Many more Americans than in the past are now renting for less than the cost of buying a home.
In fact, in more than half of housing markets nationwide — 442 of 755 U.S. counties — renting a three-bedroom property is now more affordable than buying a median-priced home. What that means is that home prices are rising faster than wages in 80 percent of housing markets across the nation, from Chicago to Houston to Phoenix.
With a boost in the job market, many Americans want to stay mobile and even though they have higher paying jobs near urban centers, they cannot afford to buy homes that are close to their jobs.
Simply put, at this time, renting might be better than owning to build wealth.
As rents continue to rise faster than wages in most markets, including Chicago and Los Angeles, more renters are finding themselves priced out of the housing market. Home prices are appreciating more quickly than rents in 70 percent of the U.S. markets.
Because of that, the old adage of not spending more than 30 percent of your income on rent (or a mortgage) has become more difficult to follow in cities like San Francisco and New York.
Huntsville, Alabama, had the most affordable rental market in the country in January 2018. Last year, the average renter there only had to devote 22.3 percent of their wages to rent. Home prices in that area rose nearly 11 percent between 2016 and 2017, as rental property investors flocked to buy investment property to rent. And, not surprisingly, the wages in Huntsville and many other such places are not nearly as high as in cities like New York or Seattle.
Buying an investment property is centered around buying a place where people want to live. That seals the greater demand for rentals. The Dallas housing market continues to have a strong rental demand. Growth in 2019 has been projected to grow significantly by the Dallas Business Journal, and so far those projections have proven true.
The price to rent ratio in Dallas is higher, making better financial sense for people to rent rather than purchase a house, and establishing a strong rental demand for real estate investors to capitalize on.
With the prospect of lower interest rates on the horizon, the market for the backlog of interested home buyers may be unveiling changes. Keep a close watch on trending news surrounding the potential lowering of interest rates to make better decisions related to rental investment properties and real estate purchases.