Renters Paying Substantially More While Owning Costs Less

Renters Paying Substantially More While Owning Costs Less
Renters Paying Substantially More While Owning Costs Less | MyKCM

In a recent InsightsBlog, CoreLogic reported that rentprices have skyrocketed since 2005. Meanwhile, the typical mortgagepayment has actually decreased.

“CoreLogic’s national rent index was up 36% inDecember 2018 compared with December 2005, while the typicalmortgage payment was down 4% over that period.”

Renters Paying Substantially More While Owning Costs Less | MyKCM

Why the difference between the costs of renting versusowning?

It makes sense that rents have risen. However, how did mortgagepayments decrease? CoreLogicexplained:

“It’s mainly because mortgage rates back inDecember 2005 were significantly higher, averaging 6.3% for afixed-rate 30-year loan, compared with 4.6% in December2018.

The national median sale price in December 2005 –$190,000 – was lower than the $220,305 median in December2018, but because of higher mortgage rates in 2005 the typicalmonthly mortgage payment was slightly higher back then – $941– compared with $904 in December 2018.”

Additionally, a recent report by the NationalAssociation of Realtors (NAR) showed that purchasing ahome requires less of your monthly paycheck.

According to the Economists’ OutlookBlog, NAR’s February2019 Housing Affordability Indexshowed thatthe “percentage of income needed” topay the typical mortgage has decreased the last three months.

  • November – 17.3%
  • December – 16.9%
  • January – 16.2%
  • February – 15.9%

Bottom Line

What does this all mean to the current housing market? Wethink First American said it best ina post last week:

“The mortgage rate-driven affordability surge hasarrived just in time… Rising affordability has alreadybenefited home buyers and, if the lower rate environment persists,we’re in for a great spring home-buyingseason.”

Renting