ATTOM Reports: Home Ownership Is More Affordable Than Renting!

Categories: Homes Planning Real Estate Residents

Published 01/28/2022

On January 6th, 2022, ATTOM released its 2022 Rental Affordability Report, which proves that owning a median-priced home is more affordable than average rents on a three-bedroom property in 666, or 58%, of the 1,154 U.S. counties analyzed in this report. That means major homeownership expenses consume a smaller portion of average local wages than renting.

That can be pretty hard to believe, considering how much the median price of homes skyrocketed since the start of the pandemic, but the data does not lie. Home prices have increased more than average rents and more than average wages in 88% of the counties analyzed.

U.S. Department of Housing and Urban Development reports homeownership is more affordable in the majority of the country as it was in 2021, following another year when the benefits of rising wages and historically-low mortgage rates counteracted the effects of home prices surging throughout much of the country. U.S. home prices shot up 10% in most of the country within the past year, while average wages increased about 8% and interest rates hovered around 3%, helping to maintain homeownership affordability.

The median price for three-bedroom homes are increasing more than the value of three-bedroom rentals in 1,015 of the 1,154 counties analyzed or 88%. To be included, counties must have at least 500 sales from January through November 2021.

The most populous counties where home prices are accelerating are Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ and San Diego County, CA. While the largest counties where rents are rising faster than home prices are Allegheny County (Pittsburgh), PA; Hidalgo County (McAllen), TX; Ventura County, CA (outside Los Angeles); Jackson County (Kansas City), MO, and Lake County, IN (outside Chicago).

Some of the nation’s most populous counties are showing some semblance of normalcy, where renting is more affordable for average wage earners than buying a home. That accounts for 21 of 25 most-populated counties and 35 of 42 counties in the report with a population of 1 million or more (69%). These counties include Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA and Orange County, CA (outside Los Angeles).

Other counties with populations of more than 1 million where it’s more affordable to rent than buy a home include Dallas, Miami, New York City, San Francisco, Washington, D.C., and Riverside, CA, metropolitan areas.

In counties with populations of more than 1 million where it’s more affordable to buy a home than rent includes Harris County (Houston), TX; Bexar County (San Antonio), TX; Wayne County (Detroit), MI; Philadelphia County, PA; and Hillsborough County (Tampa), FL.

For more information, including details of ATTOM’s buy or rent heat map, click the link provided.

Low-Density Versus High-Density Counties

Low-density areas saw rent prices lag behind growing home prices. According to a Zumper Housing Cost report, rent either stayed flat or rose modestly in less-dense suburban areas at the beginning of the pandemic when home prices were rising dramatically.

In 2021, rent began to arise at a similar rate to home prices, even as home price appreciation slowed in many areas during the summer. For example, take the Austin metro area; in June 2021, the median home price was up 54.3% relative to January 2019, but the median one-bedroom rent was up only 10.7%. By August, however, the median home price was still up 54.3%, and rents rose a whopping 25.9% from January 2019 levels.

The Zumper report tries to determine the reason for this lag, theorizing it’s likely a combination of a few factors. At the beginning of the pandemic, home sales swung up unusually fast, then another rush of demand in 2021 when most people were receiving vaccinations. Renters are typically unable to move that fast on purchases because they have to wait for their lease to expire. That also means landlords have to wait to raise the rent in response to rising home prices.

Additionally, broad adoption of work-from-home policies and fear over the virus led to a minor outflow of populations from areas that froze rents. Then, when leases began to expire over the summer, rent began to fall.

Are you looking to receive some assistance from one of Homesnap’s top 25% Realtors of 2021? Help from Advent Properties’ Darryl Glass is one phone call away! Contact Darryl Glass today at (510) 500-7531 for assistance navigating through any step of your property purchasing process. You can also click here to schedule a call with Darryl in the upcoming weeks at your convenience.