Buying a home isn’t necessarily your ticket to more affordable living.
A new report from real-estate data provider Attom Data Solutions found that buying a median-priced, three-bedroom home was more affordable than renting in only 53% of the 855 counties analyzed across the U.S., making renting in the other counties the more affordable option.
Attom’s analysis incorporated its own sales-deed data, 2020 fair-market rent data from the U.S. Department of Housing and Urban Development and wage data from the Bureau of Labor Statistics.“Home ownership is a better deal than renting for the average wage earner in a slim majority of U.S. housing markets,” Todd Teta, chief product officer at Attom Data Solutions, said in the report.
“Either buying or renting is a financial stretch or out of reach for individual wage earners throughout most of the country in the current climate,” he added. “But with interest rates falling, owning a home can still be the more affordable option, even as prices keep rising.”
So how do you know which is the more affordable housing option between buying and renting? One indicator is how many people live in your county. Renting is generally more affordable in areas with larger populations, while less-populated counties tend to see buying as the better option, the researchers at Attom found.
In 36 of the 43 counties nationwide that had a population of 1 million or more, renting was the more affordable option. This includes the nation’s largest cities, such as New York, Los Angeles, Chicago, Houston and Phoenix. Additionally, in over two-thirds of the counties with populations greater than 500,000 people, renting was the less costly choice for housing.
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The parts of the country that were outliers in this regard were generally located in two regions: the Rust Belt and Florida. Some cities where buying was cheaper include Detroit, Philadelphia, Cleveland and Pittsburgh. Additionally, three highly populated counties in Florida — Miami-Dade, Broward and Hillsborough — were more affordable to buy a home in rather than rent a property.
While highly populated counties lend themselves to renting rather than buying, they aren’t the most affordable rental markets, overall. Roane County, Tenn., which is located west of Knoxville, had the cheapest rent in the country, with the fair market rent only eating up 20.1% of the average wage. Next was Steuben County, N.Y., located south of Rochester (22.2%), and Madison County, Ala., which includes Huntsville (22.4%).
Renting could become the better option for more Americans in the years ahead. Home prices were rising faster than rents in 67% of markets and faster than wages in 66% of markets nationwide, Attom reported. Meanwhile, wages were rising faster than rents in a majority of markets, suggesting that it’s becoming even more affordable to rent in over half the country.