Real Estate

Realtor.com: Home prices are rising 3 times faster than rents

This could mean further reinforcement for multifamily demand for the foreseeable future

Good news for the multifamily industry: According to an analysis from Realtor.com, home prices are rising at three times the rate of rent growth.

A new analysis by the real estate company’s research division shows that the monthly costs of buying a home have risen by 14% over the past year while rents have only increased by 4%.

This likely means two things:

1. People are struggling to buy homes, so they must continue to rent.

2. If home prices are increasing at three times the rate of rent growth, there may be room left for rent growth going forward.

"Even setting aside big upfront expenses like a down payment, rising month-by-month costs are likely keeping many people from purchasing," Realtor.com Chief Economist Danielle Hale said in a statement.

Rent vs buy infographic

(Courtesy of Realtor.com)

"Today only 41% of people live in a county where the median income family can afford to buy a home at the median list price, and affordability declined significantly over the past year. Since home ownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long. Still, even in places where renting is currently more affordable, rising home prices provide wealth building opportunity for home buyers," she added.

According to the report, in July the median monthly cost to buy a home was $1,647 while the cost to rent was $1,267 per month.

Over the course of the last year, 289 U.S. counties have flipped from being more affordable to buy to being more affordable to rent, so now just 35% of the counties in the U.S. have cheaper monthly costs for buying than renting.

This should cement demand for rental units into place for the foreseeable future.

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