Big Rent Increases Convince More People to Buy
More renters are wondering: “What happens next year if my rent went up $200 this year? And what do I have to show for this lost money anyway?
NEW YORK – More renters are making moves toward homeownership quickly, pressured by rising mortgage rates on the buying side and skyrocketing monthly payments on the rent side.
Average monthly rents climbed more than 14% year-over-year in December 2021, reaching $1,877. Miami and Austin, Texas, saw rents surge more than 30% over the past year.
Economists point to homeownership as a way to stave off inflation and build wealth, The Wall Street Journal reports. But higher rents make it tougher to save for a down payment to buy a home.
Real estate pro Brooke Baenen in Green Bay, Wis., says one of her first-time homebuyer clients – in her 40s and a lifelong renter – started looking to buy a home after her rent skyrocketed. At first, the client’s rent rose by $50 a month, and then by $200 a month. Baenen says she’s had other clients in similar situations, paying higher prices for small apartments with the cost similar to big-city prices.
Many renters find that a mortgage payment, with historically low interest rates still under 4%, may cost them about the same as, or less than, their increased rental costs.
“If you’re spending $2,400 a month in rent, that could be equity in a home,” says Audrey Chaney, a real estate professional at Realty ONE GroupComplete and Acre & Co. in Sacramento, Calif. “If you do that for two years, it’s over $50,000.”
Source: “How Rent Hikes Make Buying a House Even Harder,” The Wall Street Journal (Feb. 2, 2022) [Log-in required.]
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