It’s no secret that the housing market has come to a near standstill, with high interest rates and a lack of supply of homes for sale driving up prices. Conversely, the rental market has cooled significantly after rising rents at breakneck speed in 2021 and 2022.
Consider these data points. According to the National Association of Realtors, Existing housing supply is only 3.0 months, down from 4.6 at the beginning of the pandemic. The S&P CoreLogic Case-Shiller Home Price Index hit a record high in December. The average interest rate for a 30-year mortgage is hovering around 7%.
However, according to Zumper year-over-year data, rent growth has stagnated. Two-bedroom rent growth has fallen to just above 0%, and one-bedroom rent growth has turned negative.
The disconnect between the two markets leaves potential buyers with a simple question: “Where are mortgage payments cheaper than renting?”
BiggerPockets has crunched the data to provide answers for cost-conscious residents. Using Zillow’s January home price and rent data for metropolitan areas, calculate your monthly mortgage payment assuming a 7% interest rate and compare it to rents in the 50 largest metropolitan areas in the United States. Did.
However, the repayment amount of a home loan largely depends on the down payment.According to the National Association of Realtors, the average down payment is 6% for first-time buyers, while for repeat buyers it is 17%. This makes intuitive sense, as repeat buyers are more likely to accumulate equity, especially in homes purchased in a low interest rate environment.
The two maps show where it’s more expensive to buy (blue dots) and where it’s more expensive to rent (red dots) for both first-time and repeat buyers. The size of the dot represents how much higher the cost would be in a particular scenario for that metropolitan area.
Use these as a good indicator of what it takes to get into the market and how easy your cash flow will be when you’re there. Keep in mind that in markets where buying is cheaper than renting, you’re more likely to get cash flow.
market mapping
Note by BiggerPockets: These are the opinions expressed by the author and do not necessarily represent the opinions of BiggerPockets.