Forecasting the Cost Gap Between Homeownership and Renting Under Changing Mortgage Rates

Publication Date

Spring 2026

Presentation Length

15 minutes

College

Jack C. Massey College of Business

Department

Economics and Finance

Student Level

Undergraduate

Faculty Mentor

Dr. Dustin Rumbaugh

Presentation Type

Talk/Oral

Summary

This project examines whether changes in mortgage interest rates affect the gap between the monthly cost of owning a home and the monthly cost of renting. Using data from IPUMS USA spanning 2019-2024, this study constructs a housing cost gap measure by comparing owner housing costs, including mortgage payments, property taxes, and insurance, to renter housing costs measured by monthly rent. The analysis focuses on households located within metropolitan statistical areas (MSAs) to ensure comparability across housing markets. The empirical approach involves regressing the housing cost gap on mortgage rates and relevant control variables. In addition to estimating the relationship between interest rates and housing cost differences, the model will generate predicted values to forecast how increases in mortgage rates affect the expected cost gap between owning and renting. The hypothesis is that higher mortgage rates will be associated with a larger predicted gap between ownership and rental costs. The results of this project aim to provide insight into how interest rates influence housing affordability and the relative financial burden of homeownership compared to renting.

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