Buying a Home More Affordable Than Renting in Most Markets
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This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm Charlie Turner in New York. Many Americans who are on the move have this internal debate. Should I rent or should I buy a home? A new study finds that, in fact, buying a home is more affordable than renting in a slim majority of U.S. housing markets. The problem is that a majority of Americans reside in markets where it's more affordable to rent. This comes from Adam Data Solutions' 2018 Rental Affordability Report. And joining us with the survey details is Adam Vice President Darren Blomquist. Darren, first off, some numbers. In what percentage of housing markets is buying more affordable than renting?
How common is buying more affordable than renting across U.S. housing markets?
Sure, yeah. When we look at by markets, by number of markets, we looked at 447 counties across the country, and in 54% of those, or 240 counties, it is actually still more affordable to buy than to rent. So that wins out when we look at it based on number of markets across the country.
However, about two-thirds of Americans live in markets where it's more affordable to rent.
That's right, and that's where you start seeing really the affordability issue changes when you're looking at population centers and job centers, really, where there's a lot of population. Those are the areas where it tends to be more affordable to rent, and those areas where it's more affordable to rent account for 64% of the population of those 447 counties that we looked at. And so... That's where we see that it really goes back to jobs. The areas that have a lot of jobs and higher paying jobs are the areas where home prices have risen more quickly over the past few years, and that's making buying a home less affordable. It doesn't necessarily mean rent is highly affordable in those areas, but what it means is it's the lesser of two, I guess, affordability evils in a lot of these markets.
Those are the areas where the good jobs are. Price appreciation is still outstripping income growth?
That's right. I mean, when we looked at these 447 counties across the country, 60% of them were seeing that rental growth, as well as home price growth, actually are outpacing wage growth. Just over the past year, and that's been a consistent drumbeat that we've seen really over the past five years nationwide, Home prices have gone up over 70% since 2012 in the last five years, and that's very true and sometimes even higher in some of these markets. Wage growth has not gone up 70%, I think most people can attest to that, and the numbers show that as well during that same time period. And as we look forward, There's no real huge relief in sight, at least imminent relief. We do see, in fact, interest rates are projected to go up this year, which will make buying a home less affordable.
That will hurt the affordability on that side of the equation. And then there's not a lot of new inventory being built, although I think we will see maybe some more inventory come online, enough inventory to kind of give some relief maybe by the end of this year. But really then the only other source of relief would be an economy that actually produces rising wages in greater, bigger numbers. And that's the wild card here. If wages do start to rise at a faster pace, and they have been, that could ease this affordability issue, this crisis really, this year.
I'm speaking with Darren Blomquist of Adam Data Solutions, and you're listening to Your Money Matters from The Wall Street Journal. Thanks for listening, everyone. Darren, how did Adam Data Solutions compile the survey?
Well, this is actually based on a couple of data sources. The home price data is actually from our publicly recorded database of sales deeds. So it's actually not a survey. It's directly based on homes that sold in the fourth quarter and looking at the median home price data. And then for wages, we looked at data from the Bureau of Labor Statistics, the data they put out at the county level, average weekly wages. And then for rents, we looked at the average fair market rents for 2018 that the U.S.
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