New Homebuyers’ Mortgage Payments Rising Quicker Than Rents


The national median monthly mortgage payment for homebuyers rose 67% faster than rents during the same period, according to a new report from Redfin. This is despite mortgage interest rates falling back to near-record lows.

This is the seventh consecutive month that growth in median mortgage payments for new homebuyers has outpaced that of rents. However, in August, growth in rents was speeding up while growth in mortgage payments was slowing.

Mortgage payments for new homebuyers outpaced rent price increases in 25 of the 50 largest metro areas in the U.S. during August. Nationwide, the average monthly rent of $1,836 is still larger than the $1,494 median monthly mortgage payment for new homebuyers.

“Record-high home price growth has priced many renters out of buying, leaving many facing higher rents this summer as more households look to move thanks to the rise of remote and flexible work arrangements,” observes Taylor Marr, Redfin’s lead economist. “The end of pandemic eviction moratoriums and mortgage forbearance may also cause landlords to raise rents to cover the risk of future tenant protections or make up for lost rental income.”

Most of the metro areas with the biggest increases in rent were warm, affordable destinations in Florida, California and Arizona that have benefitted from a surge in migration thanks to a newly mobile workforce. Florida rents were up the most from a year earlier in Tampa (29.2%), followed by West Palm Beach, Miami and Fort Lauderdale (all at 28.9%).

However, rents are not increasing everywhere. A few metro areas saw decreases, including expensive areas where people are moving away like the Bay Area in California. Rents were down in Pittsburgh in Pennsylvania (-5%), followed by San Jose in California (-3%) and St. Louis in Missouri (-1%).

These price drops are the rare exception to nearly across-the-board increases in housing costs for both rentals and homebuying and are not likely to last as the economy recovers from the pandemic. For those who need to move and are looking for a place to rent, now may be a good time to check out some traditionally more expensive coastal metro areas such as the Bay Area, Boston and Washington, D.C., where rental costs are rising slower than the 8.5% national average.

Read the full report here.

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