Rental demand increases as cost of homeownership keeps rising

SALT LAKE CITY — The increasing costs of owning a home are leading to higher demand for rentals, according to new data from Zillow.

The typical monthly rent payment is $1,932, Zillow recently reported, compared to $3,037 a month for a homeowner. The real estate marketplace company found homebuying costs are rising nearly twice as fast as renting costs.

In Utah, the difference is even more pronounced. For single-family homes specifically, it costs about $2,500 a month to rent versus $4,000 a month to own, according to the Kem C. Gardner Policy Institute at the University of Utah.

"Elevated mortgage rates have pushed home shoppers straight into the arms of rentals," said Kara Ng, Zillow senior economist. "Homeownership has long been a way for families to build wealth, but with the rise in borrowing costs, we're seeing the rise of the deliberate renter, someone who chooses to bank the difference between a buyer's monthly payment and rent, and build wealth without owning a home."

Dejan Eskic, a housing analyst at the Gardner Institute, noted that mortgage rates were around 6% before the Iran war started. Now they're at 7.4%, according to Freddie Mac.

"The move from 6% to 7.4% with prices staying constant has added about $400 to $450 per month to a new buyer from earlier this year," Eskic said.

That equates to buyers needing to make an additional $15,000 to $18,000 per year to qualify for a mortgage, he added.

All this means some families are opting to rent instead of buy. Zillow's data showed a 19.2% increase in rental demand year over year across the country, while in the Salt Lake City area specifically, demand rose 7.4%.

Eskic said demand for single-family rentals in Utah is fairly strong. But the apartment market has a lot of supply, which has led to falling rents for those units.

"We've seen a lot of new projects come online at the same time," Eskic said. "Landlords are competing for tenants."

Apartment rents are down about 8% from their peak along the Wasatch Front, Eskic said. But for single-family homes, "the competition and demand-supply is relatively tight."

A recent study from the Gardner Institute found that overall average monthly costs for homeownership have priced roughly 91% of Utah renters out of the market.

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