(AP) – The real estate market was one of the industries hit hardest by the COVID-19 pandemic. Housing and rental prices skyrocketed in the years immediately after the pandemic. However, Realtor.com has some good news for renters: rental prices are finally dropping. Mortgages on starter homes in the biggest cities cost $1,027 more than the average monthly rent in February.
Zillow places the median monthly rent in the United States at $2,075, That’s still $586 cheaper than the average mortgage of about $2,661 for a 30-years on a fixed 7% interest rate. Zillow estimates this is a $75 year-over-year decrease. Even when factoring in the average cost of renter’s insurance, which is about $219 per year, it’s still cheaper than a mortgage payment.
A lower rent payment is just one advantage of rental housing. Others include no worries about maintenance, property value, down payments, and property taxes. For those who don’t want all the responsibilities of homeownership, renting may be an attractive — and cheaper — option.
Danielle Hale, Chief Economist at Realtor.com, says, “With rents continuing to fall and the cost of buying a home remaining high, exacerbated by the rise in mortgage rates in the later half of 2023, renting a home is now a more cost-effective option in all major U.S. markets.”
Where the Rent Is Cheaper
The Realtor.com report shows the metro region around Austin, Texas, had the widest gap between mortgage payments and monthly rent. This area also includes the towns Round Rock and Georgetown, where people can save as much as $2,165 per month — a gap of 141.5%.
The gap is 121% for residents in the Seattle-Tacoma-Bellevue, Washington metro region. A mortgage payment may be up to $2,422 more than the average monthly rental price.
The Phoenix, Arizona, metro area is third on the list. Renters there pay 99% less in rent than in mortgage payments.
Although California is the most expensive state in the U.S., Bay Area residents pay $2,689 less rent. That’s a 95.5% savings in house payments.
The Los Angeles-Long Beach-Anaheim metro area is fifth on the list. Renters in those cities pay $2,539 less — an 89.7% difference.
Residents in the Birmingham-Hoover, Alabama metro area and those in Baltimore, Maryland, St. Louis, Missouri, and Pittsburgh, Pennsylvania, have the smallest differences in rent vs. mortgage payments. Birmingham residents will save 14% if they rent, while Pittsburgh renters save 1.3% compared to a house payment.
So Why Buy?
Most people who have rented different residences for any length of time have probably had “that” landlord or rental company. The landlord or company doesn’t make needed repairs, doesn’t deposit the rent in a timely fashion, has strange rules, and gets picky about what they consider “damage” when the renter moves out and doesn’t return security deposits.
Homeowners don’t have those issues. While they pay for their own repairs, they have freedom over their homes. While homeowners associations (HOA) exist, many homes and neighbors aren’t bound by the strict rules of an HOA.
Plus, a home is an investment and can help build wealth. Hale says, “…it [renting] does not bring the benefit of housing wealth gains over time that owning does.” Homeowners build equity with every mortgage payment, as well as get tax benefits. Plus, fixed-rate mortgage payments don’t change with the economy and remain consistent throughout the loan’s length.
Finding the Right Rental
Finding the right place to live can be a long process for those who have decided to start renting. Renters need to consider whether they would rather live in an apartment complex, townhouse, duplex, or detached house.
According to Redfin, renters should stay within their budgets when looking at a new place. When you sign a lease, you have to pay the security deposit and sometimes first — and possibly last — month’s rent. Renters shouldn’t look at properties they know will break the bank, lest they fall in love with a place they can’t afford but can’t leave behind.
Redfin also recommends renters start the process — if possible, look for other places about 60 days before they plan to move. Apartment complexes may not know what units will be available until 30 to 60 days before a tenant moves.
If the person is moving to a new city, they should consult a local realtor familiar with the area. This gives clarity on rental prices and what they should expect to pay for the type of property they want. They may learn about local coffee shops and restaurants in the area, which might sweeten the deal.
Renters should take a complete tour of the house or apartment before they agree to anything. They should ask questions about the property and get satisfactory answers. The landlord or rental company should agree in writing to make any necessary repairs to be completed, if not before the tenant moves in, then by a firm date afterward.
This article was produced by Media Decision and syndicated by Wealth of Geeks.
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