Rising rents pushing lifelong renters to buy

The pressure of rising rents is pushing more people to consider homeownership, but not because they’re particularly interested in becoming a property owner. Rather, it’s being seen as a way of reducing their living expenses.

The Wall Street Journal reported that average monthly rents rose more than 14% year-over-year in December. Some cities, including Austin, Texas and Miami, have seen rents jump by more than 30% over the past year.

Those increases are proving to be too much to bear for some lifelong renters.

Brooke Baenen, a real estate agent in Green Bay, Wisconsin, told the Journal that one of her first-time buyer clients – a woman in her 40s who was a lifelong renter – became motivated to buy an apartment after her monthly rent skyrocketed. She explained that her client’s rent was increasing by $50 a month earlier on in the pandemic, and was then increased again by $200 a month. At that point, it makes no sense financially to continue renting, the client said.

Economists often advise that homeownership is a good way to stave off inflation and build wealth. Baenan said she has had numerous clients in similar situations, who’re looking to buy due to paying much higher prices for their rented homes and apartments.

Homeownership is proving more attractive now because interest rates are still at historic low levels, meaning a mortgage payment can cost the same, or even less than monthly rent.

“If you’re spending $2,400 a month in rent, that could be equity in a home,” said Audrey Chaney of Realty ONE GroupComplete and Acre & Co. in Sacramento, California, in an interview with the Journal. “If you do that for two years, it’s almost $50,000.”