On average, across the country, it costs 25% more to own than rent, in terms of monthly payments. Still, there are a handful of cities in which is it cheaper to own than rent. Those cities are Detroit, Philadelphia, Cleveland and Houston, according to Redfin.
Values did not go up as quickly in those cities than others. Also, some of them have large high crime areas that bring down the average prices that are tracked in such studies.
The rate for a 30-year loan is over 7%. It is now more than twice as expensive to finance a home than in 2021 and early 2022 when rates were about 3%.
In the San Jose, California area, Silicon Valley, it is much more expensive to own than rent. Monthly mortgage payments for owning are typically 165% the cost of renting. Those moving to Silicon Valley should strongly consider renting and letting the landlord subsidize you.
Rent versus price ratios are always changing. When interest rates went down to 3%, there was a rush of demand into real estate, which caused values to soar. With interest rates now high, values should come down but they are being sticky because people who have low mortgage rates don’t want to sell. Move up buyers and downsizing buyers are both hesitating to sell because of the high interest rates on their new loan. There could be an avalanche of selling if interest rates stay high and a recession is caused. Out of work employees may need to sell to move someone else where they can find a job. So much about real estate is caused by Fed actions yet renters look to politicians to do something about housing affordability. Politicians often take actions that have unintended consequences.
Real estate values are slowly starting to come down. They are coming down quicker in some markets than others, such as San Francisco, San Jose, Boise, and Austin.
Even though Austin has a strong economy and stronger job growth than other parts of the country, there is a lot of real estate inventory. If values can come down in Austin, they can come down everywhere.