updated - August 13, 2020 Thursday EDT
Zillow, an online company that offers real estate database and resource for home buying inquiries, has released a report stating that in the second quarter of 2015, renting a house on a monthly is becoming less affordable as compared to paying for a mortgage.
U.S. citizens can expect to spend 30.2 percent of their monthly income on rent payments as compared to 15.1 percent of their income for monthly mortgage payments.
Zillow has added that renters in high demand markets like Los Angeles, San Jose, Miami and San Francisco are in a worse situation as they can expect to spend more than 40 percent of their monthly income for rent payments.
The 40 percent is a 10 percentage point increase from historical norms.
CNBC added that while apartment buildings are experiencing a steady growth in construction over the past three years, multifamily homes, such as apartment buildings, fell next to nothing amid the housing bust.
The new units are also being met with pent-up demand.
On the other hand, home buyers are experiencing the opposite, as a mortgage payment is expected to eat up only 15.1 percent of U.S. citizen's monthly income, according to Zillow.
This is below the pre-burst of the real estate bubble when home buyers spend 21.3 percent of their monthly income on a mortgage payment.
Zillow added that even if the current mortgage rate goes up by 6 percent, U.S. citizens can still expect to pay less than 30 percent of their monthly income on mortgage payments.
CNBC adds that the current average contract interest rate for a 30-year fixed-rate with a balance of $417,000 is around 4.13 percent.
Dr. Svenja Gudell, chief economist at Zillow, said that although there are certain reasons for renting temporarily, it is still better to buy a house than rent, as long as you can afford the down payment.
"From an affordability perspective, rents are crazy right now," she said. "If you can possibly come up with a down payment, then it's a good time to buy a home and start putting your money toward a mortgage."
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