In a stark year-over-year reversal, renting is now more affordable than owning where most people in the U.S. live, according to Attom Data Solutions.
The average three-bedroom rent is more affordable than owning a comparably sized median-priced home in 95% (210 of 222) of counties evaluated by Attom Data. Owning and renting are both “significant financial burdens” across the areas in the study, with housing costs taking up more than one-third of average wages in most major metros. But average rents still comprise a substantially smaller fraction of wages than homeownership expenses on three-bedroom properties.
“What a difference a year makes,” said Rick Sharga, the company’s executive vice president of market intelligence. “Last year, our study concluded that it was more affordable to own than to rent in 60% of the markets analyzed. But with mortgage rates doubling, monthly payments for new homeowners rose by 45% to 50% compared to a year ago, even though home price appreciation has slowed down dramatically.”
The shift comes even with rents rising faster than home prices in about half of the country. In 46% of analyzed areas, average three-bedroom rents grew more than median single-family sales prices over the past year. Home price gains have decelerated sizably as markedly higher interest rates, elevated inflation and other economic uncertainties have hit the brakes on the formerly torrid residential purchase market.
The affordability gulf between renting and owning is amplified when it comes to the most populous counties. Among counties in Attom Data’s report with at least 1 million residents, the largest gap was in Honolulu County, Hawaii, where average three-bedroom rents take up 66% of average local wages, compared to 140% for single-family homeownership expenses.
Unsurprisingly, California is among the states with large counties that have significant gaps between rental and ownership expenses. These include Alameda County, encompassing Oakland (47% for renting compared to 110% for owning); Santa Clara County, encompassing San Jose (28% compared to 83%); and Orange County, outside Los Angeles (73% compared to 125%).
It’s more affordable to buy rather than rent in only one county with a population of more than 1 million: Cook County in the Chicago metro area, where average homeownership costs consume 38% of local wages, compared to 40% for average rents.
Counties were included in Attom Data’s report if they had sufficient data, a population of at least 100,000 and at least 100 home sales from January through November of last year.