Rent prices and mortgage payments are rising faster than inflation

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With inflation hovering around 7%, just about everything is more expensive than before, from groceries to fuel oil to cars. Worse still, one of the most important monthly expenses for millions of people – rent – has seen price increases well above normal inflation.

According to new data from Redfin, the average monthly rent in the United States rose 14.1% last month from a year earlier – the biggest jump in two years. This increase brings the average monthly rent in the United States to $1,877 in December 2021, from $1,645 at the end of 2020.

East Coast cities including New York, Miami and Jacksonville saw particularly large spikes (up 30% or more year over year), while Austin, Texas was the most hard hit with growth in rental prices of almost 40%.

Unfortunately, owning a home does not protect you from soaring housing prices: mortgage payments are rising even faster than rental prices. The national median mortgage payment for homebuyers with a 5% down payment jumped 21.6% year on year in December to $1,553, according to Redfin.

“Mortgage payment growth has been driven by both rising prices and rising mortgage rates,” Redfin chief economist Daryl Fairweather said in a statement. “And those rising mortgage costs are driving more potential buyers to rent, driving up demand and prices for rentals.”

This is especially true for millennials, many of whom are entering their peak home-buying years but instead choose to rent thanks to a fiercely competitive housing market. A recent study by RentCafe, a rental research and search firm, found that the share of rental inquiries from millennials earning more than $50,000 a year rose to 43% in 2021, a huge jump from to 28% in 2017.

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Which cities have the highest rent increases?

As rental prices rise across the country, some cities have seen particularly large spikes. Here are the 10 cities with fastest rising rents, according to Redfin.

  1. Austin, TX: 40%
  2. Nassau County, NY: 35%
  3. New York, New York: 35%
  4. Newark, New Jersey: 35%
  5. New Brunswick, New Jersey: 35%
  6. Miami, Florida: 34%
  7. West Palm Beach, Florida: 34%
  8. Fort Lauderdale, Florida: 34%
  9. Jacksonville, Florida: 31%
  10. Portland, Oregon: 29%

The average rent in Austin, which tops the list, is $2,290. Austin has one of the fastest growing real estate markets in the country. The median home price in Austin rose nearly 19% on an annual basis to $567,000 last month, according to Redfin. Mortgage payments in Austin have risen 37.5% over the past year, according to the new report. (Round Rock, Texas — located just outside Austin — was on Money’s 2021 list of the best places to live, thanks in part to its booming job market.)

Only one city included in the Redfin study saw rent prices drop in December from a year earlier: Kansas City, Missouri, where rents fell 0.8%.

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