After more than a year of historic property price growth, mortgage payment amounts have accelerated almost twice as fast as rent since August 2020, according to Redfin.
As the pandemic pushed interest rates to record lows and consumer demand intensified, the national median monthly mortgage cost – assuming a 5% down payment – rose 14.8% annually in August versus 8.5% for rents. In August 2020, these amounts had increased by around 2% for mortgages and 4% for rents compared to the previous year. Last month's average monthly home loan payment rose to $ 1,494 from $ 1,300 a year ago, while the average monthly rent rose from $ 1,692 to $ 1,836 per year. Home loan rates exceeded rents in only 24 of the 50 largest metropolitan areas.
“Shift in housing preferences and simply not enough homes in the market have created these expensive and competitive conditions,” Redfin’s chief economist Daryl Fairweather said in a statement to NMN. "We saw rents drop in the most expensive cities as people flocked to the suburbs and more rural areas where it's more common to own a home than rent one."
In general, areas with warmer climates and better affordability experienced waves of migration due to the remote working conditions of COVID-19, Fairweather added.
Austin, Texas led the country with median mortgage payments change of 34% year over year. As the Lone Star State capital's booming tech scene brings an influx of businesses and workers, it saw monumental growth in value in 2021, which is expected to continue in 2022. Phoenix came in second with a 23.3% increase, followed by 19.4% in Las Vegas. On the flip side, the average home loan amount in Milwaukee fell 0.6%, followed by a 0.4% increase in San Francisco and 3.6% in Baltimore.
The highest average mortgage payments were all in California. San Francisco led the country with an average monthly mortgage payment of $ 5,984 in August, followed by $ 5,326 in San Jose, $ 3,728 in Oakland, $ 3,570 in Anaheim, $ 3,217 in Los Angeles, and $ 2,943 in San Diego. The bottom six all fell below $ 1,000. Detroit was the cheapest place for borrowers, with a median of $ 714 per month. Next up was Cleveland for $ 785, Pittsburgh for $ 863, St. Louis for $ 902, Cincinnati for $ 973, and Indianapolis for $ 981.
Florida saw the largest rental growth as Tampa grew 29.2%, followed by 28.9% in Miami, West Palm Beach and Fort Lauderdale and 26.8% in Jacksonville. Rent increases were down in three cities, with a 5.1% decrease in Pittsburgh, 2.9% in San Jose, and 0.5% in St. Louis. Boston – which had the shortest time to sell homes in the first half of 2021 – had the highest average monthly rent at $ 3,551. San Francisco and Oakland followed in a tie at $ 3,530. The lowest average monthly rents were recorded in San Antonio at $ 1,255 per month, Indianapolis at $ 1,266, and Cincinnati at $ 1,338.
According to a recent study by the Federal Housing Finance Agency, property values across the country have grown quarterly over the past decade. This steady upward move, coupled with accelerated growth in the short term, is pricing out many potential buyers and allowing landlords to increase rents as well, Redfin lead economist Taylor Marr said in the report.
In addition, "the end of the pandemic eviction moratoria and mortgage deferral could also result in landlords increasing rents to cover the risk of future tenant protection or to compensate for lost rental income," said Marr.