Lending Real Estate

Buying still more affordable than renting for most of country

RealtyTrac report shows it makes more sense to buy in 58% of housing markets


Rapidly rising rents are ensuring that it makes more sense to buy in much of the country, a new report from RealtyTrac showed.

According to RealtyTrac’s 2016 Rental Affordability Analysis report, it is currently more affordable to buy rather than rent in 58% of the 504 counties analyzed as part of the report, despite home price appreciation outpacing rent growth in 55% of markets.

Not only is the rent rising equal to, or in some cases more than home prices, rents are outpacing weekly wage growth in 57% of markets, RealtyTrac’s report showed.

According to RealtyTrac’s report, rents on three-bedroom properties are expected to increase an average of 3.5% in 2016 over 2015 across all 504 counties analyzed, per the HUD data.

Meanwhile, average weekly wages in the second quarter of 2015, which was the most recent wage data available, were up an average of 2.6%from a year ago and median home prices were up an average of 5% in the third quarter of 2015 compared to a year ago across all 504 counties, RealtyTrac’s report stated.

“Renters in 2016 will be caught between a bit of a rock and a hard place, with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents,” said Daren Blomquist, vice president at RealtyTrac.

“In markets where home prices are still relatively affordable, 2016 may be a good time for some renters to take the plunge into homeownership before rising prices and possibly rising interest rates make it increasingly tougher to afford to buy a home,” Blomquist added.

The RealtyTrac report includes recently released rental data from the U.S. Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics along with public record sales deed data from RealtyTrac in 504 counties with a population of at least 100,000 people.

According to RealtyTrac’s report, across all 504 counties analyzed in the report, an average wage earner would need to spend 37% of their income on rent for a three-bedroom property in 2016, slightly less than the 38% of income to make monthly house payments — assuming a 3% down payment and including mortgage, taxes, insurance and mortgage insurance — on a median priced home on average across all 504 counties.

Renting was more affordable than buying in 213 of the 504 counties analyzed (42%), including counties in Los Angeles, Houston, San Diego, New York City (Brooklyn), and Dallas, RealtyTrac’s report showed.

Buying was more affordable than renting in 291 counties (58%) including counties in Chicago, Phoenix, Miami, the Inland Empire of Southern California, Las Vegas and Detroit.

Check out the interactive map below (courtesy of RealtyTrac) to see which markets are more affordable for buyers and renters.

The least affordable markets for rents (where average wage earners need to spend the highest percentage of their income on renting a three-bedroom property) in 2016 are counties in Honolulu, Washington, DC, New York City, and the Northern California metros of Salinas, Santa Cruz and San Francisco. In each of the top five least affordable rental markets, average rents represent more than 60% of average wages, RealtyTrac’s report showed.

The most affordable markets for rents in 2016 are counties in Huntsville, Alabama, Peoria, Illinois, Davenport, Iowa, Atlanta, Georgia, and Pittsburgh, Pennsylvania. In each of the top five most affordable rental markets, average rents represent 25% or less of average wages.


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