Rents And Mortgage Payments See Record Growth

Both rent and mortgage payment price growth reached record highs in December, according to a new report from Redfin.

Rents jumped to $1,877, 14.1% year-over-year (YOY) and the largest annual jump since at least February 2019, the earliest month in Redfin’s data. The national monthly mortgage payment rose 21.6% YOY, also the largest increase in Redfin’s data history.

“The growth in mortgage payments has been driven by both climbing prices and climbing mortgage rates,” said Redfin Chief Economist Daryl Fairweather. 

“And those rising mortgage costs push more potential homebuyers into renting instead, which pushes up demand and prices for rentals. Mortgage rate increases are accelerating, which will cause both mortgage payments and rent to grow throughout 2022.”

The 30-year fixed-rate mortgage averaged 3.56% last week. Inventory reached a record low in December, down 19.5% year-over-year and 40.5% from December 2019.

Affordability continues to pose a challenge, especially for first-time homebuyers forced to compete with buyers drawing on equity from their current homes or seeking non-primary residences. There are 45 million millennials aged 26 to 35, prime first-time homebuying age.

“The ongoing supply shortage continues to put upward pressure on house price appreciation as buyers compete to buy what few homes are for sale. You can’t buy what’s not for sale, but you will compete for what is,” said First American Chief Economist Mark Fleming.

“Rapid house price appreciation and its differing impact on existing and first-time homebuyers will persist until the supply and demand imbalance improves. In the game of housing musical chairs, it’s clear the housing market needs more chairs.” 

Mortgage payment growth continues to outpace rent-price increases, with rents overtaking mortgage growth in only 16 of the 50 metros tracked by Redfin.

Austin, TX saw the largest rent price growth YOY at 40%, followed by Nassau County, NY (35%), New York City (35%), Newark, NJ (35%), and New Brunswick, NJ (35%). Austin and Portland, OR (29%) were the only cities outside the East Coast to make the top ten.

Kansas City, MO, was the only metro to see a rent price decline, down 0.8% YOY.