A new study is challenging the long-held notion that renting is less financially viable than homeownership.
According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index report produced by Florida Atlantic University (FAU) and Florida International University (FIU), many renters who reinvest their money have an increasingly better chance at creating wealth than individuals who purchase a home. The BH&J Index tracked 23 metro areas, with many of them close to the peak of their current housing cycle. in the BH&J Index, many are nearing the top of their current housing cycle, meaning they are above their long-term pricing trend. These markets include pricey metro areas such as Honolulu, Houston, Los Angeles, Portland, San Diego, San Francisco and Seattle. and St. Louis.
But this situation does not necessarily play out in metro areas below their long-term pricing trend, which means meaning buying and building equity is the superior option. This includes Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, New York and Philadelphia.
"On the heels of information concerning slowing housing starts, rising mortgage rates, decreased demand and unsustainable price increases, these numbers provide additional evidence that housing markets around the country are slowing, resulting in many to opt for renting," said Ken Johnson, a real estate economist and one of the index's creators in FAU's College of Business.
"The current scores driving the markets in the direction of renting and reinvesting appear to be the results of higher mortgage rates, increase in returns, on average, in the stock market, and the cost of ownership, which includes your mortgage payment, taxes, insurance, maintenance, etc.," said Eli Beracha, Co-Creator of the index and associate professor in the Hollo School of Real Estate at FIU. "All of these costs are rising faster than the cost of renting a comparable property. Therefore, renters who take the money they're saving each month and reinvest it are going to build wealth faster than those who buy a home, on average."