Mortgage Industry News
« Return to Mortgage Industry News
Buying Cheaper than Renting in two-thirds of Major Counties
Thursday, July 9, 2015
on a mortgage used to purchase a three-bedroom home were more affordable than
paying rent on a similar home in 66 percent of the counties recently analyzed
by RealtyTrac. The company, which looked
at data in 285 U.S. counties found that buying beat out renting in 188 of them.
"buy-or-rent" analysis compared the percentage of median household income in 285
U.S. counties that would be needed to pay the fair market rent on a 3-bedroom
property to the percentage that would be needed to make monthly house payments
- including mortgage, insurance and property taxes - on a similar property.
all 285 counties analyzed, the average percentage of median household income
needed to rent was 29.96 percent while the average percentage of median
household income needed to buy was 29.00 percent.
where it was cheaper to buy than rent, however, did tend to be those that had
been most impacted by foreclosures including Miami-Dade, San Bernardino County,
Clark County (Las Vegas), Broward County, Florida, and Wayne County
(Detroit.) The portion of income needed
to buy in those counties ranged from 42 percent in Miami-Dade to 23 percent in Wayne
counties switched from being more affordable to rent in 2014 to more buyer
friendly in 2015. These included
counties housing Seattle, Reading, Pennsylvania, Indianapolis, Olympia
Washington, and Cincinnati.
were 97 counties where renting is more affordable than buying and among the top
three - where the income required to buy exceeded 50 percent - were in
California. Rounding out the top five
were the counties in which Seattle and Denver partially reside.
counties moved from being more affordable to buy in 2014 to being more affordable
to rent in 2015 including Sacramento County and San Joaquin County, California;
Lancaster County, Pennsylvania; Spokane County, Washington; and Polk County,
also looked at properties that were what they called "Buy-to-Rent" purchased during
the first five months of 2015. They
found those properties are showing a slightly decreased return on investment
than properties purchased during the same time period in 2014 in 169 of the 285
counties analyzed (59). The more
recently purchased homes had a gross rental yield of 8.94 percent compared to
9.07 percent for an equivalent three-bedroom property bought a year earlier.
rental rates on 3-bedroom properties increased 3 percent from a year ago across
all 285 counties analyzed, while average home prices on 3-bedroom properties
increased 4 percent across those same counties.
home price appreciation moderates and aligns more closely with trends in rental
rates, the returns in the buy-to-rent market are stabilizing and becoming more
predictable - if not as lucrative as they were for investors who purchased a
few years ago near the bottom of the market," said Daren Blomquist, vice
president at RealtyTrac. "Buying rentals continues to be a brilliant strategy
that allows investors to hedge their bets in a real estate market shifting away
from homeownership and toward a sharing economy."
on investment increased in 41 percent (116) of the counties as rental rates outpaced
home price appreciation. Major counties
where potential buy-to-rent returns increased from a year ago included Orange
County, California; King County, Washington; Santa Clara County, California;
Philadelphia County, and Suffolk County.
with the highest potential rental returns for 3-bedroom properties purchased in
the first five months of 2015 were Clayton County, Georgia (Atlanta) (24.05
percent annual gross rental yield), Bay County, Michigan (19.23 percent),
Mahoning County, (Youngstown) (19.04 percent), Bibb County (Macon) metro area
(18.11 percent), and Philadelphia County, Pennsylvania (17.67 percent).
Read Full Article