Rent vs. Ownership: Where is the rent cheaper than owning a home?


Americans have been moving for the past two years, and three recent studies of migration patterns show they are moving west – although an analysis by the National Board of Realtors found that relocators are more likely to rent than to own a new home. .

First, let’s take a look at where Americans are moving and why.

The Tax Foundation, Independent Tax Policy Nonprofit, Used US Census Bureau Population Data, Along with the recently released data U-Hall And United Van LinesTo determine – not surprisingly – one of the purposes of immigration is to lighten one’s tax burden.

“The picture portrayed by this demographic shift is clear of people leaving high-tax, high-cost states for low-tax, low-cost alternatives,” the Foundation reported. It noted that six of the top three states (Florida, Tennessee, Texas, Nevada, New Hampshire and South Dakota) do not impose personal income tax on those experiencing immigration from April 2020 to July 2021.

The four states that have experienced the highest rate of immigration over the past year have a personal income tax. The Tax Foundation acknowledged in its analysis that taxes play no role in the decision to relocate a family.

Reported that the push for technology and pandemic-induced distance work has enabled and encouraged many workers to live where they like to play. Healthy economies and job prospects, influenced by corporate taxes, are factors that motivate people to look to the West.

“The epidemic has accelerated changes in the way we live and work, making it easier for people to move – and they have,” the foundation concluded. “As states work to maintain their competitive advantage, they need to focus on where people are moving and try to understand why.”

According to trade data compiled for the annual U-Haul Growth Index, a U-Haul study of where customers leave their rental vans found the western states of Arizona, Colorado, Idaho and New Mexico in the top 10 growth states. Growth conditions are calculated from one-way net profit U-Haul trucks Entering the state against leaving the state during the calendar year.

Texas is No. 1 in the U-Haul Growth Index. No. 1, but California moved in the opposite direction. “California remains the top state for out-migration, but the net loss of U-Haul trucks is not as severe as 2020,” the company said. “This could be partly attributable to the fact that U-Haul simply completed inventory to meet customer demand for outbound equipment.”

The study did not predict why people would pack up and go west.

Now, let’s look at the analytics that help these Americans to decide whether or not to rent their new homes in some areas of the West that drive high demand housing prices and rents.

The National Association of Realtors 56% of the 178 metro areas surveyed in the third quarter of 2021 found that it was more affordable to rent than to own a home.

“Many of these metro areas are located in the western part of the United States (Pacific, Mountain, West North Central and West South Central geographies),” wrote the association’s research economist Scholastica Gay Cororaton.

Nationally, the association found that the amount of monthly mortgage, property taxes and operating expenses was 70% higher than the average asking rent (a ratio of 1.7). The proportion of ownership cost and rent ratio in the top 20 metro areas is higher than the national average, with 13 in the West.

Here are the association’s top 20 areas, where rent is cheaper than ownership:

Rent against ownership

Metro area Average selling price ($ 000) Mortgage, property tax and 3% maintenance and insurance amount Asking for rent on multifamily property Mortgage to rental ratio
Metro area Average selling price ($ 000) Mortgage, property tax and 3% maintenance and insurance amount Asking for rent on multifamily property Mortgage to rental ratio
San Jose-Snnyvl-Sant Clara, CA $ 1,650.0 $ 11,291.00 $ 2,709.00 4.2
San Francisco-Oakland-Hayward, CA. $ 1,350.0 $ 9,244.00 $ 2,404.00 3.8
Urban Hololulu, HI $ 1,047.8 $ 6,814.00 $ 2,038.00 3.3
San Diego-Carlsbad, CA $ 850.0 $ 5,837.00 $ 2,156.00 2.7
Boulder, CO $ 769.4 $ 5,166.00 $ 1,805.00 2.9
Seattle-Tacoma-Bellevue, WA $ 708.4 $ 4,965.00 $ 1,854.00 2.7
Bridgeport-Stamford-Norwalk, CT $ 658.9 $ 5,118.00 $ 2,396.00 2.1
Boston-Cambridge-Newton, MA-NH $ 657.8 $ 4,781.00 $ 2,482.00 1.9
Naples-Immokalee-Marco Island, FL $ 640.0 $ 4,432.00 $ 2,180.00 2
Barnstable Town, MA $ 615.9 $ 4,297.00 $ 1,423.00 3
Denver-Aurora-Lakewood, CO $ 614.8 $ 4,126.00 $ 1,689.00 2.4
In Reno, NV $ 553.9 $ 3,719.00 $ 1,471.00 2.5
Portland-Vancouver-Hillsboro, OR-WA $ 549.2 $ 3,856.00 $ 1,508.00 2.6
Wash. Arlington-Alexandria, DC-VA-MD-WV $ 548.6 $ 3,884.00 $ 1,949.00 2
Fort Collins, CO $ 538.2 $ 3,610.00 $ 1,520.00 2.4
Riverside-San Bernardino-Ontario, CA. $ 524.0 $ 3,636.00 $ 1,850.00 2
Sacramento-Roseville-Arden-Arcade, CA. $ 512.0 $ 3,546.00 $ 1,701.00 2.1
Salt Lake City, UT $ 500.8 $ 3,373.00 $ 1,445.00 2.3
Austin-Round Rock, TX $ 498.4 $ 3,857.00 $ 1,581.00 2.4
Boise City-Nampa, ID $ 480.8 $ 3,259.00 $ 1,410.00 2.3

But according to education experts at Florida Atlantic University and Florida International University, not all is lost for frustrated prospective home buyers who hope to build wealth by owning real estate.

The authors of Beracha, Hardin and Johnson Buy vs. Rent IndexHe said tenants in high-priced housing markets can reallocate their savings to rentals for stocks, bonds and other investments. Globestreet.com.

The article stated that rent and reallocation makes sense for customers in Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego, San Francisco and St. Louis.

Beracha, director of Florida International’s Hollow School of Real Estate, said, “People who live in any of these areas can hardly go wrong.” If they find a good deal in the rental market, they can take it and still be confident in their ability to build wealth in the long run.

Scholars have insisted on buying in Dallas, Denver, Houston, Kansas City and Seattle.

“In these five metropolitan areas, home prices have risen so fast, and the potential for near-term price declines is so great,” said Ken H. Schneider, a real estate economist and associate dean of the Florida Atlantic College of Business. Johnson told GlobeStreet. .com. “There is strong evidence that home prices in these markets are significantly higher than their long-term price trends.”

Contributing: K. Will Sophie

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