Gap Between Buying & Renting Narrows in U.S.

From Point2Homes.com, February, 2020

The gap between buying and renting narrowed nationwide in the last quarter of 2019. While buying a home accounted for 30% of the national median income, renting accounted for 25%.

Lower mortgage rates and regulating home prices have made purchasing housing more affordable, representing good news for buyers who had been previously sidelined. This was despite the fact that, following years of increasing home prices, the cost to purchase a home was higher than renting in 84% of the study’s 593 U.S. counties.

At the end of Q4 2019, the monthly cost of the national median home price was $1,600, which represents 30% of the national median income – down 1% from $1,658 in the previous year. Conversely, the monthly cost to rent rose by 4% – from $1,254 to $1,319 – accounting for 25% of the median household income in both 2018 and 2019.

Where the Gap Narrowed the Most

Home-buying conditions have improved in many counties in the past year. The places that have seen the gap between buying and renting narrow the most were:

Santa Cruz County, CA
King’s County, NY
New York County, NY
Hawaii County, HI
Flagler County, FL.

Flagler was the only market in this category that was priced in line with the national rate. In Santa Cruz County, CA; King’s County, NY; and New York County, NY, home prices are far above the nation’s median listing price of $300,000, surpassing it by anywhere from 169% to 460%. And, although Hawaii County’s real estate market isn’t even one of the country’s most expensive markets, the median home price here is 43% higher than the national median.

Despite its high prices, Hawaii County's median listing price decreased by 10%. It was followed by Brooklyn’s market, where values dropped by 9%. Additionally, the price for homes in Manhattan decreased by 1% and Flagler was down by 6%. Meanwhile, in Santa Cruz County, CA, the median price slowly increased by 2%, while median rents jumped by 38%.

Most Affordable Counties for Homebuyers

In some counties, buying a home is more favorable than renting. In particular, in the top 10 counties where buying was better than renting, median listing prices were 53% lower than the national median listing price. Similarly, median rents were also lower than the national average by 11%. Danielle Hale, chief economist at realtor.com, told Yahoo Finance:

“In these areas, there are a lot of homes available for homeownership and not a lot of rental inventory. The country is facing limited building and a lack of housing availability, but these areas don’t tend to have those issues.”

Purchasing a home is most affordable in Clayton County, GA, where homebuyers spend just 18% of their household income to buy, as opposed to 32% of their income that would go toward renting. Jefferson County, NY, – where it takes 24% of a household’s income to buy versus 31% to rent – closed out the top 10.

Most Affordable Counties for Renters

By the end of the fourth quarter of 2019, several counties saw more attractive conditions for renting than buying. On average, median listing prices in this category were 260% higher than the national median listing price. While still high, rents here were only 79% higher than the national average. Realtor.com’s Hale said:

“In these areas, the markets are so large and well-established that, for the most part, buying comes with a huge premium. These tend to be markets that attract not only homeowners and investors, but international investors, too – like New York and California.”

As expected, New York County, NY, topped the list. Here, it takes an astounding 117% of the household income to buy a home versus 30% to rent. Moreover, seven of the top 10 counties are in California, with the Los Angeles market spending 77% of household income to buy a home as opposed to 36% to rent. The Maui real estate market took the last spot, with 64% of household income needed to purchase a home and just 30% needed to rent.