In just a year, renting has become far cheaper than owning

Expense was about the same until the housing market went wild: report

(iStock/Photo Illustration by Steven Dilakian for The Real Deal)
(iStock/Photo Illustration by Steven Dilakian for The Real Deal)

The rising cost of owning a home is making renting more attractive than it has been in two decades, according to a new report.

Owning a home in April cost $839 more per month than renting, an analysis by John Burns Real Estate Consulting found. A year earlier, the difference between the two was negligible.

The differential between owning and renting is nearly $200 higher than at any point this century.

The report calculated the costs typically associated with renting and owning. For renting, it looked at single-family listings and the cost of renter’s insurance. For owning, the report assumed a purchase price of 80 percent of the median home price in an area, a 5 percent down payment and a 30-year, fixed-rate mortgage. Taxes, insurance, mortgage insurance (required if the down payment is less than 20 percent) and maintenance costs were factored in.

Across the country, it was 31 percent more expensive to own than rent in April, according to the report. The cost to own a home increased 37 percent from a year before, while the company’s single-family rent index rose only 6 percent.

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The most glaring disparity is in the Raleigh-Durham metro, where it was 42 percent more expensive to own than rent in April. The other cities with the biggest disparities were Nashville and Denver.

In both Miami and Austin, it was 30 percent more expensive to own than rent. Texas was well represented on the list, featuring a 29 percent difference in Dallas and 25 percent difference in Houston. Chicago’s ownership premium was also high, at 23 percent.

The report is more evidence of the rising cost of housing. A recent report from Zillow revealed that housing affordability was at a 15-year low because of increasing prices and mortgage payments.

Mortgage rates have been flirting with the 6 percent mark, roughly twice what they were late last year. While rates are still modest historically, they have triggered sticker shock among some home shoppers.

According to Zillow, monthly mortgage payments took 28 percent of homeowners’ income in April; more than 30 percent is considered burdensome. Mortgage payments exceeded monthly rent in all but five states. Three years ago, rent was higher than mortgage payments in a small majority of states.

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