With affordability draining quickly, the gap is growing between the amount of buyers with a desire to purchase, and the amount of buyers who actually can.
According to an analysis newly released by realtor.com®, the cost of homeownership has increased more than three times the price of renting today—and, areas in growing numbers are unaffordable. From July 2017 to July of this year, the expense of homeownership (including insurance and taxes) mounted by 14 percent, to $1,647 (median, monthly); to compare, the cost of renting rose 4 percent, to $1,267. Approximately 40 percent of Americans are in a county that earns enough to purchase today.
In addition, buying is cheaper in 35 percent of counties examined—a decrease from 44 percent in July 2017—and cheaper in only 7 percent of major markets, or those with over 100,000 residents. Roughly 290 counties are now in rent territory, including freshly-minted Marion County, Ind. (Indianapolis); Bronx County, N.Y.; Richland County, S.C. (Columbia); Jackson County, Mo. (Kansas City); and Stark County, Ohio (Canton).
“Even setting aside big upfront expenses like a down payment, rising month-by-month costs are likely keeping many people from purchasing,” says Danielle Hale, chief economist at realtor.com. “Today only 41 percent of people live in a county where the median-income family can afford to buy a home at the median list price, and affordability declined significantly over the past year.”
According to the analysis, buying is more expensive than renting in:
New York County, N.Y. (Manhattan)
Cost (Monthly) to Purchase: $9,840
Cost (Monthly) to Rent: $2,086
Kings County, N.Y. (Brooklyn)
Cost (Monthly) to Purchase: $4,860
Cost (Monthly) to Rent: $2,086
Monterey County, Calif. (Salinas)
Cost (Monthly) to Purchase: $4,816
Cost (Monthly) to Rent: $1,682
San Mateo County, Calif. (Menlo Park, Redwood City, San Mateo)
Cost (Monthly) to Purchase: $8,405
Cost (Monthly) to Rent: $3,471
Santa Barbara County, Calif. (Santa Barbara, Santa Maria)
Cost (Monthly) to Purchase: $4,878
Cost (Monthly) to Rent: $1,910
Buying is financially more prudent than renting, however, in:
Clayton County, Ga. (College Park, Jonesboro)
Cost (Monthly) to Purchase: $699
Cost (Monthly) to Rent: $1,236
Baltimore City, Md. (Baltimore, Towson)
Cost (Monthly) to Purchase: $1,097
Cost (Monthly) to Rent: $1,475
Wayne County, Mich. (Detroit)
Cost (Monthly) to Purchase: $695
Cost (Monthly) to Rent: $1,040
Cumberland County, N.C. (Fayetteville)
Cost (Monthly) to Purchase: $864
Cost (Monthly) to Rent: $1,012
Madison County, Ill. (Edwardsville, Granite City; outside of St. Louis, Mo.)
Cost (Monthly) to Purchase: $832
Cost (Monthly) to Rent: $1,019
“Since homeownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long,” Hale says. “Still, even in places where renting is currently more affordable, rising home prices provide wealth-building opportunity for homebuyers.”
For more information, please visit www.realtor.com.
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.
