October 23rd 2023.
The cost of buying a new home is hitting prospective buyers hard. According to a report by the Wall Street Journal, the average monthly mortgage payment is now 52% higher than the average monthly rent on an apartment. This marks an all-time high based on data from the real estate firm CBRE.
Just a few years ago, the financial gap between monthly mortgage payments and apartment rents was narrower or even favored homeowners. An April report by CBRE indicated that from 1996 to mid-2003, homeownership was often the more financially beneficial route.
Unfortunately, this has changed drastically due to a perfect storm of rising interest rates, a shortage of available housing, and surging home prices. This has put the dream of homeownership out of reach for many first-time buyers. On top of this, the outlet reports the interest rate landscape has shifted significantly. For the first time in nearly two decades, the rate on a 30-year fixed mortgage reached a notable 8% this week. Goldman Sachs also predicts that home prices will continue to rise, with an estimated 3.5% increase by the end of 2024.
Despite the high-interest rates, experts have pointed out that this might not be an entirely unfavorable moment to enter the housing market. Waiting for rates to drop could result in fiercer competition within the real estate market, as Daryl Fairweather, Redfin's chief economist, pointed out. David Meyer, vice president of data and analytics at the real estate investment platform BiggerPockets, noted that there's never a "perfect time" to buy a house. It is a decision influenced by individual circumstances and market dynamics, and prospective buyers must weigh their options carefully in the current challenging environment.
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