Housing Market Becoming More Favorable for Renters than Buyers According to Latest Buy vs. Rent Index
The latest national housing market index produced by 麻豆女郎 and Florida International University faculty indicates it is becoming more favorable for renters than buyers in terms of wealth accumulation.
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罢丑别听聽attempts to answer one of the toughest questions American consumers face: Is it better to rent or buy a home in today鈥檚 housing market? The quarterly index聽is designed to signal whether current market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period in a particular market relative to historical market conditions and alternative investment opportunities.听It examines the entire housing market in the United States and isolates the markets of 23 key cities.
According to the latest BH&J Index, as of the end of the first quarter of 2015,聽the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.听聽
Three cities (Dallas, Denver and Houston) are clearly in rent territory, with property pricing clearly out-pacing rents, meaning buyers should proceed with strong caution.
In contrast to the latest聽, which recently reported a five percent year-over-year property appreciation rate, the BH&J Index suggests that potential purchasers in many cities around the U.S. should begin to bargain more aggressively.
鈥淧otential buyers should be cognizant that 鈥榯he deals鈥 are out of the marketplace and that it is essentially a tossup between rent and ownership as to which way will, on average, provide greater wealth accumulation,鈥澛爏aid聽,聽Ph.D., a real estate economist who is one of the index鈥檚 authors and an associate dean of graduate programs and professor in聽.听鈥淢iami, in particular, deserves attention as it has been trending toward rent territory for several reporting periods.听In Miami, potential buyers should seek to bargain more aggressively.鈥
Seven cities (Miami, Honolulu, Los Angeles, Pittsburgh, Portland, San Francisco and Seattle) are at or near the indifference point between ownership and renting. Here the spread between monthly rent payments and ownership payments appears to be at a point where neither ownership nor renting is statistically favored.
Four cities (Chicago, Cincinnati, Cleveland and Detroit) remain in strong buy territory with scores that have historically favored wealth accumulation through home ownership.听
The index conducts a 鈥渉orse race鈥 comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership. Johnson鈥檚 collaborators in this ongoing independent research are聽, Ph.D., assistant professor in the T&S Hollo School of Real Estate at FIU, and聽, Ph.D., director of the T&S Hollo School of Real Estate at聽.听
The index鈥檚 results are standardized between 1 and -1, with negative scores favoring ownership and positive scores favoring renting. The BH&J Index provides information on both the direction and health of varying housing markets, as well as collateral information for real estate professional, developers, lenders and housing policy makers.
The BH&J Index is published quarterly and is available online at聽.听Due to data availability and the time necessary to calculate the most current index values, the index is produced two months after the end of the quarter.
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