Thu, 18 January 2024 | housing
The 2024 Rental Affordability Report from Attom, a real estate data aggregator, reveals that renting a typical three-bedroom home is cheaper than owning in nearly 90% of local markets throughout the US. According to the survey, the majority of county-level housing markets saw rent or ownership of a three-bedroom home consume more than one-third of the salaries of average workers, resulting in considerable financial constraints. However, in 296 out of 338 U.S. counties with sufficient data for analysis, median rental rates still demand a lesser percentage of typical salaries than significant home-ownership expenses on three-bedroom residences.
Even while rents have generally increased more quickly than property prices over the past year in the United States, this discrepancy maintains tendencies from 2023.
In addition to publicly documented sales deed data licensed by ATTOM, the study for this report included 2024 rental prices and 2023 home prices gathered from ATTOM's worldwide property database (see complete methodology below). The Bureau of Labor Statistics' average wage data were blended with information from those two data sources (complete methodology is provided below).
"Regardless of whether they wish to buy or rent, finding an affordable home remains a daunting prospect for regular workers across the nation. Rob Barber, CEO of ATTOM, stated that rising property prices are a major factor in the rise in rental expenses, making it difficult for most Americans to purchase and rent real estate. "But the latest data shows that even as rents are growing faster, they remain more affordable than owning."
The current state of affairs, which favors renting over owning, is the result of a number of housing market developments that provide home seekers with few clear options but eventually tilt in favor of rentals.
In much of the nation, the cost of homes and rental rates have increased within the past 12 months. In most counties where there is sufficient data for analysis, rental rates have increased even more rapidly.
This has occurred as rising housing costs have gotten more and more out of reach for regular workers, making it difficult for individuals with modest incomes to get mortgages and giving them no choice except to rent. Despite rising mortgage rates, the price of homes continued to rise in 2023, partly due to a shortage of available properties.
Even yet, rent hasn't increased to the point where renting and ownership account for more than a third of typical income in most local markets, making them the more affordable choice for most workers. While the trend has persisted across the nation, it is still more noticeable in the urban and suburban areas with the highest population densities.
Rent changes in roughly two-thirds of US cities are greater than changes in property prices.
In 210, or 62% of the 338 counties examined in this research, the median rent for a three-bedroom home has grown more or decreased less in comparison to the median price for a single-family home over the past year. Counties with a population of 100,000 or more, at least 100 transactions from January to November of 2023, and enough information demonstrating variations in three-bedroom rental prices from 2023 to 2024 were included in the research.
While variations in single-family home median selling prices last year generally varied from 3 percent losses to 7 percent gains, changes in three-bedroom rents have frequently ranged from 3 percent drops to 15 percent rises.
The largest affordability discrepancies between owning and renting are found in the most populated counties.
In 2024, renting a three-bedroom house is more cost-effective than buying a median-priced single-family home in the country's major counties, although it is still challenging for average workers. Rent as a percentage of average local wages is at least 10 percentage points less than what is needed for typical major house ownership expenses in about 75% of areas with populations of one million or more. The comparisons are predicated on a 20% down payment on a mortgage for the purchase of a home. The three main costs of property ownership are insurance, property taxes, and mortgage payments.
The report covers 45 counties with a population of at least one million. The largest disparities are found in Honolulu, Hawaii, where median three-bedroom rents consume 67 percent of average local wages, while typical single-home affordability consumes 134 percent; in Kings County, New York, (72% for renting versus 136%), Alameda County, California, (51% for renting versus 108% for owning); Santa Clara County, California, (29%), Orange County, California (outside of Los Angeles), and (88%), among the 45 counties with a population of at least one million.
Only two counties with a population of one million or more will have cheaper rents in 2024 than median rents: Wayne County (Detroit, MI) (renting at twenty-two percent compared to owning at 19 percent) and Riverside County, CA (median rents at 101 percent of average local wages versus typical home ownership costs at 91 percent).
Although it stretches budgets, three-bedroom rentals are still most economical in the Midwest and South.
According to the survey, 274 out of the 338 counties that were examined for the study (81 percent) have median three-bedroom rents that are higher than one-third of the average local wage.
The Midwest and South account for 59 of the 64 markets where median three-bedroom rents are less than one-third of average local wages.
The most reasonably priced rental areas include Caddo Parish (Shreveport, LA), Wayne County (Detroit, MI), Ingham County (Lansing, MI), Genesee County (Flint, MI), Jefferson County (Birmingham, AL) (22 percent of average local salaries required to rent), and Wayne County (Detroit, MI) (22 percent).
Other than Wayne County, the least expensive counties to rent in among those with a population of one million or more are Cuyahoga County (Cleveland, OH), St. Louis County, MO, Allegheny County (Pittsburgh, PA), and Philadelphia County, PA (28 percent). Cuyahoga County's rental cost is 24 percent of the average local wage.
Most of the least expensive counties to rent are in the South and West. These include Santa Barbara County, CA (131 percent); Monterey County, CA (outside of San Francisco) (107 percent); Indian River County, FL (102 percent); and Riverside County, CA (101 percent); Collier County, FL (fort Myers), FL (153 percent of average local wages needed to rent).
With the exception of Riverside County, the least expensive counties to rent in among those with a population of one million or more are Orange County, CA (outside of Los Angeles), Los Angeles County, CA (83 percent), Kings County, NY (Brooklyn), Palm Beach County, FL (West Palm Beach), and Riverside County, NY (72 percent).
Home ownership is still most inexpensive in the South and Midwest, and least expensive in the West and Northeast.
According to the paper, in 296 of the 338 counties examined for the study (88 percent), primary costs for median-priced single-family homes need more than one-third of typical local salaries (assuming a 20 percent down payment).
Wayne County (Detroit, MI) (19% of average local earnings needed to buy); Montgomery County, AL (21%); St. Louis City/County, MO (23%); Bibb County (Macon, GA) (23%); and Caddo Parish (Shreveport, LA) (23%), are the most cheap markets for ownership.
With the exception of Wayne County, the least expensive counties to own in those with a population of one million or more are Allegheny County (Pittsburgh, PA); Cuyahoga County (Cleveland, OH) (27 percent); St. Louis County, MO (30 percent); and Harris County (Houston, TX) (35 percent).
Among the markets examined, Orange County, CA (outside of Los Angeles) (136 percent); Santa Cruz County, CA (160 percent); Kings County, NY (Brooklyn), NY (136 percent); and Honolulu County, HI (134 percent) are the least expensive for ownership. Marin County, CA (outside of San Francisco) (164 percent of average local wages needed to own).
The least expensive counties among those with a population of at least one million are Queens County, New York, at 105%, and Alameda County (Oakland), California, at 108% of the average local wages required to own, with the exception of Orange, Kings, and Honolulu counties.
In most markets, rents are increasing more quickly than salaries.
In 197 of the 338 counties the study examined, the median three-bedroom rent is rising faster than the average local wage (58 percent). These include Orange County, California (outside of Los Angeles), Maricopa County, Arizona; San Diego County, California; Harris County, Texas; and Los Angeles County, California.
In 141 of the counties in the survey (42 percent), average local earnings are expanding faster than average rents; these counties include Cook County (Chicago), IL; Kings County (Brooklyn), NY; Miami-Dade County, FL; Queens County, NY; and San Bernardino County, CA.
In almost 60% of the country, wages are rising more quickly than the price of homes.
In 197 of the 338 counties in the study, or 58%, average weekly incomes are increasing more quickly than median housing prices, which is the opposite of the trend observed in 2023. Among them are San Diego County, CA; Harris County, TX; Los Angeles County, CA; Cook County, IL; Maricopa County, AZ; and Harris County, Houston, TX.
In 141 of the counties examined in the report (42 percent), median home prices are increasing more quickly than average weekly wages. These counties include Middlesex County, MA (outside Boston), Miami-Dade County, FL, Broward County (Fort Lauderdale, FL), Orange County, CA (outside Los Angeles), and Kings County (Brooklyn, NY).