Rising Rents Surpass Mortgage Payments – Will This Mean More Buyers?

Is it finally time for agents to start their engines?

In what will hopefully serve as a growing reason to buy, the Wall Street Journal reported earlier this week that rising rent costs have surpassed mortgage payments, making it cheaper to buy than it is to rent.

Well, not so fast. Both real estate agents and economists say the trend hasn’t boosted the demand for homes. Affordability alone hasn’t been enough to overcome the obstacles in the way of a housing recovery. Some homeowners who would like larger properties are stuck because they can’t sell their homes.

Other would-be buyers can’t qualify for mortgages because lending conditions are tight or because they don’t have enough equity in their current homes to use as down payments.

“The reality of coming up with the down payment and the loan-qualification standards makes things much different than the raw numbers suggest,” says Hessam Nadji, managing director of Marcus & Millichap, a real estate brokerage house.

And even those who may qualify remain skittish about buying in a market where prices could fall amid foreclosures and weak job growth.

The low mortgage rates continue to be a big reason why affordability is improving. However, these low mortgage rates don’t seem to help sales because nobody expects mortgage rates to rise anytime soon. The Federal Reserve in August said it would keep rates at ultra-low levels for two years.

One hopeful sign is that inventories have fallen from their levels of last year. But that should level out because the banks have yet to process massive quantities of potential foreclosures.

Are your holiday sales looking up? Or have you shuttered your doors until after the New Year? Please share with us.