New Data Answers If Owning a Home Is Cheaper Than Renting

ATTOM Data Solutions released its 2021 Rental Affordability Report earlier in January. The report gave many insights, but this was perhaps the most interesting: ATTOM found that owning a median-priced three-bedroom home was actually more affordable than renting the same type of property in 63% of the 915 counties analyzed across the United States.

Keep note that most ownership affordability resided in suburban and rural areas, making up most of the nation, but it’s a trend to pay attention to, nonetheless.

Home prices appreciated more than rents—but remained more economical

There’s no question that owning real estate–contrary to renting–is a better move in the long-term, but it’s simply not affordable for some folks. On paper, the numbers don’t mesh either. Home prices have appreciated more than average rent prices in 83% of counties in the US, as well as outpaced wage growth in most of the nation. However, with COVID-19 and slashed interest rates, the trend was counteracted with easier access to home ownership, especially in suburban and rural areas, thus making it more affordable to own a home in almost two-thirds of the US.

“Home prices are rising faster than rents and wages in a majority of the country. Yet, home ownership is still more affordable, as amazingly low mortgage rates that dropped below 3% are helping to keep the cost of rising home prices in check,“ said Todd Teta, a chief product officer with ATTOM Data Solutions. “It’s startling to see that kind of trend. But it shows how both the cost of renting has been relatively high compared to the cost of ownership and how declining interest rates are having a notable impact on the housing market and home ownership. The coming year is totally uncertain, amid so many questions connected to the Coronavirus pandemic and the broader economy. But right now, owning a home still appears to be a financially-sound choice for those who can afford it.”

The most populated counties where home prices grew faster were:

Los Angeles County, CA
Cook County (Chicago), IL
Harris County (Houston), TX
Maricopa County (Phoenix), AZ
San Diego County, CA

On the other hand, the most populated counties where rent is outpacing ownership are:

Kings County (Brooklyn), NY
Queens County, NY
New York County (Manhattan), NY
Bronx County, NY
Allegheny County (Pittsburgh), PA

Renting remains more affordable…most of the time

According to the report, renting remains more affordable in about 66% of counties with populations totaling over one million. Other metros not mentioned earlier include Seattle, San Francisco, and Boston.

However, not all large metros told the same story. Among the 44 counties analyzed with one million or more people, these places featured more homes that were more affordable to own than rent:

Miami-Dade County, FL
Clark County (Las Vegas), NV
Tarrant County (Fort Worth), TX
Broward County (Fort Lauderdale), FL

Counties with lower populations are the most affordable

Counties included in the study with less than one million people had the most home ownership affordability, on average. Some of these counties included metros like Milwaukee, Tampa, and Memphis. Push farther into the suburbs and past them, and you’ll find even more ownership affordability. In counties that featured less than 500,000 people, at the top of the list were:

Greenville County, SC
Adams County (outside Denver), CO
Hampden County (Springfield), MA
Lake County (Gary), IN

Counties with the same profile but better renting affordability were places like:

Spokane County, WA
Morris County, NJ
Richmond County (Staten Island), NY
Polk County (Des Moines), IA

Wage growth outpaces rent—but not home prices

A welcome statistic is that wage growth is outpacing rent prices in 81% of counties across the US. Out of 915 counties, wages increased more than fair market rent values in 739 of them.

However, some of the areas where rent prices have grown faster than wages were counties like Harris County, Texas; Tarrant County, Texas; Fresno County, California; Pinellas County (Tampa), Florida; and Macomb County (outside Detroit), Michigan.

On the other side of the coin, home prices have outpaced wage growth in 62% of counties, mostly in large markets like Chicago, Los Angeles, and Miami.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.