Enjoy access to a free NMLS renewal class when you attend an in-person event.
- Owning a median-priced home is more affordable than average rents on a three-bedroom property in 58% of the U.S. counties analyzed.
- In some of the nation’s most populous counties, renting is more affordable for average wage earners than buying a home.
- Home prices are rising faster than both rents and wages while wages rise faster than rents.
- Low-density areas actually saw rent prices lag behind growing home prices.
Today, ATTOM released its 2022 Rental Affordability Report, which proves that owning a median-priced home is more affordable than average rents on a three-bedroom property in 666, or 58%, of the 1,154 U.S. counties analyzed in this report. This means major home ownership expenses consume a smaller portion of average local wages than renting.
That can be pretty hard to believe, considering how much the median price of homes skyrocketed since the start of the pandemic, but the data doesn’t lie. Home prices have increased more than average rents and more than average wages in 88% of the counties analyzed.
"Home-prices are rising faster than both rents and wages while wages rise faster than rents,” said Todd Teta, chief product officer with ATTOM. “And the housing market boom of the past decade keeps pushing home values to new records.”
The data, from the U.S. Department of Housing and Urban Development, shows that home ownership is more affordable in a majority of the country, as it was in 2021, following another year when the benefits of rising wages and historically-low mortgage rates counteracted the effects of home prices surging throughout much of the country. U.S. home prices shot up 10% in most of the country within the past year, while average wages increased about 8% and interest rates hovered around 3%, helping to maintain home ownership affordability.
“Home ownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay,” Teta continued. “The trend is slowly shifting toward renters, which could be a major force in easing price increases in 2022. Prices can only go up by so much more before renting becomes financially easier. For now, though, rising wages and interest rates around 3 percent are enough to offset recent price run-ups and keep ownership on the plus side of the affordability ledger compared to renting.”
The median price for three-bedroom homes are increasing more than the value of three-bedroom rentals in 1,015 of the 1,154 counties analyzed or 88%. Counties were included if they had at least 500 sales from January through November 2021.
The most populous counties where home prices are accelerating are Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ and San Diego County, CA.
The largest counties where rents are rising faster than home prices are Allegheny County (Pittsburgh), PA; Hidalgo County (McAllen), TX; Ventura County, CA (outside Los Angeles); Jackson County (Kansas City), MO and Lake County, IN (outside Chicago).
Some of the nation’s most populous counties are showing some semblance of normalcy, where renting is more affordable for average wage earners than buying a home. This accounts for 21 of the nation's 25 most populated counties and 35 of 42 counties in the report with a population of 1 million or more (69%). These counties include Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA and Orange County, CA (outside Los Angeles).
Other counties with populations more than 1 million where it's more affordable to rent than buy a home include locations in Dallas, Miami, New York City, San Francisco, Washington, D.C., and Riverside, CA, metropolitan areas.
In counties (population more than 1 million) where it's more affordable to buy a home than rent include Harris County (Houston), TX; Bexar County (San Antonio), TX; Wayne County (Detroit), MI; Philadelphia County, PA; and Hillsborough County (Tampa), FL.
For more information, including a look at ATTOM’s buy or rent heat map, click the link provided.
Low-Density Versus High-Density Counties
Low-density areas actually saw rent prices lag behind growing home prices. According to a Zumper Housing Cost report, rent either stayed flat or rose modestly in less dense suburban areas at the beginning of the pandemic when home prices were rising dramatically.
In 2021, rent began to rise at a similar rate to home prices, even as home price appreciation slowed in many areas during the summer. For example, take the Austin metro area; in June 2021, the median home price was up 54.3% relative to January 2019, but the median one-bedroom rent was up only 10.7%. By August, however, the median home price was still up 54.3% and rents rose a whopping 25.9% from January 2019 levels.
The Zumper report tries to determine the reason for this lag, theorizing it’s likely a combination of a few different factors. In the beginning of the pandemic, home sales swung up unusually fast, then there was another rush of demand in 2021, when most people were receiving vaccinations. Generally, renters are not able to move that fast on purchases because they have to wait for their lease to expire. This also means landlords have to wait to raise rent in
response to rising home prices.
Additionally, broad adoption of work-from-home policies and fear over the virus led to a minor outflow of populations from areas that froze rents. Then, when leases began to expire over the summer, rent began to fall.