The ‘buy-vs.-rent’ equation, which has see-sawed back and forth between both ends of the spectrum, has titled back toward renting as rising home prices create affordability pressures for many buyers.
The Beracha, Hardin & Johnson (BH&J) quarterly index produced by Florida Atlantic University (FAU) and Florida International University, compares the long term impact on wealth accumulation resulting from purchasing or renting a home. That analysis found market conditions at the end of the first quarter either trending toward or “strictly favoring” renting nationally and in 23 major cities.
Soaring home prices put some cities (Dallas, Denver and Houston among them) “clearly in rent territory,” according to this report. Chicago, Cincinnati, Cleveland and Detroit also remain “in strong buy territory,” but seven other cities are near the “indifference point,” with conditions favoring neither renting nor buying.
Ken Johnson, a professor at FAU’s College of Business and one of the index authors, says buyers should pay close attention to these trends. “The deals are out of the marketplace” in most areas, he cautions, making it “essentially a tossup between rent and ownership as to which will, on average, provide greater wealth accumulation.”