Weekly Housing Trends

The big story

Ahmad Bilal/Getty Images

We’ve all heard the broken record: It’s better to buy than rent. But with mortgage rates over 7%, is that still true?

The latest numbers from Zillow suggest the math has changed. Today’s typical rent runs $1,948 per month. The typical mortgage payment—assuming a 30-year fixed-rate loan, 10% down, 6.67% rate, plus taxes and insurance—comes to $3,014. That means renters hang onto an extra $1,066 per month, or $12,792 a year.

That gap looks even bigger once you factor in what renters could do with that extra cash. Put it into a 10-year Treasury bond earning a steady 4.68%, and that first year’s savings alone would grow by another $322. Keep saving and investing at that pace for five years, and the total nest egg tops $72,000.

“The idea that renting is a consolation prize is outdated,” argues Zillow’s chief economist Mischa Fisher. “When mortgage costs are running hundreds of dollars more per month than rent, renters who are intentional about saving and investing the difference are often making a sound financial decision.”

The new rent vs. buy balance

It wasn’t always this way. Back in 2010, when mortgage rates settled into the sweet 4% range for most of the decade, buying was actually cheaper than renting nationwide. Then rates spiked in 2022, and the tables turned. Renting is now cheaper than buying in all 50 major US metros—ridiculously so in some markets. The spread is widest in San Jose, CA, where renters save $7,883 per month over buyers, followed by San Francisco ($5,413/month), Los Angeles ($4,441/month), and San Diego ($4,235/month). Over five years, renters in San Jose who invest that difference could end up $532,446 richer than homeowners.

But that doesn’t mean renting wins forever. Homebuyers may pay more up front, but they typically make it back—and then some—as they pay down their mortgage and their home’s value climbs over time. Data shows that the typical buyer putting 5% down reaches the financial break-even point with renting after 5.9 years. This timeline varies by location, too. Buyers in Columbus, OH, come out ahead of renters in just 3.5 years, followed by Memphis, TN (3.7 years), and Buffalo, NY (4.2 years). Meanwhile, in San Francisco, San Jose, and New Orleans, buyers who hunker down in their homes for 30 years still end up with less in the bank than renters.

The moral of the story? Your personal rent-or-buy math depends on where you’re shopping and how long you plan to stay put. A rent-versus-buy calculator can help you run the numbers and see what actually makes sense for you. The decision might not come down to money alone, but a clear cost comparison beats leaning on age-old wisdom that no longer holds water.

      

From The Crew

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What's up this week

Realty check

Courtesy of Airbnb Community

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🏚️ What’s cheaper than an old house? A brand-new one. In one-third of major US markets, buyers can now snag new construction for up to 19% less than existing properties. See if your city made the list, and how much you’ll save.

💪 Think no one’s buying? Surprise: “Serious” home shoppers have surged by 20% year over year, and the city with the fiercest competition might surprise you.

✈️ Earn $30,000 just for showing up: These six gorgeous international spots will actually pay you to move there.

💡 The most boring thing in your home just got a $40 glow-up that’ll get guests talking. Best of all, you’ll use it every day.

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🏖️ Retirees are ditching Florida for these three states, earning the nickname “Halfbacks.”

🧑‍🤝‍🧑 Builders have finally figured out how to engineer the ultimate amenity: friends.

You asked, we answered

Q: How much could mortgage rates change over the next year, and how can I prepare?

Realtor.com

Although mortgage rates are tougher to predict than a Knicks playoff run, historic data can give us a decent sense of where rates could go next. Realtor.com researchers found that over three months, rates shift by as much as 50 basis points in 80% of scenarios. So if current rates sit at 7%, that could swing up to 6.5% or down to 7.5% by the end of the year.

Homebuyers hoping to buy next year are essentially rolling the dice on a wider range: Over six months, rates could shift by 75 basis points (6.25% to 7.75%); over a full year, by 100 basis points (6% to 8%).

How to prepare: With home affordability already hanging by a thread, homebuyers can cushion the blow by “rate-proofing” their budget, which essentially means running scenarios for how much you’d have to spend in the best- and worst-case scenarios. For instance, on a typical $424,500 home with a 10% down payment, a 7% rate would put your mortgage bill at $2,542 per month. If rates rise to 7.5%, that would hike your payment to $2,671, tacking on an extra $129 per month. Putting a dollar amount on it should make it easier to figure out whether your budget can take the hit.

Buyers can also sidestep rate volatility entirely by locking in their rate. It’ll cost you up front, but the peace of mind might be worth it to keep your plans from going sideways. Another must in a high-rate world: Never settle for the first lender you meet. Rates and terms vary by provider, and finding one from the cheapest 10% of lenders can shave 19 basis points off the typical mortgage rate, amounting to $5,800 in purchasing power. Here are more ways to beat high rates.

Got a question about real estate? Ask it here, and we’ll answer it in a future issue.

Real talk

Stephan Desrochers/Van to Vault

Stephan Desrochers was determined to save money, so he took a swing at his biggest expense—rent—by moving into a van for a year. Here’s how this experiment helped him buy a house (but not in the way you think) and launch Van to Vault to teach others how to invest in real estate without much cash.

Q: What led you to live in a van? “I was living in California in my 20s, in and out of my parents’ house, renting rooms and sharing with roommates. After getting my accounting degree, I worked for a disappointing salary. I tried cutting costs, and the largest was always rent. So I bought a van, tried to make it into something livable, and moved in for a year. I installed a subfloor, insulation, electrical, fridge, convertible bed and work desk, and a sink without plumbing connections. I never fully finished because I was living there and working full time, so energy was a constraint, and buying materials was getting increasingly difficult as the year wore on.”

Q: Comfort aside, what were the challenges? “I had to cycle where I’d park. A big white van without windows stands out. Parking at Walmart and other places where people living out of their cars would congregate didn’t always feel safe. I’d usually go to okay neighborhoods, find a privacy wall, park for the night, and not come back to it for a few days. It was a strange way to live while holding a job. I had to get to work early and kind of get ready in the bathroom. It was cheaper than renting, but the trade-offs weren’t worth it. Ultimately, I didn’t save much. I just made life harder. That struggle reinforced the idea that I wanted to get into real estate.”

Q: So how’d you transition from van to house? “Since housing costs in my area were insurmountable at my income, I moved to Minneapolis/Saint Paul. Once I lined up a job and a small apartment, I was finally saving money. I also qualified for down payment assistance, and it isn’t as hard to get as you think. This assistance sometimes goes unclaimed! In a year, I bought an 800-square-foot starter home for $185,000. I later sold that for $230,000 and bought a duplex for $460,000. I live in one side, rent out the other side long-term, and the basement is a mid-term rental, making $20k to $30k a year.”

Q: What’s your advice for someone who wants to buy real estate without much money? “Seriously, consider moving. I wish I’d done the math on that sooner; I wasted a lot of time because I didn’t want to leave California. Being willing to live somewhere I wouldn’t initially have chosen was my real price of admission—whether it was a van, a different town, or a small house.”

Click here to see inside the van and hear more about how he bought a home.

      

Housing market of the week

Jackie Coffey/Jackie the Happy Investor.

Jackie Coffey at Jackie the Happy Investor has flipped 1,000+ Dallas homes, owns 100+ rentals, and has learned one universal truth: No listing photo has ever captured the smell of regret. Here’s what she’s learned the hard way.

Average home price: $305,765 (down 1.7% YoY, per Zillow)
Homes that sell over list price: 17.2%
Homes that sell under list price: 66.4%
Average rent: $1,591/month

How she got started: Seeking more freedom and control over her life and income than a 9-to-5 job could provide, Coffey jumped into real estate without knowing anything and learned the ropes through trial and error. “There were moments I was overwhelmed, scared, and wondering what I had gotten myself into,” she recalls. “But over time, I realized that successful investors are not people who have all the answers. They’re just people willing to figure things out and keep moving forward when things get hard. That mindset completely changed my life.”

Her market’s pros: Dallas has earned the nickname “Y’all Street” for its booming economy, which now includes the newly formed Texas Stock Exchange alongside financial heavyweights like Goldman Sachs and Morgan Stanley. “There’s strong job growth, population growth, and a huge demand for housing,” says Coffey, who recently purchased a distressed property in the suburb of Waxahachie for $205,000, spent $24,500 on renovations, and sold it for $425,000. “This project is a great example of how profitable deals can be when investors buy right.”

The cons: “It’s gotten waaayyy more competitive,” she warns. “The ‘easy deals’ are not just sitting around waiting anymore.” Plus, taxes, insurance, labor, and material costs have increased, so investors really need to know their numbers before jumping in.

Her advice: “For the sake of all things holy, walk the house,” Coffey says. “Pictures lie. Sellers lie. Carpet definitely lies! I once bought a property that looked amazing online and then showed up in person to realize the house smelled like 14 cats and broken dreams.” She also urges investors to network like crazy. “Some of the best deals come from relationships with wholesalers, contractors, title companies, Realtors, lenders, and other investors,” she explains. “Real estate is still a people business, and Dallas has a very active investor community if you’re willing to put yourself out there.”