February 8th, 2019 9:36 AM by Jackie A. Graves, President
FREEHomePurchaseAnalysis FREEFHAHomePurchaseAnalysis FREEVAHomePurchaseAnalysis
The difference in affordability between renting or buying is
It's becoming increasingly rare to find a market where it makes
more sense to buy than rent.
New data from Realtor.com indicates
that the difference in affordability of either purchasing or renting a home is
tightening, meaning that the number of markets where it's cheaper to buy than
rent is decreasing.
According to the company’s latest Rent vs. Buy report, in the
fourth quarter of 2018, buying a home was more affordable than renting in only
17% of U.S. counties, falling from 25% in 2017.
In fact, the average mortgage payment for the U.S. median home
was $1,578 in Q4, compared to the average monthly rent of $1,267.
“At the end of the fourth quarter of 2018, the monthly costs to buy
the national median priced home was $1,578 or 31% of the national median
income,” The company writes. “This is slightly more than the budgeting rule of
thumb of spending no more than 30% of gross income on housing costs.”
Realtor.com notes that the cost to buy increased 13% from
the same time last year, when it sat at $1,398 and required 29% of the national
Unfortunately, the cost to rent a home has also climbed,
increasing 4% from last year's total to $1,267, representing a negligible
change in the share of income required for renting of 25%, according to the
“Pockets of affordability persist, but they are getting harder
to find. Many parts of U.S. have seen relative home-buying affordability erode
away, thanks to rising home
prices and interest
and slower rising rents,” Realtor.com writes. “Still, while the short-term math
may be challenging, in the long term, rising rents tend to eventually outpace
the cost of principal and interest on a fixed rate loan, which can make a home
purchase the better long-term decision.”
In fact, Realtor.com's data reveals the cost to purchase a home
is still affordable in 60% of larger counties. However, the company notes that
as inventory and affordability impact the market, the share of income required
for purchase has increased from 29% to 31% over the past year.
That being said, the company notes that rising home prices can
further encourage home buying, and help explain why renters are
looking to enter the housing market. Even if it is becoming increasingly
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