Is it better to buy a home or rent?
It’s complicated question that most Americans will ask themselves at some point, and there’s no easy answer, as everyone’s circumstances are different. But a new study from ATTOM Data Solutions examines the question through the lens of location and finds that in 53 percent of the 855 U.S. counties studied, it’s more affordable to buy a home than rent one.
Depending on where you live, this is good news or bad news. Generally, in rural areas, it’s more affordable to buy than rent, and in suburban or urban areas, it’s cheaper to rent than buy. But there are many surprising exceptions, in addition to specific local trends that are driving housing affordability in particular U.S. cities.
ATTOM’s researchers found that renting is more affordable than buying in 36 of 43 counties with a population of 1 million or more. Among those counties where it was more affordable to buy are the counties where Miami, Detroit, Philadelphia, Cleveland, and Pittsburgh are located.
The study also found that home prices are rising faster than rents in 67 percent of counties, and those counties tended to be in areas that are already relatively cheap. Conversely, rents rose faster than home prices in many areas that are already expensive—Los Angeles County, California; Cook County, Illinois (where Chicago is located); San Diego County, California; and Orange County, California.
The most concerning revelation from the study is that home prices are rising faster than wages in 66 percent of counties. Plus, the counties where wages were rising faster than home prices were the areas that could use the most relief—Los Angeles County, California; Cook County, Illinois, San Diego County, California; Kings County, New York (Brooklyn); and Orange County, California.
On the bright side, wages were growing faster than rents in 57 percent of markets, but curiously, many of the same areas where rents rose faster than wages were also the areas where wages are growing faster than home prices—Los Angeles County, California; Cook County, Illinois; San Diego County, California; and Orange County, California.
Housing affordability has been a growing issue since the financial crisis in 2008. Home prices have exceeded, matched, or are near their pre-crisis peaks in most major markets, while wages have generally been stagnant.
The issue has become so concerning that housing has become an election topic for the first time in decades, as every major Democratic candidate for president has released a formal housing plan, other than frontrunner Joe Biden.
Housing affordability has become strained for a number of reason, primarily a shortage of housing, particularly in urban cities where land is scarce and expensive, like New York City, San Francisco, and Los Angeles. When housing supply is low, it drives up rents and home prices.
The cost of construction materials has also risen dramatically since the financial crisis, making it more expensive to build new housing and thus driving up prices. This has led to developers building fewer homes for the lower- and middle-income brackets, and more for luxury and wealthy buyers.
But conditions vary from market to market, so check ATTOM’s map to see how it’s playing out in your county.