Despite the fact that home prices are rising faster than they have in 15 years, buying a home is more affordable than renting in a large portion of the country.
According to a new report from ATTOM Data Solutions, owning a median-price three-bedroom house is more affordable than renting a three-bedroom property in 63% of the country.
Per the report, buying is more affordable than renting in 572 of the 915 counties ATTOM analyzed, even as median home prices have risen more than average rents in 83% of those same counties.
According to ATTOM’s analysis, the fact that interest rates remained at previously unheard-of levels for much of 2020 made buying more affordable despite home prices rising faster than rent and wages.
The report states that buying a home unsurprisingly tends to be more affordable in suburban and rural areas, while renting is more affordable in the nation’s largest cities.
In fact, renting is more affordable than buying in 18 of the nation's 25 largest counties and in 29 of 44 counties with a population of 1 million or more, ATTOM said.
That includes Los Angeles County, California; Cook County (Chicago), Illinois; Harris County (Houston), Texas; San Diego County, California; and Orange County, California (outside Los Angeles).
Other markets where it’s more affordable to rent include New York City, Seattle, Dallas, San Francisco, and Boston.
Meanwhile, it’s more affordable to buy in areas like Maricopa County (Phoenix), Arizona; Miami-Dade County, Florida; Clark County (Las Vegas), Nevada; Tarrant County (Fort Worth), Texas; and Broward County (Fort Lauderdale), Florida.
“Home-prices are rising faster than rents and wages in a majority of the country. Yet, home ownership is still more affordable, as amazingly low mortgage rates that dropped below 3% are helping to keep the cost of rising home prices in check,” said Todd Teta chief product officer with ATTOM Data Solutions.
“It's startling to see that kind of trend. But it shows how both the cost of renting has been relatively high compared to the cost of ownership and how declining interest rates are having a notable impact on the housing market and home ownership,” Teta added.
“The coming year is totally uncertain, amid so many questions connected to the Coronavirus pandemic and the broader economy,” Teta said. “But right now, owning a home still appears to be a financially-sound choice for those who can afford it.”
Note: ATTOM bases rental affordability on the average fair market rent for a three-bedroom property as a percentage of the average monthly wage (based on average weekly wages). Home buying affordability is the monthly house payment for a median-priced home (based on a 3% down payment and including mortgage, property tax, homeowner's insurance and private mortgage insurance) as a percentage of the average monthly wage.