Housing Index Shows Renting Beats Buying in Eight Major U.S. Markets
As the cost of housing continues to soar, deciding whether to buy a home or rent one is a virtual toss-up in many parts of the country.
But the decision is clear-cut in eight major metropolitan areas, according to an analysis by professors at 91制片厂 and .
In Dallas, Denver, Houston, Kansas City and Seattle, consumers looking to build wealth are better off renting a property and reinvesting the money they would have spent on ownership. That鈥檚 because the total monthly cost of homeownership in those areas is rising faster than monthly rents, the researchers said.
鈥淚n these five metros, home prices have shot up so fast, and the potential for near-term price declines is just too great,鈥 said , Ph.D., a real estate economist and associate dean in 91制片厂鈥檚 . 鈥淭here is that home prices in these markets are significantly higher than their respective long-term pricing trends.鈥
Renting and reinvesting also is the better option in Miami, Pittsburgh and Portland, Oregon, but the potential for price declines isn鈥檛 as severe in those three markets, Johnson said.
He and FIU鈥檚 , Ph.D. and William Hardin, Ph.D., are the authors of the . The quarterly analysis examines the entire U.S. housing market but focuses on 23 metro areas, factoring in home prices, rents, mortgage rates, investment returns, home insurance and other costs.
While the indicate that renting and reinvesting is the clear better option in the eight previously disclosed markets, consumers in the remaining 15 metro areas shouldn鈥檛 agonize over the buy-rent decision, the professors said.
In Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego, San Francisco and St. Louis, consumers are just as likely to create more wealth by renting and reinvesting as owning and building equity.
鈥淧eople living in any of these areas can hardly go wrong, no matter what they decide,鈥 said Beracha, director of FIU鈥檚 . 鈥淚f they find a good home for sale at a fair price and plan on being there more than a few years, then buying certainly makes sense. If they find a better deal in the rental market, they can take that and still be confident in their ability to build wealth over the long term.鈥
Despite strong demand leading to rising rents, renting typically still costs less per month than owning, after factoring in home maintenance costs, homeowner association dues and other fees. Renters who don鈥檛 invest that monthly savings in stocks and bonds might be better off buying because homeownership is a forced savings plan, the professors said.
Homeownership traditionally was considered the far better option than renting and reinvesting for building wealth, but the historic housing crash from 2006 to 2011 changed that perception for many Americans. The BH&J Buy vs. Rent Index, first published in 2013, shows that even when home prices are rising, renting and reinvesting can be lucrative for disciplined investors.
鈥淩ents and home prices are rising at near unprecedented levels, creating an affordability crisis,鈥 Johnson said. 鈥淭he goal of the index is to help consumers understand the trends so they can make more informed real estate decisions.鈥
-91制片厂-
Tags: faculty and staff | business