CBRE: Persistent Gap to Continue Between Mortgage Payments and Rental Costs

Homeownership will continue to remain out of reach for many, with mortgage payments projected to exceed rental costs for at least the next five years, according to new research from CBRE.

CBRE finds that the average monthly mortgage payment for a newly purchased home has surpassed apartment rents by 38%. Historically, these costs have aligned closely. However, since late 2019, average mortgage payments, including taxes, have increased by 75%.

“The disparity between mortgage payments and rental costs presents a substantial hurdle for aspiring homeowners,” said Matt Vance, Americas head of multifamily research at CBRE. “The sharp increase in the cost of buying a home has made it increasingly difficult for individuals and families to make the transition from renting to owning.”

CBRE forecasts modest 2.8% annual multifamily rent growth over the next five years, which is in line with pre-pandemic trends. Elevated mortgage rates also are keeping homeowners in their residences longer, which has reduced the available housing stock for sale and pushed prices higher.

In addition, according to CBRE, the nation is short 3.8 million housing units, primarily in single-family and smaller multi-unit residences, which account for approximately 90% of the overall shortage. This is expected to persist until at least 2029.

As interest rates drop and home price growth slows, CBRE anticipates all regions will experience lower cost-to-buy premiums. It projects Dallas; Raleigh, North Carolina; and Chicago to see premiums return to pre-pandemic levels within five years, while Los Angeles; Austin, Texas; the San Francisco Bay Area; Seattle; and Nashville, Tennessee, are expected to maintain higher costs compared with historical trends.

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