Is it cheaper to rent or buy a house in the Chicago area?

Is it cheaper to rent or buy a house in the Chicago area?

It’s a question many are asking amid an ever-shifting housing market: should I rent or should I buy?

New data has been released showing the difference between housing markets in 2020 and 2023, and where the market leans better for renters or buyers.

The Economist analyzed data from the U.S. Census Bureau, the Department of Urban Development, the Federal Housing Finance Agency and Zillow to compare housing and rental prices across the U.S. during and after the coronavirus pandemic.

According to the publication, mortgage payments have more than doubled since 2023 while rents have risen by roughly 20% across the U.S.

In 2020, nearly all of Illinois was listed as being cheaper to buy, but in 2023, the numbers have started to shift.

The Economist maps show parts of the Chicago area are now cheaper to rent, and while some remain slightly cheaper to buy, few sit at the levels seen just three years ago.

A recent New York Times report also highlighted the shift between buying and renting, with Moody’s Analytics Chief Economist Mark Zandi telling the publication “this is not the time to buy for most people.”

Zandi cited high mortgage rates and housing prices along with lower inventory.

The news isn’t all bad for those looking to purchase a home.

CNBC reported last week, however, that mortgage rates are trending down. According to its report, “the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.41% from 7.61% and points decreased to 0.62 from 0.67 (including the origination fee) for loans with a 20% down payment.”

“U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation. Most mortgage rates in our survey decreased, with the 30-year fixed mortgage rate decreasing to the lowest rate in two months,” Joel Kan, MBA’s deputy chief economist, told CNBC. “Mortgage applications increased to their highest level in six weeks, but remain at very low levels.”

While applications to refinance a home have also increased in recent weeks, rates are currently roughly 75 basis points higher than they were at this same time in 2022, and more than twice what they were in 2021, CNBC also reported.

“The average loan size on a purchase application was $403,600, the lowest since January 2023. This is consistent with other sources of home sales data showing a gradually increasing first-time homebuyer share,” Kan added.

Meanwhile October sales of existing homes dropped to the lowest level in 13 years, according to a recent report from the National Association of Realtors.

“During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years,” Lawrence Yun, NAR chief economist, said in a statement last week. “Recent weeks’ successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied. Multiple offers, of course, yield only one winner, with the rest left to continue their search.”

Still, don’t expect things to change dramatically for the better if you’re looking to purchase property.

“The market has clearly shifted gears into holiday mode with light volume and liquidity greasing the skids for random volatility without any fundamental justification,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.

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