The US homeownership rate was at a historic low in 2016, with many potential homebuyers continuing to rent, being unable to save up for a down payment while renting. However, according to new data from the country’s largest property database ATTOM Data Solutions, buying a home is actually more affordable than renting in most US housing markets.
In more than 66 percent of the counties analyzed by ATTOM for the report, making monthly housing payments on a median-priced home — including mortgage payments, property taxes and insurance — was more affordable than the fair market rent on a three-bedroom property.
ATTOM’s analysis included recently released fair market rent data for 2017 from the Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics, as well as public record sales deed data from RealtyTrac in 540 US counties that had at least 900 home sales in 2016.
To determine a county’s “rental affordability,” ATTOM used the average monthly wage as a percentage of average fair market rent for a three-bedroom property. “Homebuying affordability” was assessed using the average monthly wage as a percentage of the monthly house payment for a median-priced home. ATTOM defined a house payment based on a 3 percent down payment and including monthly mortgage payment, property tax, homeowner’s insurance and private mortgage insurance.
On average, across all the counties analyzed by ATTOM, monthly fair market rent on a three-bedroom property in 2017 will require 38.6 percent of average wages. However, a monthly house payment on a median-priced home (again, including mortgage, property taxes and all insurance) requires just 36.6 percent of average wages.
Among the 354 counties where it was more affordable to buy than rent were Cook County (Chicago), Illinois, Maricopa County (Phoenix), Arizona, Clark County (Las Vegas), Nevada, and San Bernardino County, California.
Conversely, it was more affordable to rent in 186 of the 540 counties analyzed. Los Angeles, California, San Diego County, California, Santa Clara County (San Jose), California, and Queens County and Kings County (Brooklyn) in New York were among the more affordable counties to rent in.
ATTOM’s analysts found that rents were rising faster than home prices in 37 percent of the studied markets, and many of those markets were West Coast counties.
“While buying continues to be more affordable than renting in the majority of US markets, that equation could change quickly if mortgage rates keep rising in 2017,” said senior vice president with ATTOM Data Solutions Daren Blomquist.
Blomquist added that with that scenario, “renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year.” Renting could end up being the “lesser of two housing affordability evils in a growing number of high-priced markets.”
Click here to read the full report.