices rise. Listing (Seller) activity is well below the long-term average. Almost 85% of homeowners in Washington state have a mortgage interest rate below 5%. If mortgage interest rates continue to decrease more homeowners, who want to move but have feared paying a significantly higher mortgage rate on their next home, may feel more comfortable listing their houses which will increase the supply of homes for sale. I believe 2024 will be a busier year as more Sellers find it feasible to upgrade and more Buyers feel comfortable with the monthly cost of ownership as we enter the selling season from February to June. This should produce modest increases in home values. 👉See full article with graphs.

Good news for Housing Providers: For years, the costs of renting and owning were relatively in sync. That changed in 2021 when the cost of home buying started to skyrocket. And unlike many pandemic-era trends that have since reverted to the norm, this particular one is here to stay “for some time,” according to CBRE. “With average mortgage payments 38% higher than average apartment rents as of year-end 2023, many U.S. households are continuing to rent rather than buy a home,” they wrote. “Even though the premium to buy a home may come down over the next several years based on home-price, interest-rate and rent-growth forecasts, it is expected to remain high enough to keep today’s renters renting for longer.” https://hubs.la/Q02qQ24F0