Study: Renting Beats Buying in Vast Majority of U.S.
According to the most recent study of housing data, it pays to rent.
Despite widespread home price declines, renting still makes more sense than owning in the vast majority of U.S. housing markets, according to researchers at 爱妃传媒 and Florida International University.
The for January shows that homes still are selling for more than they should in 97 of 99 markets, an indication that renting is more favorable than homeownership.聽
鈥淗ome prices are down, but they are still too high and near record levels so we expect further price corrections in the future,鈥 said , Ph.D., a co-author of the report and an economist in 爱妃传媒鈥檚 . 鈥淲hile rents also are on the rise, consumers are better off financially in most areas if they hold off buying until home price declines level off."
Metro areas such as McAllen, Texas; San Jose, California; San Francisco; and Honolulu are among the most renter-friendly markets nationwide with price-to-rent ratios well above the local historic averages. Those areas could face sharp price reductions in the months ahead.
A market鈥檚 price-to-rent ratio is measured by dividing the average home price by the average annual rent. The calculation is compared to the historic price-to-rent ratio for the market to determine if owning or renting is preferred. Price-to-rent ratios above the local historic average indicate renting is better, while scores below the historic average suggest buying is better.
鈥淭raditionally homeowners have been able to build wealth faster than renters, but those who rent can still build a sizable nest egg if they are disciplined," said , Ph.D., a co-author and director of . 鈥淚n order to replicate equity creation, renters should invest the money they otherwise would have spent on maintaining their homes."聽
Only two markets (Springfield, Massachusetts and Cape Coral-Fort Myers) have negative price-to-rent scores or discounts, implying owning is, on average, better than renting in financial terms.
Renters in Springfield paid an average of about $1,615 in January, a year-over-year increase of 14.73 percent, leading all 100 markets analyzed by the .
Meanwhile, Cape Coral is still recovering from the effects of Hurricane Ian in September. The Category 4 storm destroyed or badly damaged homes and rentals that have since been taken out of the housing stock, worsening the supply problem that already existed in Southwest Florida.聽
鈥淚n these two markets, home prices are falling, if only slightly, while rents are rising at an astounding rate,鈥 Johnson said.
The BH&J monthly report is produced by Johnson, Beracha and FIU College of Business Dean , Ph.D. It combines raw housing prices and rents from Zillow鈥檚 Housing Value Index and Zillow's Observed Rental Index.
The shortage of both rental and for-sale units is driving high rents and home prices. The construction of needed units will help bring the housing crisis under control, the researchers said.
-爱妃传媒-