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Renting in the Boston area remained far less expensive than purchasing a home as the fall homebuying season arrived, with high interest rates adding to the gap in monthly payments.
The typical Greater Boston renter paid $3,074 a month in August, while the typical monthly payment for a new buyer was $5,903, according to a new analysis by the listings portal Zillow. With a gap of $2,829, Boston renters save $33,948 a year.
The average interest rate on a 30-year, fixed-rate mortgage rose hovered around 6.7 percent for much of August, according to Freddie Mac. As bond traders anticipated the Federal Reserve’s decision to raise its benchmark short-term interest rate by a quarter-point Wednesday, mortgage rates rose above 7 percent, according to Mortgage News Daily, likely making homebuying less affordable.
“The idea that renting is a consolation prize is outdated. 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,” Zillow Chief Economist Mischa Fisher said in a statement. “Finances are just one piece of the puzzle. Those weighing their options should also consider the lifestyle differences, such as the flexibility to move more often as a renter or stable payments year after year as an owner.”
In Hartford, Connecticut – the only other New England metro covered by the Zillow analysis – the rent-versus-owning gap is smaller but still significant. The typical renter paid $2,034 a month in August while the typical new homebuyer paid $3,565, according to Zillow economists. On an annual basis, renters save $18,372.
Across the United States, the typical renter paid $1,066 less per month than the typical homebuyer, according to Zillow. The typical asking rent was $1,948, while the typical mortgage payment plus taxes and insurance totaled $3,014. U.S. renters save $12,792 a year over owning a home.
In each of the 50 largest U.S. metros, the typical rent is lower than the typical monthly payment for a new homeowner, according to Zillow. The gap has widened as the monthly cost for U.S. home buyers rose $140 over the past six months, more than four times the $32 increase in typical rent over the same period.
