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One Stat That Should Have Renters Thinking About Buying a Home Even in This Market

In an era of rapid inflation and wage growth there's one stat that shows why homeownership is still a worthwhile investment.

April 29, 2022
April 29, 2022
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There are plenty of reasons to buy a home. They include building wealth through home equity and having a place to customize and call your own.

But perhaps the most compelling reason, especially in today’s housing market, is to lock in a fixed monthly payment, and there’s one stat that proves it.

According to a survey by Freddie Mac, 56% of renters and just 24% of homeowners were spending more than 30% of their monthly income on housing in February 2022.

Why is that significant? Just Google “how much income to spend on housing” and you’ll find that most finance gurus suggest spending no more than 28%-30% of your gross monthly income on housing. It’s pretty telling that over half of renters are above this threshold compared to less than a quarter of homeowners.

And there’s another stat that illustrates the benefits of homeownership. Freddie Mac found that 58% of renters were concerned about making house payments, compared to 41% of homeowners. That likely includes the 56% spending more than 30% of their income, plus another chunk of renters that realize their monthly payments are going to keep rising.

In February, single-family rent prices increased 13.1% year-over-year, marking the 11th consecutive month of record increases, according to CoreLogic.

On top of 11 months of record rent increases, consider that average wages “only” increased 5.2% in February from a year before. So wages may be growing at a fast clip, but single-family rents are growing at over twice the rate.

It’s important to note that at 19.8%, home prices grew much faster year-over-year than wages or single-family home rents in February. And that’s not to mention rapidly rising mortgage rates adding to the cost of buying a home.

But there’s a reason why 56% of renters and just 24% of homeowners were spending more than 30% of their monthly income. Buyers have the unique opportunity to lock in a fixed housing cost and benefit from price and wage growth over the long-term, whereas renters are subject to price hikes that outpace wage growth, as we’re seeing today.

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