Report: As Mortgage Prices Soar, Renting Could Be The Better Option
According to a report by the Wall Street Journal on Oct. 22, The soaring cost of new homes is hitting prospective buyers in their wallets, as the average monthly mortgage payment now stands at a staggering 52% higher than the average monthly rent on an apartment. This concerning trend marks an all-time high based on data from the real estate firm CBRE.
In the past, the financial gap between monthly mortgage payments and apartment rents was narrower or even favored homeowners. An April report by CBRE, a prominent American commercial real estate services and investment firm, indicated that from 1996 to mid-2003, homeownership often had the advantage in monthly costs. However, a perfect storm of rising interest rates, a shortage of available housing, and surging home prices have reversed the equation, putting the dream of homeownership out of reach for many first-time buyers.
On top of this, the outlet reports the interest rate landscape has shifted significantly. For the first time in nearly two decades, the rate on a 30-year fixed mortgage reached a notable 8% this week. Goldman Sachs has also predicted that home prices will continue their ascent, with an estimated 3.5% increase by the end of 2024, unless unforeseen economic challenges arise.
Despite the high-interest rates, experts have noted that this might not be an entirely unfavorable moment to enter the housing market. Waiting for rates to drop could result in fiercer competition within the real estate market, as Daryl Fairweather, Redfin’s chief economist, pointed out.
As per David Meyer, vice president of data and analytics at the real estate investment platform BiggerPockets, there’s never a “perfect time” to buy a house. It is a decision influenced by individual circumstances and market dynamics, and prospective buyers must weigh their options carefully in the current challenging environment.