The Real Deal New York

Renting more expensive than buying in most US metro areas

Renters spend 30 percent of income on monthly charge; buyers fork out half that on mortgages
September 02, 2014 08:00AM

Buying is becoming a better bargain than renting in many metropolitan areas in the U.S., according to a new report.

In 94 of the nation’s 100 biggest metros, renting is proving more costly than buying, according to a Zillow report. Unlike the housing market, rentals did not suffer a large drop in prices following the financial crisis, and so rental rates have steadily trended upwards. Renters, the study found, spend 29.5 percent of their income on rent on average, compared to buyers who spent 15.3 percent on their income on home mortgages.

“As rents keep rising, along with interest rates and home values, saving for a down payment and attaining home ownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt,” Stan Humphries, Zillow chief economist, said in a statement. “In order to combat this phenomenon, wages need to grow more quickly than they are, particularly for renters, and growth in home values will need to slow.”

Another rent increase driver is a recent uptick in the number of all-cash home buyers. In the second quarter of 2014, 38 percent of all sales were cash purchases — although that’s down from 42 percent during the first quarter. Then again, all-cash buys during the first three months of the year hit a level not seen in three years. [Main St.] Julie Strickland

  • Intheknow

    This is a false comparison:

    1) Mortgage expense is usually less than half the maintenance costs associated with a property. Especially when a large chunk of homebuyers have had their credit scores messed up by the mortgage crisis, so good luck getting a decent spread over prime at a reasonable LTV.

    2) Mortgage payments (at least in the early years) are mostly comprised of interest payments, meaning you aren’t really buying the property, just paying the bank for “using” the property while you afford to pay off the owed principal.

    3) You are “stuck” with the property until you sell it or get foreclosed. Not exactly a position a lot of people want to risk in the “new highs” we are seeing.