Even in 2023, the age-old argument over whether it is preferable to own a home or rent one will continue.
Despite the decline in home values, mortgage rates are anticipated to increase further. Realtor.com expected the average mortgage rate to be 7.4% in 2023, along with a growth in homebuyers’ monthly payments.
While Realtor analysts anticipate a 5.4% increase in median home prices, rental rates would rise countrywide by 6.3%. Redfin’s rental-market tracker indicated that the typical monthly rent in October was USD 1,983 and a 6.3% rise would raise it to USD 2,108. The third quarter of 2022 saw a median home price of USD 454,900, according to the Federal Reserve Bank of St. Louis. A typical US home would cost USD 479,464 after a 5.4% increase.
If both buying and renting get more expensive in 2023, the choice will get complicated as well. Rents will rise faster than home prices, but home ownership has its financial burdens.
Renters are frequently persuaded to consider buying a property by raising their monthly expenses.
As per Realtor, the rent growth rate has been higher than usual. Mortgage costs will rise by 28% in 2023, bringing the average monthly payment to roughly USD 2,430.
According to data from the real estate consulting company John Burns Real Estate Consulting, the monthly costs of buying a property versus renting were “virtually identical” in 2021. However, the monthly cost difference between buying and renting a property is now USD 839.
Realtor says the scenario was flipped between 2013 and 2019 when property prices rose by 6.4% and rentals increased by 5%.
The data from John Burns was published on LinkedIn by Jay Parsons, the head of economics for the real estate technology platform RealPage.
According to Parsons, the cost of becoming a homeowner is significantly more than renting due to rising mortgage rates and housing prices.
Although a 6.3% rent rise is not ideal for tenants, the alternative can be worse.
One year of rent rises is not sufficient to convince somebody that they must buy immediately, Hale said.