It's becoming increasingly more rare to find a market where it makes more sense to buy than rent.
New data from Realtor.com indicates that the difference in affordability of either purchasing or renting a home is tightening, meaning that the number of markets where it's cheaper to buy than rent is decreasing.
According to the company’s latest Rent vs. Buy report, in the fourth quarter of 2018, buying a home was more affordable than renting in only 17% of U.S. counties, falling from 25% in 2017.
In fact, the average mortgage payment for the U.S. median home was $1,578 in Q4, compared to the average monthly rent of $1,267.
“At the end of the fourth quarter of 2018, the monthly costs to buy the national median priced home was $1,578 or 31% of the national median income,” The company writes. “This is slightly more than the budgeting rule of thumb of spending no more than 30% of gross income on housing costs.”
Realtor.com notes that the cost to buy increased 13% from the same time last year, when it sat at $1,398 and required 29% of the national median income.
Unfortunately, the cost to rent a home has also climbed, increasing 4% from last year's total to $1,267, representing a negligible change in the share of income required for renting of 25%, according to the company.
“Pockets of affordability persist, but they are getting harder to find. Many parts of U.S. have seen relative home-buying affordability erode away, thanks to rising home prices and interest rates, and slower rising rents,” Realtor.com writes. “Still, while the short-term math may be challenging, in the long term, rising rents tend to eventually outpace the cost of principal and interest on a fixed rate loan, which can make a home purchase the better long-term decision.”
In fact, Realtor.com's data reveals the cost to purchase a home is still affordable in 60% of larger counties. However, the company notes that as inventory and affordability impact the market, the share of income required for purchase has increased from 29% to 31% over the past year.
That being said, the company notes that rising home prices can further encourage home buying, and help explain why renters are looking to enter the housing market. Even if it is becoming increasingly challenging.
