New Mortgage Payments Expected to be Higher than Rent for Next Five Years, Making U.S. Homeownership a Challenge for Many

Achieving the American dream of homeownership has become increasingly challenging, with new research from CBRE indicating that mortgage payments are projected to exceed rental costs for at least the next five years.

CBRE's research reveals that average monthly mortgage payment for a newly purchased home now surpasses apartment rents by 38%. While these costs historically aligned closely, average mortgage payments, including taxes, have risen by 75% since late 2019, creating a persistent gap between mortgage payments and rental costs.

"The disparity between mortgage payments and rental costs presents a substantial hurdle for aspiring homeowners," said Matt Vance, Americas Head of Multifamily Research for CBRE. "The sharp increase in the cost of buying a home has made it increasingly difficult for individuals and families to make the transition from renting to owning."

Looking ahead, CBRE expects modest 2.8% annual growth for multifamily rents over the next five years, in line with pre-pandemic trends. Elevated mortgage rates are expected to keep homeowners in their properties for longer periods, reducing the number of homes available for sale and sustaining higher prices.

Additionally, CBRE estimates a shortage of 3.8 million housing units in the U.S, primarily in single-family homes and smaller multi-unit dwellings. These housing types account for approximately 90% of the overall shortage, which is expected to persist until at least 2029.

Despite the challenges to homeownership, all regions and markets across the country will experience lower cost-to-buy premiums as interest rates drop and home price growth slows. Markets such as Dallas, Raleigh, and Chicago are projected to see premiums return to pre-pandemic levels within five years, while Los Angeles, Austin, the San Francisco Bay Area, Seattle, and Nashville are likely to maintain persistently higher costs compared to historical trends.