Housing Index Makes the Case for Renting in Overheated Markets
Lingering issues involving supply chains and the employment outlook are contributing to widespread economic uncertainty, but the U.S. housing market bucks that trend as it continues to sizzle during the COVID-19 pandemic.
U.S. job growth stalled in August amid the delta variant surge, and consumers already were dealing with caused by a supply squeeze that began last year at the start of the pandemic. But COVID-19 has not hurt housing in the least.
Strong demand for homes, near-record-low mortgage rates and a shortage of properties for sale keep pushing prices higher in much of the country, making it more advantageous for consumers in many markets to postpone ownership, according to from a national housing index created by researchers at 抖M女仆 and Florida International University.
The latest results from the show prices at or near their peaks in Dallas, Denver, Houston, Kansas City, Seattle and Miami. As a result, residents in those areas would be better off renting and reinvesting the money they would have spent on ownership.
鈥淚n these housing markets, worries of a correction continue,鈥 said , Ph.D., co-author of the index and a real estate economist and associate dean in 抖M女仆鈥檚 . 鈥淎t this time, buying carries considerable risk. Consumers can build wealth faster if they sit out these sharp price increases and instead rent a similar property and reinvest their savings in a portfolio of stocks and bonds.鈥
The 抖M女仆 and FIU researchers analyze 23 major U.S. metropolitan markets, factoring in home prices, rents, mortgage rates, home maintenance costs, homeowner association dues and other household expenses.
The index also shows renting and reinvesting beats buying in: Atlanta, Los Angeles, Pittsburgh, Philadelphia, San Diego, Minneapolis and Portland, Oregon.
Buying and building equity makes more sense in Chicago, New York, Honolulu, San Francisco, Cincinnati, Boston, Cleveland, Detroit, Milwaukee and St. Louis.
鈥淚n these metros, the cost of renting is outpacing the cost of ownership, resulting in some surprising recommended buys,鈥 said FIU鈥檚 , Ph.D., an index co-author.
The index helps to counter the traditional argument that homeownership is far superior to renting over the long term. The BH&J Buy vs. Rent Index, first published in 2013, shows that renting and reinvesting can be equally or more lucrative for disciplined savers.
One option consumers never should do is rent and pocket the savings each month, said , Ph.D., index co-author and director of FIU鈥檚 Hollo School of Real Estate.
鈥淭hat鈥檚 one of the worst things you can do if your goal is to build a nest egg,鈥 Beracha said. 鈥淚f you鈥檙e not inclined to invest your savings, you might as well buy a house, even at the top of the market, because owning a home would at least force you to save.鈥
In a separate report, Johnson and Beracha study and rank the of the nation鈥檚 100 largest housing markets. 聽
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