The Blubber

US housing market is so expensive that home prices would have to crash 35% or mortgage rates drop four percentage points to make it considered affordable, per BI.

It's now cheaper to rent than buy a home, and the gap hasn’t been this big since at least 2015, per Bloomberg.


In high-priced housing markets in the United States, such as Los Angeles, Honolulu, Seattle, San Jose, and San Francisco, the financial advantage of buying a home versus renting one is growing significantly, as reported by Zillow Group Inc. For example, in the San Jose metro area in California, where the average home price stands at $1.4 million, a buyer with a 10% down payment would be looking at a monthly mortgage payment of $8,771. This is over $5,000 higher than the monthly rent.

On a national scale, the monthly rent in August was $81 cheaper than the monthly mortgage payment on a home for sale with a 30-year mortgage. This is based on the assumption of a 10% down payment and a 7.18% interest rate for a house listed at around $350,000. This represents the largest gap in data dating back to 2015. Rising borrowing costs are contributing to the increased expenses associated with buying a home, even before considering taxes, insurance, and maintenance costs.

Traditionally, individuals who could manage the initial expenses of purchasing a home, such as a down payment or closing costs, could enjoy a more affordable monthly housing expenditure compared to renting. However, this changed for the first time in September 2022, as indicated by Zillow's data.

As the real estate market experiences limited activity, many first-time homebuyers are compelled to rent while they await a potential decrease in housing costs. 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. We now have a very large gap between mortgage payments and rent payments."

It is important to note that homeowners' monthly payments can vary widely based on factors like the size of their down payment and loan terms. Those with a larger down payment—average 13% earlier this year—can secure a more manageable monthly bill. Nonetheless, even in some of the country's most competitive housing markets, buyers who can provide a 20% down payment are finding that purchasing remains costlier than renting.

Read more: https://unusualwhales.com/news/its-now-cheaper-to-rent-than-buy-a-home-and-the-gap-hasnt-been-this-big-since-at-least-2015