SEATTLE — Mortgage rates, now hitting 7%, are putting heavy pressure on potential homebuyers.
According to Bankrate Analyst Alex Gailey, it may be time to rent rather than buy.
“A housing shortage, rising home prices, and high mortgage rates are tipping the housing market in favor of renting, at least in the short term, all across the country,” said Gailey.
A new Bankrate study reveals the Seattle metro area ranks third in the nation as the least affordable area to buy versus rent. Only Silicon Valley and the Bay Area are more expensive.
“You see home prices really high in Seattle, well above the national median sale price. In Seattle, the median sale price of a home is roughly around $800,000. That compares to the national median sale price, which is closer to $400,000. And so, that really makes a huge difference in the monthly mortgage payment you’re making,” said Gailey.
The Seattle-Tacoma-Bellevue area has the third-largest gap between renting and buying costs, with the average rent in the area at nearly $2,200 a month, while the typical mortgage payment is over $4,900. That’s a buy-to-rent ratio of 125%.
Gailey’s advice: If you want to buy right now you should make sure you’re in it for the long haul.
“Time in the housing market is more important than trying to time the housing market,” said Gailey.
While affordability is one of the main obstacles for aspiring homeowners, if you can afford it, then buying is a smart financial choice in the long term.
In Washington state, on average, you need a combined income of $150,000 annually to afford to buy, and more than half of aspiring homeowners say they can’t get there.
Rental rates in the area are high as well but more comparable to the national average. The average rental unit prices at $2,200, compared to a national average of about $1,950.