Rents Now Higher Than Mortgages in Portland Metro

January 4, 2013 2:07 am

For the first time in decades the average rent rate is considerably higher than the average mortgage. According to JP Morgan this is part of the fallout from the Housing Bubble and Great Recession.
After the housing bubble crashed numerous people were unable to afford their homes. Some experienced dramatic rate increases on their ARM loans, and some found themselves underwater and unwilling to put money into a depreciating asset. Other homeowners lost their jobs in the recession and were not able to keep up with their payments.

This triggered unusual growth in the rental market. Supply and demand economics 101: More renters, same number of rental units equals higher demand and higher rental rates.
Simultaneously interest rates plummeted making loans more affordable. Buyers began paying less for homes through short sales and foreclosures. These sales depressed neighborhood property values further. Property taxes, which are based on home values, also began to decrease making home ownership even more affordable.

To illustrate this point, we found two homes for rent on Craigslist this week in Beaverton and Cedar Mill and found two similar homes in the same neighborhoods for sale. We checked with NW Mortgage Group to get an estimate of payments at today’s rates. Here is the comparison:

Remington Neighborhood rental
2509 SF
4 BD/3 BA
$1995/mo rent

Remington Neighborhood for sale $419,000
2509 SF
4 BR/3 BA
$1880/mo mortgage (principal+interest+taxes) with 20% down
$2389/mo mortgage (principal+interest+taxes) with 5% down

Bel-Aire Neighborhood rental
1056 SF
3 BD/1 BA
$1275/mo rent

Bel-Aire Neighborhood for sale $219,900
1008 SF
3 BD/1 BA
$1204/mo mortgage (principal+interest+taxes) with 10% down
$1298/mo mortgage (principal+interest+taxes) with 5% down

For more details or information on the sample properties above, please contact your Lee Davies Real Estate Broker.

In the end you get a scenario where rents are higher than the cost of home ownership. Buying and owning a home is now more important than it ever has been in terms of not just a long-term investment, but also as its opportunity cost relative to renting. Are you or someone you know still renting? Now is the time to buy. Give us a call today and you could be paying less for your monthly mortgage payment than your current rent.