Mortgage payments have jumped nearly twice as high as rents

After over a year of historical home price growth, mortgage payment amounts accelerated nearly twice as fast as rent since August 2020, according to Redfin.

As the pandemic dragged interest rates to record lows and intensified consumer demand, the national monthly median mortgage costs — assuming a 5% down payment — spiked 14.8% annually in August versus 8.5% for rents. In August 2020, those amounts had increased by about 2% for mortgages and 4% for rents year-over-year. Last month’s median monthly home loan payment jumped to $1,494 from $1,300 the year prior, while the average monthly rent rose annually to $1,836 from $1,692. However, home loan payments only outpaced rent in 24 of the 50 largest metro areas.

"Shifting home preferences and simply not enough homes on the market created these expensive and competitive conditions," Daryl Fairweather, Redfin's chief economist, said in a statement to NMN. "We saw rents fall in the most expensive cities, as people flocked to the suburbs and more rural areas where it is more common to own a home than to rent one."

Generally, areas with warmer climates and better affordability experienced migration waves from COVID-19's remote working conditions, Fairweather added.

Austin, Texas, led the country with a 34% year-over-year change in median mortgage payments. As the Lone Star State’s capital’s booming technology scene brings an influx of companies and workers, it saw monumental value growth in 2021 and that’s forecasted to continue in 2022. Phoenix came second with a 23.3% rise, followed by 19.4% in Las Vegas. On the other end, the median home loan amount actually fell 0.6% in Milwaukee, followed by increases of 0.4% in San Francisco and 3.6% in Baltimore.

The highest median mortgage payments were all in California. San Francisco topped the country with a $5,984 median monthly mortgage payment in August, trailed by $5,326 in San Jose, $3,728 in Oakland, $3,570 in Anaheim, $3,217 in Los Angeles and $2,943 in San Diego. The bottom six all fell under $1,000. Detroit was the least expensive place for borrowers, with a median of $714 per month. Next up was Cleveland at $785, Pittsburgh at $863, St. Louis at $902, Cincinnati at $973 and Indianapolis at $981.

Florida saw the largest rental growth, as Tampa experienced an increase of 29.2%, followed by 28.9% in Miami, West Palm Beach and Fort Lauderdale, and 26.8% in Jacksonville. Three cities saw rental appreciation fall, with drops of 5.1% in Pittsburgh, 2.9% in San Jose and 0.5% in St. Louis. Boston — which had the shortest home sale listing times in 2021’s first half — had the highest average monthly rent at $3,551. San Francisco and Oakland followed in a tie at $3,530. The lowest average monthly rents came in San Antonio at $1,255 per month, Indianapolis at $1,266 and Cincinnati at $1,338.

Nationwide, property values posted quarterly year-over-year gains for the last decade straight, according to a recent study from the Federal Housing Finance Agency. This steady upward movement, coupled with the accelerated pace of growth in the near term, prices out many potential buyers and allows landlords to raise rents as well, Redfin Lead Economist Taylor Marr said in the report.

Additionally, “the end of pandemic eviction moratoriums and mortgage forbearance may also cause landlords to raise rents to cover the risk of future tenant protections or make up for lost rental income,” Marr said.