January 16, 2024
Do you look at today’s mortgage rates, the housing market, and current economic headlines and wonder why you should consider purchasing a home in the new year? You aren’t alone.
There are several economic factors at work in the American housing market. In 2024, one of those factors has to do with the difference between the cost of renting compared to owning a home.
That gap has always been there in one degree or another. However, in the year 2024, that gap seems more attention-worthy. Especially for anyone struggling to decide which makes more sense, renting or owning a home.
Compare The Numbers
Forbes.com notes that home loan interest rates and home loan prices changed so much in the previous year that there seems to be a widening gap between how much a mortgage may cost each month compared to a rental lease has reached a historic high mark.
From mid-December 2023, that difference hit 52%, at least according to Forbes. That number might not seem relevant all on its own. But compare that with the fact that in 2021, the number was in the negative, and a picture begins to emerge.
The difference between renting and owning in the year 2021, was -1%. You read that correctly, negative one percent.
Remember, that percentage shows the cost difference between a monthly rental expense and a mortgage.
It’s not applicable everywhere, but this is a factor you can use to help determine housing affordability. Is the housing market meeting consumer expectations in the early new year? The numbers you read above might convince some that it’s better to rent instead of own, at least for now. But for some that’s not the right advice. Why?
What You See Isn’t Always What You Get For Housing Numbers
The same Forbes report provides some additional clarity for the numbers above. How should consumers interpret such a large divide between renting and owning?
In the 3rd quarter of 2023, Forbes noted, “it cost $1,138 more per month to own a new home than to pay rent on a new lease, once taxes and private mortgage insurance, or PMI, are figured in…”
You could be forgiven for assuming this is an argument for renting over owning. And if the numbers above contained the entire narrative about this situation, it would be easy to take the information above as an encouragement to rent and save money this year.
The Forbes article notes a trend toward smaller rental inventory in 2024. Could fewer available rental units translate into a tougher search for housing if you are committed to renting? Some may grow weary of the apartment-hunting process enough to at least review home loan options to compare costs.
If 2024 develops into a time where landlords have more power over renters and those who rent are competing more for the existing inventory of rental units, the concept of home ownership could seea renewed interest for these (currently) undecided house hunters.
Some will choose to buy instead of rent because they don’t want to fight their fellow renters for the same potentially smaller amount of rental properties available.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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