What a difference a year makes.
In February 2019, we reported on how it was increasingly difficult to find a market where it made more sense to buy than rent.
Fast forward 16 months and one pandemic later, and it’s safe to say that the rent-versus-buy gap is only shrinking with each passing day.
According to realtor.com, over 80% of large counties saw the gap between the cost of renting vs. buying a home shrink in the first quarter of 2020. And that was at the beginning of the COVID-19 pandemic’s impact on the housing market.
Since the end of the first quarter, of course, COVID-19 has dramatically and further affected the economy. As such, it remains to be seen just how local housing markets calibrate to new conditions, realtor.com economic analyst Nicolas Bedo writes in the company’s first-quarter report.
Certainly one factor contributing to a further tightening of the gap is the fact that mortgage interest rates continue to dip. As of June 25, the average rate for a 30-year fixed mortgage remained at an all-time low at 3.13%.
Meanwhile, rents are dropping, but not at the same pace that mortgage rates are declining. Certain markets are seeing more rent decreases than others, such as Boston, Detroit, New York, Salt Lake City, San Francisco and San Jose, California.
For some, the lower interest rates make purchasing a home more economically viable and practical than continuing to rent, so it’s not surprising that we saw U.S. home prices actually grow by 5.5% in April despite the pandemic.
According to realtor.com, the monthly cost to purchase the U.S. median home was $1,584 in the first quarter of 2020, compared to the median monthly rent of $1,391. On average, buying the median priced home accounts for 29% of the national median income, while renting accounts for 25%.