Little Rock Renters May Be Paying More Than a Mortgage, Broker Says

Jerry Larkowski, managing broker at ESQ. Realty Group, LLC in Little Rock, says many renters in the city are delaying home purchases in hopes of lower mortgage rates, but that wait may be costing them more than they realize.

“When you rent, you’re basically paying 100 percent interest every month,” Larkowski said. “You are building up no equity. You are not paying down any principal.”

A mortgage payment splits between interest and principal, with some portion reducing the loan balance each month. The home may also appreciate over time. In contrast, every dollar of rent goes to the landlord, with no asset accumulating for the tenant.

Larkowski illustrated the point: if a landlord pays $1,100 a month on their mortgage and charges $1,500 in rent, the tenant is covering that note and generating cash flow for the owner. “You’re already buying a house,” he said. “You’re buying it for your landlord.”

The comparison renters often make is between today’s rates, which are in the mid-to-high sixes, and the 3.5% rates some buyers secured a few years ago. But Larkowski notes that the person who bought at 3.5% owns a home, while the renter waiting for rates to drop owns nothing.

“You can never change the price you pay for a house,” Larkowski said. “You can always change the interest rate.” If rates fall after buying, homeowners can refinance to lower their payment while keeping the purchase price locked in. If rates rise, they benefit from having bought before rates went higher.

The only scenario where waiting clearly wins is if home prices drop significantly at the same time rates fall. But in Central Arkansas, where values are historically stable, that combination is unlikely, Larkowski said.

Currently, inventory in Little Rock is sitting longer than a year or two ago, giving buyers more choices and less pressure. Quality single-family homes are available at price points where a mortgage payment is competitive with many rents. Arkansas’s low property taxes also keep monthly ownership costs lower than many expect.

A fixed mortgage payment stays the same over time, while rent can increase at the landlord’s discretion. For renters considering buying, Larkowski suggests the key question is whether their current monthly payment is building anything for them.

More information on available properties is on the ESQ. Realty Group active listings page.

ESQ. Realty Group is a full-service brokerage serving Little Rock and Hot Springs, Arkansas, led by managing broker Jerry Larkowski, a dual-licensed attorney and broker.

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