Buying is still more affordable than renting in the majority of U.S. housing markets, according to a new analysis. A study conducted by RealtyTrac factored in 2015 fair market rental data recently released by the U.S. Department for Housing and Urban Development for three-bedroom properties in 543 counties nationwide with populations of at least 100,000. Buying a median-priced home was found to be more affordable than renting a three-bedroom property in 68 percent of the counties tracked.
Overall, in 473 of the counties tracked, the fair market rent for a three-bedroom property in 2015 will require 27 percent of median household income, on average. For comparison, buying a median-priced home will require an average of 25 percent of median household income, based on median sales prices in November, the study found.
There are plenty of valid reasons to own instead of rent, especially in the current low rate environment. Let’s take a look at why homeownership simply makes more sense than renting, especially over a long-term basis.
Since the housing crisis began in 2008, approximately 4.6 million homes were lost to foreclosure, according to CoreLogic. The vast majority of those homeowners became renters. Even as housing recovered, credit tightened, pushing even more potential buyers out of homeownership and into rentals, both apartments and single-family rental homes.
There are now 43 million renter households, or 35 percent of all U.S. households, the highest rate in over a decade for all age groups, according to Harvard’s Joint Center for Housing Studies; 4 million more renters today than there were in 2007. For those aged 25 to 54, rental rates are the highest since the center began record keeping in the early 1970s.
As a result, rental vacancies have fallen dramatically, and rents have skyrocketed.
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The recent rise in mortgage rates has made buying a house a little more expensive: the increase in the 30-year fixed rate over the past month from 3.4% to 3.9% (Freddie Mac) raised the monthly payment on a $200,000 mortgage by $56, or 6%. However, because mortgage rates are still near long-term lows, and because prices fell so much after the housing bubble burst and remain low relative to rents even after recent price increases, buying is still much cheaper than renting. That means that the recent jump in rates doesn’t change the rent-versus-buy math much.
Rates are likely to keep rising, but how far must rates rise before buying a home starts to look expensive relative to renting?
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The average annual increase of 3.9% is outpacing inflation and income growth. Will renters be priced out of many cities?
It’s no secret renters have been feeling the crunch of a competitive rental market for a few years now. If it seems like rent increases have been unusually high this year though, that’s because they have been.
Though the housing recovery is trucking along, that doesn’t mean real estate scams have gone away. Home owners have been duped out of an average of $4,000 to $5,000 from scams, but even five-figure losses aren’t uncommon for those who have fallen prey to fake loan modifications and other housing fraud. Forbes recently highlighted three of the most common real estate scams today.
A recent study by mortgage giant Fannie Mae showed that 90 percent of renters aspire to be home owners one day, and the top reason behind that desire is for the sense of gaining greater control over their living arrangements.
The survey revealed the following top reasons why renters want to own…