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Renting is Now More Expensive than Buying in St. Louis

Renter's Trap

New Report Shows Renting is More Expensive than Buying in St. Louis:Dangers of the Renter’s Trap

Renting is now more expensive than buying a home in St. Louis according to a new report. Unlike the rest of the housing market, rentals did not suffer a drop in price over the last decade. In fact, rental prices continue to rise. If you’re currently renting you could get caught in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment. Over a period of time you could become a victim of “The Renter’s Trap”.

In a recent press release, Zillow stated that the affordability of the nation’s rental inventory is currently much worse than the affordability of the country’s inventory of homes for sale. Their data showed two things:

1.  Nationally, renters signing a lease at the end of the second quarter paid 29.5% of their income to rent.
2.  U.S. home buyers at the end of the second quarter could expect to pay 15.3% of their income for the typical home.

Dr. Stan Humphries, the Chief Economist for Zillow, explains the current situation:

“The affordability of for-sale homes remain strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates … As rents keep rising, along with interest rates and home values, saving for a down payment and attaining home ownership becomes that much more difficult for millions of current renters.”

Affordability in the St. Louis Metro Area: Percentage of  Income Going  to Renting Versus Owning a Home

Rent or Buy?

What’s the more affordable thing to do if you are considering buying a home in the St. Louis Metro area?  Is it more affordable to rent or is it more affordable to purchase a home?  The chart below looks at these issues based on statistics recently gathered by Zillow.  It presents the median price of a home, the median rent being paid, the percentage of income needed to afford a home and the percentage of income needed to pay median rent prices:

Metro AreaMedian Price of HomeMedian Price of Rent/Month% of Income Needed to
Afford a Home
% of Income Needed
to Pay Rent
St. Louis$128,800$1,07611.3%23.6%
Charlotte, NC$154,000$1,19413.3%25.9%

As you can see a first-time home buyer purchasing a median priced home will only need to have 11.3% of their income going into an equity building mortgage compared to 23.6% of their income to a median priced rental.  So why aren’t more people buying than renting still stuck in the “Renter’s Trap”?  The answer?  Perception and lack of current information …

Know Your Options

Maybe you’ve already saved enough to buy your first home.  HousingWire recently reported that analysts at Normura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

Freddie Mac came out with comments on this exact issue:

  1. A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
  2. Freddie Mac’s purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
  3. More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.

Bottom Line

Don’t get caught in the “Renter’s Trap” so many renters are currently in.  If you’re ready and willing to buy a home, find out if you are able.  Speak to a professional and see if you are eligible for a mortgage.  If you do not know anyone call Finding Homes for You and we can help you in this area. Finding Homes for You specializes in first-time homebuyers and are here to guide you through the maze of buying a home.  It’s not as difficult as you think!  Give us a call today at 636-532-4200.  We only work for Buyers, so you’ll feel safe working with us!



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