As the typical 30-year mortgage rate rises above 6.0% again this week, the gap between the average rental payment and the average mortgage payment is mounting. With mortgage payments rising faster than rents across the country, renting becomes even more cost effective for many.
The average home buyer would need a gross monthly salary of $8,000 (or $96,000 annually) to comfortable qualify for a conventional 30-year mortgage for a typically priced home with rates over 6.0%. Currently, only 35% of households make over $100,000 annually, creating a much shallower pool of buyers in the current market.
The lack of affordability is driving increased retention rates for multifamily properties. According to RealPage, nearly 55% of expiring leases in August were renewed with an average rental increase of 11%. However, we’ve likely hit the peak in the affordability gap.
Housing price increases are moderating or modestly falling in many markets. But despite a potential narrowing in the affordability gap, renting will remain substantially more cost effective for much of the public