Is it cheaper to rent or buy a home? This is one of the most common questions that we hear in real estate each year. Like all of real estate, the answer will vary based on your location. A new report from ATTOM Data Solutions looked closer at this question. Even though home prices have skyrocketed in the past two years and mortgage interest rates are creeping higher, owning a median-priced house remains more affordable than renting in a slim majority of U.S. counties.
What the data shows
According to this analysis, the monthly cost of owning a home takes up a smaller percentage of an individual’s wages compared to monthly rental costs in 58% of the counties throughout the country. However, when looking at the most populous counties, renting was more affordable than buying in the majority of the cases. Renting (using the fair market price of a three-bedroom property) was more affordable in 69% of counties with a population of above 1 million, while ownership was cheaper in 61% of counties with populations below 500,000. In other words, this data indicates that renting may currently be more affordable than buying in big cities. Meanwhile, buying a home may be the more affordable option in rural areas.
Summary
Looking back over the past two years, home prices have outpaced wage growth in a majority of markets. On the other hand, wage growth has outpaced rent growth in most markets. Should these trends continue in many of these markets, we will likely see renting as the more affordable option for many Americans. Of course, home prices can not simply continue to rise at the same pace that we have seen. Although prices are still expected to rise this year, they should do so at a more gradual pace.
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