Should I rent or buy a home in St Louis? This is a question St Louis REALTORS® are often asked, especially in the past few years while homes appeared to be increasing weekly, there were often more than a dozen offers on a listing and generally the market seemed out of control. Granted, some of that pandemonium has eased somewhat lately given the increase in interest rates and questions about the economy but the question still remains. While there are many non-financial reasons people choose to buy their own home or condo versus rent, we’ll just look at the cost today.
Home prices increased at more than double the rate of rents…
As the chart below, exclusively available from MORE, REALTORS®, shows, the median price of homes sold in St Louis during 2018 was $178,800 and increased to $240,000 in 2022 for an increase of over 34% during the 4-year period. The median rental rate of homes leased in St Louis during 2018 was $1,250 and increased to $1,450 in 2022 for an increase of 16% during the same 4-year period. During this 4-year period the rate at which the price of St Louis homes increased was more than double the rate at which the rental rates of St Louis homes increased.
Factor in interest rates and the cost of home ownership increase and monthly cost of home ownership
As the second chart below shows, mortgage interest rates during 2018 were in the mid-to upper 4’s and in the 6’s and even hit 7% during 2022 so this means in addition to home prices going up, payments went up even more. For the sake of this comparison, we’ll use 4.7% as the rate for 2018 and 6.7% for 2022. Therefore, the payment on a typical home in 2018 (principal and interest only based upon a 5% downpayment) would have been $881 per month and in 2022 increased by 67% to $1,471 per month. So, while the actual price of a home increased 34% during the period the monthly cost of it, in terms of house payment, increased at nearly double that rate, 67%. During the same period rents increased just 16% so the monthly cost of buying a home increased four-times as much.
St Louis Home Sold Prices vs Rental Rates – Past 5 Years*
(click on chart for live, current chart)
The pricing data shown is based upon listings of homes for sale and lease in MARIS, the REALTOR® MLS for the region.
Mortgage Interest Rates 2018 – Present
(click on chart for live, current chart)
