Higher Rates Make Renting More Affordable that Homeownership
ATTOM, Irvine, Calif., said higher mortgage interest rates tipped the needle toward renting over homeownership.
The company’s 2023 Rental Affordability Report said the average three-bedroom rent is more affordable than owning a comparably sized median-priced home in 210, or 95 percent, of the 222 U.S. counties analyzed for the report.
Both renting and owning a three-bedroom home are significant financial burdens for households around the U.S., consuming more than one-third of average wages in most major housing markets. But average rents still require a significantly smaller portion of wages than major home-ownership expenses on three-bedroom properties.
That gap has emerged even as rents have risen faster than home prices over the past year in roughly half the nation.
“What a difference a year makes,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Last year our study concluded that it was more affordable to own than to rent in 60 percent of the markets analyzed. But with mortgage rates doubling, monthly payments for new homeowners rose by 45-50 percent compared to a year ago, even though home price appreciation has slowed down dramatically. This has made renter more affordable in the majority of markets, despite rental rates continuing to rise over the past year.”
The report shows that renting is more affordable in most of the country following a year of mixed market patterns around the country, flowing from a rapidly changing housing market. Average three-bedroom rents climbed more than median sales prices on single-family homes in 46 percent of the markets analyzed. That happened at a time when a decade-long run of price spikes slowed considerably across the U.S., amid rising mortgage rates, high inflation, a declining stock market and other factors that cut into what potential buyers could afford.
The report said average rents for three-bedroom homes are increasing more than median prices for single-family homes in 103 of the 222 counties analyzed in this report (46 percent). The most populous counties where three-bedroom rents are rising faster than median sales prices for single-family homes are Cook County (Chicago), Ill.; San Diego County, Calif.; Orange County, Calif. (outside Los Angeles); Kings County (Brooklyn), N.Y., and Miami-Dade County, Fla.