BOCA RATON, Fla.–For the first time in years, renting a home is starting to look like a better option than buying for many people.
Home-price appreciation is outpacing rent growth in all 23 of the metropolitan areas tracked by a national index produced by Florida Atlantic University and Florida International University faculty.
As CUToday.info has reported, in recent years the housing market had titled in favor of buyers as home prices were affordable, mortgage rates were low, and rents continued to climb. But that scenario has begun to flip flop.
“We’re trending back toward being renter friendly,” said Ken Johnson a real-estate economist at Florida Atlantic University, in a statement released with the research.
The researchers noted that home prices were up 5.5% in September compared with a year earlier, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Rents in the third quarter increased 3% compared with a year earlier, according to apartment-tracker Axiometrics Inc.
When home-price growth outpaces rent growth, that can be a sign of a bubble because it indicates people are paying more than necessary just to find a place to live, noted the Wall Street Journal in its analysis. While there is no indication there is a new bubble, in a few key markets the FAU/FIU national index is moving into what the Journal called “alarming territory.” In Dallas, Denver and Houston, renting is the most favorable it has been in the history of the index, suggesting significantly overheated housing markets there.
All three cities are likely to see flat home-price growth and slow-moving inventory in the coming years, Johnson said, though he thinks a collapse is unlikely given that prices are still nowhere near as inflated as many cities experienced during the boom.
The index indicated that Atlanta, Boston, Chicago, Cleveland, Los Angeles, New York and Philadelphia all are metro areas where it still makes sense to buy.