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Rental rates grow faster than home values locally, nationwide

Low mortgage rates have made homebuying more affordable than renting, according to Zillow research.
Rental rates in St. Louis continue to grow at a faster pace than home values. Home values in St. Louis averaged $133,700 in April, up 3.3 percent from the same month last year. Rental rates, meanwhile, have risen 4.5 percent year-over-year to $1,137 per month. It’s the eighth consecutive month rental rates have outgrown home values.

That trend holds true nationwide, too. Rents grew faster than home values in 20 of the 35 largest U.S. housing markets. U.S. rents — up 4 percent year-over-year in April at $1,364 per month — grew at their fastest pace in two years.

According to the research, U.S. homebuyers can expect to spend on average about 15.3 percent of their income each month on a typical house payment. By comparison, renters can expect to spend about 30 percent on a monthly rent payment.

“There are tremendous incentives to get into homeownership these days: Mortgage access is improving, interest rates are low, and home values remain below prior peaks,” Zillow Chief Economist Stan Humphriessaid. “But it will be increasingly difficult for many renters to realize these benefits as this country’s growing rental affordability crisis continues to worsen. More income going to rent means less going to savings for a down payment and other costs, keeping renters renting longer and feeding into the high demand that is contributing to rising rents in the first place.”

Nationwide, Seattle-based Zillow (Nasdaq: Z) projects home values to increase 2 percent. In St. Louis, home values are projected to increase 2.9 percent in April 2016.

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