(Photo: Brina Blum/Unsplash)
Owning your own home used to be less expensive than renting, but that no longer appears to be the case, says a new study by John Burns Real Estate Consulting.
“Now, owning a home costs $839 more per month than renting,” says Danielle Nguyen, senior research manager at John Burns.
When the COVID pandemic started, the cost of renting and owning were virtually the same, according to the real estate research firm.
What has changed? Ballooning home prices and rapidly rising mortgage rates are making home ownership more costly than ever before. Owning a home is now more expensive – compared to renting – than it was even before the 2008 real estate and financial crisis, when home prices became untethered from reality.
Nguyen says many prospective home buyers are now priced out of homeownership or are forced to purchase a smaller home in a less desirable area. Hot real estate markets like Nashville, Denver and Tampa are often out of reach for struggling consumers, forcing more Americans to turn to renting.
The Takeaway: As the Federal Reserve raises interest rates, buying a home will get even more expensive. A year ago, 30-year mortgage rates were below 3%. Now they are around 6%. While still reasonable by historical standards, that big increase is proving tough for many consumers to swallow.
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