Buying More Affordable Than Renting In Most Housing Markets

In the majority of U.S. counties, buying a home is less expensive than renting, according to housing data source RealtyTrac.  

The monthly house payment on a median-priced home is more affordable than the monthly fair market rent on a three-bedroom property in 76% of U.S. counties, according to RealtyTrac’s Residential Rental Property Analysis for properties purchased in the first quarter of 2015.

The analysis included 461 counties nationwide with a population of at least 100,000 and sufficient home price, income and rental data.

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Across all 461 counties, fair market rents as set by the U.S. Department of Housing and Urban Development (HUD) on average represented 28% of the estimated median household income, while monthly house payments on a median-priced home — with a 10% down payment and including property taxes, home insurance and mortgage insurance — represented 24% of the estimated median income.

“From a pure affordability standpoint, renters who have saved enough to make a 10% down payment are better off buying in the majority of markets across the country,” says Daren Blomquist, vice president at RealtyTrac, in a statement. “But factors other than affordability are keeping many renters from becoming buyers, a reality that means real estate investors buying residential properties as rentals still have the opportunity to make strong returns in many markets.”

While buying might be more affordable than renting in some markets, it doesn’t mean buying is “truly affordable by traditional standards,” Blomquist says, adding that in those markets the decision to rent or buy is more difficult. 

Among the most affordable counties for buying are Bay County, Mich., in the Bay City metro area (11% of median income to make house payments on a median priced-home); Fayette County, Penn. (11%) and Beaver County, Penn. (14%), both in the Pittsburgh metro area; Tazewell County, Ill., in the Peoria metro area (14%), and Butler County, Ohio, in the Cincinnati metro area (14%), data show.

“When considering the financial aspects of renting versus owning within the majority of the Ohio markets, the better financial opportunity is in ownership,” says Michael Mahon, executive vice president at HER Realtors, covering the Ohio housing markets of Cincinnati, Dayton and Columbus. “With many markets in Ohio seeing double-digit appreciation year over year, the cost of homeownership and renting will only go up in future years, while purchasing options offer attractive low interest rates for homeowners to stabilize monthly household expenses, while equally building equity within their household investments.”

Read the RealtyTrac analysis here

Written by Cassandra Dowell