IRVINE, CA—Is owning a home more affordable than renting one? The answer is not so cut and dried, according to ATTOM Data Solutions' analysis. In 240 of the 447 US counties with sufficient home sales data—or 54% of these counties—buying a median-priced home is more affordable than renting a three-bedroom property.
On that basis, then, it's cheaper to buy than to rent. However, renting is more affordable than buying in the nation's 14 most populated counties, and in 30 of 39 counties with a population of one million or more. These markets include Los Angeles and San Diego counties in California, Cook County (Chicago) in Illinois, Harris County (Houston) in Texas and Maricopa (Phoenix) County in Arizona.
“Although buying is still more affordable than renting in the majority of US housing markets, that majority is shrinking as home price appreciation continues to outpace rental growth in most areas,” says Daren Blomquist, VP at ATTOM. “Renting has clearly become the lesser of two housing affordability evils in many major population centers, with renting more affordable than buying in 76% of counties that have a population of one million or more.” When broken down by population rather than number of markets, the data show that “the majority of the US population—64%—live in markets that are more affordable to rent than to buy.”
On average, renting a three-bedroom property requires 38.8% of weekly wages across the 447 counties ATTOM analyzed for the report. In a few markets, though, the percentage of wages that goes toward the rent check is far higher. Among these are the Northern California counties of Marin and Sonoma, where paying the rent consumes 79.5% and 67.6%, respectively, of a paycheck; the Washington, DC metro area county of Spotsylvania in Virginia (75.5%); Honolulu County (71.9%); and Kings County in New York, better known as Brooklyn (67.4%).
The wage/rent gap may be widening. ATTOM says that average fair market rents rose faster than average weekly wages in 266 of the 447 counties analyzed in the report, or 60%. That includes a number of the most populated counties where it's still more affordable to rent than to buy, including Los Angeles County, Cook County and Harris County.
However, median home prices are rising faster than rents in 59% of markets analyzed by ATTOM. These include the aforementioned Los Angeles and Cook counties, suggesting that if wage growth is lagging rent growth in these markets, it's really lagging behind home price appreciation.
Meanwhile, average fair market rents rose faster than median home prices in 40% of the markets stuied by ATTOM. Among these are Harris County, Maricopa County, the New York City counties of Kings and Queens and the Dallas metro county of Tarrant.
In compiling the report, ATTOM looked at rental data from the US Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics and its own home price data. Rental affordability is average fair market rent for a three-bedroom property as a percentage of the average monthly wage, while home buying affordability is based on the monthly house payment for a median-priced home (including mortgage, property taxes and insurance) as a percentage of wages.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
