If you’re debating between buying and renting right now, consider this: The average rent in the U.S. is $1,556 per month, up 0.9% since last year, according to Apartments.com, while the 澳洲幸运5官方开奖结果体彩网:average 30-year fixe🐎d mortgage rate is now hovering around 6.50%, down about 1.2 percentage points from this time last year. With lower mortgage rates, and potentially more decreases in the coming months, it may be surprising to hear that the pric🌜e of rent is still increasing. Aren’t more people apꦍplying for mortgages again instead of apartments? It’s not just supply and demand, though, as inflation and other factors can impact the price of rent.

The Federal Reserve cut rates in September for the first time since 2020. Mortgage rates began dropping ahead of this move, as the 澳洲幸运5官方开奖结果体彩网:housing market is closely tied to 🌃interest rates. Fluctuations in Fed-determined rates can also affect rental prices as e💫conom♛ic factors shift. 

With more Fed rate cuts expected as early as November, mortgage rates may follow. If they do, what implications will this have for homeowners choosing betweꦅen a mortgage and renting?

Rents Are Up, Mortgage Rates Are Down

While the average price of rent has increased, the 0.9% year-over-year growth is surprisingly modest, given recent trends and historical averages. Several factors influence thi൩s rise, including inflation, interest rates, and the cost of living, which affect everything from building materials t🎀o maintenance and insurance. Rental prices are also closely tied to the availability of apartments.

Rental rates surged during the pandemic, reaching a peak year-over-year increase of 17.7% in March 2022. During 2022 and 2023, 澳洲幸运5官方开奖结果体彩网:mortgage rates increased, which may have pushed renters to stay put, rather than buy and take on a high interest rate loan in a high-priceꦅd housing m꧒arket. 

But mortgage rates have come down in the last several months, and yet renters have still stayed put—the rental vacancy rate has held firm at 6.6% since the third quarter of 2023, even despite more rate cuts in the future. So, is renting the smart idea?

“The federal government is anticipating three more rate cuts by the end of January,” said Austin-based realtor Amy Dru🌺mmond. “That, coupled with the market historically picking up after the holidays, we are anticipating 2025 to be a better year for the housing market.”

Lower mortgage rates have already spurred more people to consider buying a home. Mortgage applications for the week ending Oct. 4 were up 8% from last year, according to the Mortgage Bankers Association. But is that the best move?

“You date the rate, you marry the home,” Drummond said. “There is the option to refinan🐼ce when and if the rates come down. But you need to remember, when rates come down, that is when the buyer pool grows and you’re back to mu🔯ltiple offer situations, potentially losing out on a home you love.”

Should You Rent or Buy Right Now?

The rent vs. buy decision is not one size fits all. Potential buyers need to weigh factors like costs, fees, and💞 long-term plans. For renters, common costs may include security deposits, first and last month’s rent, application fees, renter’s insurance, utilitie⭕s, and parking fees. 

Potential homeowners should account for the down payment, closing costs, private mortgage insurance (PMI, if applicable), property taxes, 澳洲幸运5官方开奖结果体彩网:homeowners insurance, maintenance and repai𓂃rs, and homeowner association (HOA) fees (if applicable).

“Inspections can’t predict a roof leak or HVAC going out in the years to come,” Drummond said.  “When it comes down to the decision betweenꦇ renti𝓀ng vs. buying, it’s important to work with an agent and financial advisor who can educate you about the process. There are also certain tax benefits to homeownership to discuss with your CPA.” 

With costs varying significantly from state to state and even city, location is perhaps the biggest factor. The following cost comparisons assume a 20% down payment and a 30-year fixed mortgage (not including taxes or insurance):

Remembꦿer: In order to get that monthly mortgage payment, you need to put 20% down. If you don’t have that money saved up, it could make more sense to rent.

And keep in mind—some parts of the country have stronger housing markets than others. You’ll want to understand the potential value of your investment (or the potential cost increase of a rental) long-term. For example, year-over-year change in asking rents by metro range from -8.80% to +13.34%. And from the first quarter of 2020 to the first quarter of 2024, home price appreciation spread from 12.2% to 81.1%.

In the end, the decision between renting and buying depends on your financial situation, long-term goals, and the local market. Compare the costs bet♎ween both and consider mortgage rates and home pri▨ces before making your decision.

How We Track Mortgage Rates

The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a 澳洲幸运5官方开奖结果体彩网:loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.