It's Now Twice As Expensive To Buy An Entry-Level Home Than Rent

Mish Talk ^ | 08/23/2025 | Mike Shedlock

[SeekAndFind]

Thinking of buying a starter home? Be careful!

The above image from John Burns Research.

💭 When do you think owning will feel affordable again for first-time buyers?— John Burns Research and Consulting (@JBREC) July 2, 2025

Burns Criteria

• Home payment, entry-level home mortgage

• 5 percent down, 30-year fixed mortgage

• Principal, Interest, Tax Payments, and Insurance (PITI) payment plus mortgage insurance payment

• Annual maintenance costs ranging from 0.85 percent to 1.25 percent of home price

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.

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

[Fury]

Agreed re: home ownership. It’s become much more of a challenge.

[ansel12]

“”””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.””””

That is the plain fact, for most people, they have to go where the opportunity is, they have to search for the place where their type, or level, or class of work and their chance of owning a home match, and that might not be San Diego, or Brooklyn, or Denver, it might also involve a 60 mile drive to work from their newly bought house, for some.

[ansel12]

Some realities that I used to see a lot in the 60s and 70s were men or even a couple truly working two (real) jobs.

I used to find unpleasant work as a teen in machine shops and such, the unskilled labor was pulling out the machine shavings and mess, running oil to the machinists, etc., and of course it was always the night shift, filthy, oily, drab and dirty, and noisy, but the weird thing was how many of those machinists on the night shift had full time day jobs to pay off their mortgages and furniture, and their wives sometimes did as well, work, work, sleep, work, work, it struck me as a sick life, but it was common among the various night shift jobs I would find in 1960s/early 70s Houston.

Another unpleasantry I often saw and sure didn’t want to experience myself, was how many 20 something young husbands I saw during those years who would wake up at some ungodly hour like 4am to drive to their very, very distant job in remote construction or at a meat packing plant, I always figured (and hoped) that their lives would look pretty good and secure for them at some stage later in life, home, family, pensions, the city limits and property values catching up to their area, but I sure didn’t envy that drab, sacrificing life shooting for the long term gains, but it worked for people who wanted what they wanted, and who were never going to have $100,000 or $200,000 a year careers.

[aspasia]

Median income in ‘65: $7,000.
Median income today: $80,000.

[metmom]

Young people today don’t have it any harder than the rest of did. Mr. mm and I bought what we could barely afford and put a lot of work into it to fix it up. Seems young people have a huge entitlement mentality and want to start where their parents are after 40 or so years of saving and working to get where they are.

And I noticed you evaded answering the question about your nephew, which is an answer itself.

[PUGACHEV]

The numbers are almost reversed where I live, in Virginia, near D.C. We pay less than 2/3s in mortgage and escrow than what the exact same house next door rents for.

[Mashood]

“And entire families were living in other hotels.”
Yeah...its called “low income housing”. HUD does it all the time.

[Skywise]

Not really - I’ve been here 10+ years and the rents only gone up about $200/month. Most of that in the last 4 years as the complex got bought out by new management.

[Georgia Girl 2]

Agree I bought my first home in 1979 and my husband and I lived in a crummy little 1 bedroom apt and drove beater cars until we saved up the $3,000 down.

Young people now live a lifestyle that eats up all of their monthly income. They don’t save.

[conservaKate]

The extended stay places i have enjoyed had separate bedroom, had an eating table with 4 chairs, full fridge, ovrn/stove top, dishwasher and then a comfy seating area. They offered breakfast and dinner, with beer and wine for free. Pool and workout room. One in Arizona and 2 in Colorado.

[Tired of Taxes]

"3k to 8k is for 90 days."

Wow, that's a great price, especially for a nice hotel.

[Bratch]

[dfwgator]

Even if there is a neighborhood with affordable homes, I don’t think you’ll want to live there.

[Tired of Taxes]

There was an extended-stay hotel near me. Come to think of it, it was just as you describe, except it didn’t include meals (except a snack in the morning). I forget why I didn’t pick that one.

[DesertRhino]

Exactly. Get that house and hump to make that payment. It’s worth skipping the world traveling, and the expensive furnishing and top-flight kitchen.

But this generation doesn’t want to drive an 18 year old Camry and forgo trips to Iceland, get cheap used craigslist furniture, and skip the Italy and Vietnam trips.

They just can’t conceptualize how much they would benefit from buying. And to compound it, they want to live near or even in cities.

[Tired of Taxes]

Me: "“And entire families were living in other hotels.”

Mashood: "Yeah...its called “low income housing”. HUD does it all the time."

Yeah, I stayed away from those hotels. Some of those places had crime. I figured those families must be collecting gov't assistance. And now you've confirmed it.

The hotel I picked was nothing fancy. It was older, but more importantly, it was safe and clean. I noticed the people living there were working. The men were dressed like they worked in the trades. The woman was dressed in office clothes.

[stylin19a]

thanks.

it was safe and clean.

that's a big deal for me...