Better to Buy Than Rent, Index Shows
Owning a home is expected to produce greater wealth, on average, than renting, shows a national index produced by Florida Atlantic University and Florida International University.
“The U.S. as a whole is still in clear buy territory,” says real estate economist Ken Johnson, one of the index’s authors. “The cities of Cincinnati, Chicago, Cleveland, and New York City are deep into buy territory.”
The Beracha, Hardin & Johnson Buy vs. Rent Index reveals whether current market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period relative to historical market conditions or alternative investment opportunities. It examines the housing market within 23 of the largest cities in the U.S.
The index found that two cities – Miami and Portland — that have been in more favorable renting territory are “pulling back” and are now “coming back toward a toss-up between buying and renting,” says Johnson. “That’s a good sign for home pricing in Miami and Portland as it suggests prices are going to level off in these metro areas.”
Meanwhile, Dallas, Denver, and Houston are showing signs of dipping slightly deeper into renter territory due to flat income growth, and, in Houston particular, also rapid property appreciation, according to the index.