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It's Now Twice As Expensive To Buy An Entry-Level Home Than Rent
Mish Talk ^ | 08/23/2025 | Mike Shedlock

Posted on 08/24/2025 6:58:42 PM PDT by SeekAndFind

Thinking of buying a starter home? Be careful!

The above image from John Burns Research.

Burns Criteria

One might put down 10 percent to avoid mortgage insurance.

Looking ahead Burns see homeownership costs stubbornly high, 95 percent premium all the way through 2028.

That means home prices remain stubbornly high, mortgage rates remain stubbornly high, or the cost to rent drops.

20-City Comparison

The above image from John Burns Research via Realtor.Com article Top 20 Markets Where It’s Cheaper to Rent than Own a Single-Family Starter Home

Austin is the worst place to buy a starter home by percent and dollars.

In dollar terms, Denver is second. In percentage terms, Las Vegas is second. Phoenix and Riverside are high up the unaffordable list.

Better to Rent or Buy Calculator

The New York Times has a Better to Rent or Buy Calculator (free link, updated July 2025).

The NYT says the “winning choice is the one that makes more financial sense over the long run, not necessarily what you can afford today.”

The NYT philosophy assumes you can survive the short-term and you know where home prices are headed.

I know first hand of people who miscalculated what they can afford and now need tenants to manage.

A recession or job loss will complicate things greatly for millions.

The Housing Top Is Likely In, Case-Shiller Home Prices Drop Again

On July 29, 2025, I commented The Housing Top Is Likely In, Case-Shiller Home Prices Drop Again

Prices are now down the third consecutive month. [But it does not even register on a chart.]

Demographically, the upcoming boomer die-off will add tremendous supply to the housing market. Shutting down the border will slow the rate of current demand.

As a counter-balance, The Number of Housing Units Under Construction Continues to Crash

 The impact on rent will be whether or not builders overbuilt.

The Fed Is Incompetent by Design

Blame the Fed for wild swings in housing affordability.

I discussed this in Fedthink! The Fed Is Incompetent by Design and Can’t Be Fixed

Today’s Pertinent Conclusion

We are trapped in “Fedthink”, especially the nonsensical proposition that two percent inflation is a good thing despite the fact that the Fed is clueless on how to measure inflation in the first place.

The Greenspan Fed, Bernanke Fed, Yellen Fed, and the Powell Fed all ignored housing prices as a measure of inflation.

Yellen even wanted to make up for lack of not enough inflation.

Powell Admits Prior Monetary Framework Was Hugely Flawed

At the annual Jackson Hole meeting this year Powell Admits Prior Monetary Framework Was Hugely Flawed

The Fed just announced a new monetary framework. Is it any better?

The short answer is the new framework is nearly as flawed as before, and the Fed still holds many disproved economic theories. See above for details.



TOPICS: Business/Economy; Society
KEYWORDS: housing; property; realestate

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To: ClearCase_guy

I sacrificed to buy my home in 2015.
10 years later it was the right decision.


21 posted on 08/24/2025 8:15:24 PM PDT by Zathras
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To: moviefan8

Unless your neighborhood demographics change, then you’re stuck with an albatross.


22 posted on 08/24/2025 8:15:28 PM PDT by Mr. Blond
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To: frank ballenger

Sanders isn’t president. I can see why young people want to try something different. What they have now is not good. Young will only be patient for so long before they take action at the voting box.


23 posted on 08/24/2025 8:29:57 PM PDT by napscoordinator (DeSantis is a beast! Florida is the freest state in the country! )
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To: SeekAndFind

“National” housing figures should be avoided. Housing is local and local factors affect housing greatly.

And there are U.S. housing markets where it is cheaper to buy than to rent.

https://constructioncoverage.com/research/cities-where-its-cheaper-to-buy-vs-rent


24 posted on 08/24/2025 8:32:56 PM PDT by Wuli (uire)
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To: napscoordinator

RE: Sanders isn’t president. I can see why young people want to try something different

How is Bernie or his protege AOC going to make buying a house affordable?

Will they mandate that one cannot sell one’s house at a profit? Will they impose price control over selling a house?

“Hey you bought your house for $200,000 twenty years ago? Now you want to downsize and it’s worth $450,000? No you can’t sell it for that price, that’s price gouging. Sell it for it’s original price to make it affordable!”

Is that their solution?


25 posted on 08/24/2025 9:00:47 PM PDT by SeekAndFind
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To: stylin19a

I actually wondered how that would pencil out if I decided to live at a nice extended stay hotel. All utilities, cable/internet paid for, weekly cleaning provided and most offer 2 hot meals a day.

Cash out my house and add to my retirement savings.


26 posted on 08/24/2025 9:40:57 PM PDT by conservaKate
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To: SeekAndFind

Interesting statistics. Not sure how to take them... here in NW Arkansas - the MEDIAN home price is right at $500K+. The closest one might have to a “starter” home is right at $190k. That house would cost you, including required taxes and property insurance included in your escrow, of some $1400-15000/month. The exact same home would rent for $1800/month.

So...


27 posted on 08/24/2025 9:41:38 PM PDT by TheBattman (Democrats-Progressives-Marxists-Socialists-Satanists: redundant labels.)
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To: SeekAndFind

Note the chart shows high home prices from 2004 to 2007. I remember home prices shooting up to $300K and $400K back then, right before the bubble burst.


28 posted on 08/24/2025 9:51:16 PM PDT by Tired of Taxes
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To: conservaKate; stylin19a

If you own a home, hold onto it. But, after selling mine, I spent a little time in hotels right afterward. They weren’t extended-stay. But, while there, I did the math, and if you calculate in the hotel reward program bonuses and points, it came out to about the same cost as an apartment. Except there’s no credit check. No lease. No long-term commitment. You can move from hotel to hotel. All utilities included. Breakfast included. The downside is it’s only a room with a bath. But, at one hotel, I found out some people had been living there for years. And entire families were living in other hotels.


29 posted on 08/24/2025 10:11:49 PM PDT by Tired of Taxes
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To: SeekAndFind

Once interest rates are lowered, more homes will be on the market and prices will be drop significantly. This is why President Trump wants Jerome Powell to cut interest rates.


30 posted on 08/24/2025 10:59:58 PM PDT by jonrick46 (Leftniks chase illusions of motherships at the end of the pier.)
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To: Tired of Taxes; conservaKate

thanx for that...

I was hunting around for extended stays in Wichita Falls Tx.
as low as 3k a month up to 8k a month.

looking for a short term relief from illinois winters...


31 posted on 08/24/2025 11:04:33 PM PDT by stylin19a ("Death Smiles At Everyone - Marines Smile Back" - 250 years of smiling - 11/10/2025)
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To: stylin19a

I read it wrong...3k to 8k is for 90 days. Some of the places I wouldn’t stay.

https://www.booking.com/searchresults.html?ss=Iowa+Park


32 posted on 08/24/2025 11:19:12 PM PDT by stylin19a ("Death Smiles At Everyone - Marines Smile Back" - 250 years of smiling - 11/10/2025)
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To: rellic

Homeowners are still plenty under control of governments. Plenty.


33 posted on 08/24/2025 11:21:27 PM PDT by Secret Agent Man (Gone Galt; not averse to Going Bronson.)
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To: SeekAndFind

In Minnesota you are seeing homes that 3 years before have the price then today. It must be those companies buying up 10’s of thousands of homes outbidding single buyers. They then rent the homes to people you are priced out of owning one. In Minnesota you can buy a home that is 3 times the square footage then in California with a big yard.

You can see how prices has risen to astronomical heights in Southern California. These homes tend to be single story, no basement, 6ft wall on 1/4 acre lot.

Median Home Sales Prices Southern California
Existing Single-Family Homes by County, 1990-2025
https://www.laalmanac.com/economy/ec37.php


34 posted on 08/25/2025 12:32:22 AM PDT by minnesota_bound (Making money now. Still want much more.)
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To: SeekAndFind

thanks to illegal immigration and groups like Blackrock and foreign entities buying up land and houses, often for the purpose of turning them into rentals.

But there are still people out there who refuse to sell to anyone who is not going to live in their house themselves. My sister decided to do that with a property she inherited and sold and God provided my daughter a seller who thought that way for her house. Which she got despite being out bid for the very reason she was going to live in it.


35 posted on 08/25/2025 12:36:02 AM PDT by metmom (He who testifies to these things says, “Surely I am coming soon." Amen. Come, Lord Jesus….)
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To: ClearCase_guy

And so you live in one house at at time.

What does he do with the other 3? Let them sit vacant, and worsen the housing shortage?

Or rent them out?


36 posted on 08/25/2025 12:37:39 AM PDT by metmom (He who testifies to these things says, “Surely I am coming soon." Amen. Come, Lord Jesus….)
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To: bak3r
It’s not like Americans will sell their home below the maximum bidder to make sure it will end up in the hands of a young family.

Actually some will. Some with a human heart and integrity, not a greedy b@#@%^*. Happened in my immediate family.

37 posted on 08/25/2025 12:43:24 AM PDT by metmom (He who testifies to these things says, “Surely I am coming soon." Amen. Come, Lord Jesus….)
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To: ansel12
One shortcoming in these analyses is that they are based on comparisons of renting vs. owning within the same metro areas (which is how it should be done).

For young people who want to buy a home, the single most effective thing they can do is move somewhere else. Maybe you can’t afford to live in the suburban NYC town where you grew up, but if you relocate somewhere in the Midwest you could probably cut your housing cost in half while only losing about 20% of your take-home pay.

38 posted on 08/25/2025 2:16:20 AM PDT by Alberta's Child ("Although my eyes were open, they might just as well be closed.")
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To: SeekAndFind
They need to outlaw Big Business from buying and renting out houses. Order them to divest.

Same thing with foreign buyers. No American real estate for you!

Then cap the number of houses a landlord can own for rentals, B and B, etc.

Enact it and watch housing prices come down and inventories go up.

Interest rates by then will be coming down too, likewise incomes going up.

39 posted on 08/25/2025 3:07:18 AM PDT by caddie
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To: metmom

Just to clarify: my statements were meant as sarcastic comments about some people who see an article (like this one) with charts, and facts, and figures, and statistics indicating that young people today have a difficult economic environment, and these people have a counter-argument: “My nephew is doing very well and owns a zillion houses. Therefore no one in the younger generation has any right to complain. My nephew is awesome. Why aren’t you as awesome as my nephew? I guess you must be lazy.”

I see that lack of empathy quite often around here. Many young people (men especially) are leaning to the Right. Which is great. But they are often met by older Conservatives who want to criticize all young people for being lazy and stupid and unrealistic and undisciplined. No empathy for the realities of growing up in the post-2008 economic world. I think some young Conservatives may get turned off by older Conservatives who offer nothing but criticism and “My nephew did it ... I did it ...” bragging.


40 posted on 08/25/2025 4:08:37 AM PDT by ClearCase_guy (Society has no reward for following the rules any more)
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