The industry has seen the cost of renting skyrocket and mortgage rates fall to near-historic lows over the last several months. The combination of rising rents and rock bottom mortgage rates have made it cheaper to own a home than to rent a single-family home in more than four-fifths of the states, according to a recent survey from GOBankingrates.com.
The survey of all 50 states plus the District of Columbia using May 2016 data from Zillow for median home list prices and median single-family rents plus Zillow’s June 24 mortgage rates data showed that in 42 states, the median monthly mortgage payment costs less than the median monthly rent on a single-family home. In eight states plus the District of Columbia, it is more expensive to rent.
Despite the median monthly mortgage payment being cheaper than the cost of rent all but eight states, the age-old problem of saving for a down payment is still preventing would-be homebuyers from making their purchase.
“The good news is mortgage rates are near historic lows,” said Kristen Bonner, who was the lead researcher for the study. “Unfortunately, Americans are still running into road blocks with being able to save enough money to afford a down payment, and are therefore forced to rent.”
The data showed that Hawaii was the state where renters saved the most over owning, with average savings of $515 per month. Montana was second with monthly savings of $248 and Utah was third with $242.
When it came to owners saving more than renters, New York was first on the list by far with monthly savings of $1,635. Research showed that the median cost to rent a single-family home in New York was $3,295 per month, more than double the cost of median monthly mortgage payment. Second on that list was Massachusetts with savings of $559 per month when owning over renting, and Illinois was third at $522. Seven out of the top 10 states where owning was cheaper than renting were eastern states.
Mortgage rates have been near historic lows for quite some time now,” said Dr. Svenja Gudell, Chief Economist with Zillow. “This makes those monthly payments lower than monthly rent.”
Renting and owning costs were similar in Arizona, where it was only $27 more per month to rent than to own on average, and in South Dakota, where was only $67 more per month to rent.
Click here to view a state-by-state price breakdown.