Should you rent or buy a house?The answer is getting more and more complicated

Read Time:2 Minute, 44 Second


House prices and rents have soared, but house prices have risen faster. This is closing the affordability gap between home ownership and renting.

In a little over three-quarters of the country, the affordability of median-priced single-family homes is lower than historical levels. According to data from real estate data and analysis company ATTOM, this proportion is higher than 39% at the end of 2020 and the highest share in 13 years.

Rents are also rising, especially for single-family houses, which are now in much higher demand due to the pandemic. CoreLogic data shows that in October 2021, single-family residential rental growth hit a record high for the sixth time in a row, reaching 10.9%, and autumn is usually the season for housing sales to slow down.

So, which is more affordable to own or rent?

Rental houses in Corona Del Mar, California.

Scott Mlin | NBC Finance Channel

The answer is to have, but the affordability gap is rapidly closing. According to ATTOM data, among 58% of people in the country, the average rent of a mid-priced house is more affordable than the average rent of a three-bedroom house, which includes all the cost of ownership, including monthly mortgage payments, property taxes and homeowners’ insurance.

This affordability is largely due to historically low mortgage interest rates in the past few years. However, according to the Mortgage News Daily, interest rates are now beginning to rise and have risen by more than half a percentage point from a year ago.

Todd Teta, Chief Product Officer of ATTOM, said: “The trend is slowly turning to renters, which may be the main force to ease price increases in 2022. Prices can only rise so much before renting becomes easier.” “However, for now. In terms of wage increases and interest rates of around 3% are enough to offset recent price increases and keep ownership on the positive side of the affordable ledger, rather than renting.”

However, all real estate is local. Owning a house is more affordable than renting a house in the suburbs and rural areas, but it is cheaper to rent a house in big cities.

This is the case in Los Angeles, Chicago, Phoenix and San Diego. But in Houston, San Antonio, Detroit, Philadelphia and Tampa, home ownership is more affordable.

However, the ATTOM report is about affordability, not about whether owning or renting is a better financial option. Historically, owning a house can accumulate wealth, but some people believe that it may be more profitable to put the down payment of the house in the stock market or other higher-yielding investments. The calculation usually depends on how long you intend to own the house. The longer you have, the better returns you will see.

The problem facing potential buyers, especially first-time home buyers, is that it is becoming more and more difficult to save money to pay down payments.

George Ratiu, Economic Research Manager at Realtor.com, said: “For buyers who are still shocked by the overheated market and high prices last year, fast-paced inflation is squeezing their budgets. And offset the impact of low mortgage interest rates.”


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