Although rising home prices and mortgage rates have deterred many home buyers from moving forward with a purchase, it is likely the rapidly evolving housing market that has many nervous. For many home buyers, there are distinct memories of the housing collapse seen in 2008. While the current housing market does not share many of the same attributes that led to the last housing collapse, the market has certainly undergone some significant and abrupt changes over the past six months or so. The end result has been a reversal in buyer sentiment with houses staying on the market for longer periods of time.
More people are opting to rent
The average 30-year fixed mortgage rate went from 3.22% on January 6, 2022 to 5.55% on August 25, 2022 according to Freddie Mac. As a result, existing home sales fell for the sixth consecutive month with sales down 6% from June and 20% from one year ago. With less buyers in the market, more than 15% of home sellers dropped their asking price in the 97 largest U.S. metropolitan areas, according to a report. These factors have led to many more Americans opting to rent instead of buy. Essentially, many buyers are taking a “watch & wait” approach to the housing market.
The challenge with renting is that the increasing demand for rentals is also driving up prices. This will ultimately make it harder for renters to save for a home purchase. The median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year-over-year to a record high of $2,002. As of July, this figure is now up 14% year-over-year to $2,032.
Nationally, it is more expensive to buy than rent in terms of monthly payments. Assuming a 5% down payment, the average national monthly payment to buy is $2,316 whereas the average monthly rent is $2,016. With this said, in markets such as Fort Lauderdale, FL & Miami, FL it is still cheaper to buy than rent.
A general rule of thumb in the current market is that if you are planning on living in your home for 2 years or less, it may be better to rent. Alternatively, if you plan on living in a home for 5 years or more, it is better to buy. Of course, every market is different so it will be critical to have a local, knowledgeable, and experienced real estate agent to guide you. Are you in South Florida? Be sure to contact one of our experts at Live South Florida Realty, Inc. Don’t forget to also download the free Florida Home Search app as well!