'Wild' Austin Housing Market Indicative of Mortgage Payment Spikes Nationally

Mortgage payments for new homebuyers outpaced rent price increases in 25 of the 50 largest metro areas in the United States during August, according to a new report from real estate brokerage firm Redfin.

The national median monthly mortgage payment for homebuyers rose 67 percent faster than rents during the same period. However, nationwide, the average monthly rent of $1,836 is still larger than the $1,494 median monthly mortgage payment for new homebuyers.

Redfin reports that rents are climbing rapidly in some places such as many Florida metros, Riverside, Calif., Phoenix and Las Vegas. And nowhere has the pricing action been more pronounced than the “wild” Austin, Texas, market.

“Austin has always been a hot real estate market, but the past six months have been wild,” said Redfin Austin market manager Jennifer Hoffer. “We’ve been working with several landlords who want to sell their properties to cash in on high home prices. But renters right now really don’t want to move, so they’re staying put with long-term leases because they have nowhere to go. I think we will see a spike in rents in the next few months as leases come to an end.”

Redfin’s inaugural rent-versus-own analysis uses data from more than 20,000 apartment buildings across the US. The report combines rental data on all sizes of apartments for rent with home sales data on all residential home sales (single-family, townhouse and condos) from public records and the MLS.

When this report refers to the median mortgage payment for new homebuyers, it is based on a 5 percent down payment, the median sale price during the month and the average mortgage interest rate for the month. The report uses a 5 percent down payment in order to be comparable to what an average renter may be able to reasonably achieve in savings.

All This, Despite Mortgage Interest Rates at Near Record Lows

These payment spikes come despite mortgage interest rates falling back to near-record lows. This is the seventh consecutive month that growth in median mortgage payments for new homebuyers have outpaced that of rents, Redfin reported. However, in August, growth in rents were speeding up while growth in mortgage payments were slowing.

“Record high home price growth has priced many renters out of buying, leaving many facing higher rents this summer as more households look to move thanks to the rise of remote and flexible work arrangements,” said Redfin Lead Economist Taylor Marr. “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.”

Where Rents Rose and Fell the Most

“Record high home price growth has priced many renters out of buying, leaving many facing higher rents this summer as more households look to move thanks to the rise of remote and flexible work arrangements,” said Redfin Lead Economist Taylor Marr. “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.”

Most of the metro areas with the biggest increases in rent were warm, affordable destinations in Florida, California and Arizona that have benefitted from a surge in migration thanks to a newly mobile workforce. 

Rents were up the most from a year earlier in Tampa, Fla. (29.2 percent), followed by West Palm Beach, Fla., Miami and Fort Lauderdale, Fla. (all at 28.9 percent).

However, rents are not increasing everywhere. A few metro areas saw decreases, including expensive areas where people are moving away like the Bay Area. Rents were down in Pittsburgh (-5 percent), followed by San Jose (-3 percent) and St. Louis (-1 percent).

These price drops are the rare exception to nearly across-the-board increases in housing costs for both rentals and homebuying and are not likely to last as the economy recovers from the pandemic. 

For those who need to move and are looking for a place to rent, now may be a good time to check traditionally more expensive coastal metro areas such as the Bay Area, Boston, and Washington, D.C., where rental costs are rising slower than the 8.5 percent national average.