Owning a home is getting cheaper, but people are still choosing to rent.

Buying a home is affordable, despite it being the largest purchase of most people’s lives. Low mortgage rates are helping to make homeownership one of, if not the, cheapest option in terms of long-term residence. However, it remains commonplace for buyers, particularly Millennials, to opt into the rental market due, in large part, to expensive down payments; though, new mortgage rules should lower that commitment.

In August, Zillow released a series of market reports examining mortgage and rental affordability across the nation, as well as in select metro areas. What the reports found, in a nutshell, is that mortgages are getting cheaper.

From 1985 to 1999, the typical American devoted slightly more than 22 percent of his or her annual earnings to a mortgage. Fifteen years later and that figure has dropped significantly to 15.3 percent.

On the reverse side of that spectrum, rental rates have actually gone up 5 percent.

Low Mortgage Rates Drive Affordability

While the financial side of both homeownership and renting have developed differently in different parts of the country, Zillow’s reports did note some more widespread trends:

• In June, of the country’s 100 largest metros, only six were paying a larger portion of their incomes today than historically in order to buy their area’s median priced home.
• Low mortgages rates have been paramount to the widespread affordability keeping monthly costs down from homeowners.
• If mortgage rates climb to five percent, which would still be relatively low by past standards, the number of unaffordable metro areas among the U.S.’s top 100 would more than double to 13. Add another percent and nearly one-quarter become unaffordable.

Rental Rates Still Rising

The housing crisis is so aptly named because of the chaos and turmoil that trailed in its wake – people lost their homes, their savings, everything. Yet, still, there was a silver lining buried amongst the muck, which was the rebuilding of the housing market, particularly in regards to mortgages.

Under the light of scrutiny, lenders have played it safe, tightening standards and ensuring that those who receive a loan are capable of paying it back. Coupled with the Fed’s decision to lower interest rates as a way of tempting buyers back into the market, mortgage rates have fallen to remarkable lows, and hopeful buyers are reaping the benefits. Renters have not been so fortunate.

In the eight years since the housing market first started its now historic plummet, rental rates have continued climbing with barely a hiccup. While pre-bubble rates demanded that renters devote approximately one-quarter of their annual income to housing, today’s renters pay about 29.5 percent. According to Zillow’s review, 88 of the nation’s 100 largest metro areas will pay more this year towards rent than they would have historically.

Stan Humphries, chief economist for Zillow, said low mortgages are encouraging potential buyers to start saving for a downpayment, but points out that persisting high rental rates are making it exceedingly difficult for renters to save.

“As rents keep rising, along with interest rates and home values, saving for a downpayment and attaining homeownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt,” Humphries said. “In order to combat this phenomenon, wages need to grow more quickly than they are, particularly for renters, and growth in home values will need to slow.”

Unfortunately, according to the U.S. Bureau of Labor Statistics, wage growth is actually projected to slow, as well as overall labor force participation, compared to the last decade, from a growth rate of 0.7 percent annually to 0.5 percent annually.

As rental rates continue to climb, expect more Millennials to transition into homeownership.