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Rent vs. Buy: Scale Tips to ‘Rent’ – First Time Since 1999

Renting and reinvesting additional money that would have been spent on homeownership will, on average, financially outperform owning and building equity.

By Toby Tobin
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BOCA RATON, Fla. – Aug. 31, 2018 – U.S. housing markets, when viewed as a whole, are now in rent territory, according to the latest national index produced by Florida Atlantic University and Florida International University faculty. That means renting and reinvesting additional money that would have been spent on homeownership will, on average, financially outperform owning and building equity.

It's been 19 years since the U.S., on average, was in rent territory – back in June 1999. In January 2010, U.S. housing markets crossed back into ownership territory and have remained there until now.

Currently, 16 of the 23 cities covered in the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index are in rent territory. Those cities include Atlanta, Dallas, Denver, Honolulu, Houston, Kansas City, Los Angeles, Miami, Minneapolis, Philadelphia, Pittsburgh, Portland, San Diego, San Francisco, Seattle and St. Louis, all of which will be experiencing downward pressure on the demand for ownership.

What does this mean for the future of U.S. housing prices?

"It is clear that we are at a point where markets will begin to see downward pricing pressure, implying in some markets annual (home) pricing increases will begin to slow," says Ken Johnson, Ph.D., a real estate economist and one of the index's creators in FAU's College of Business.

The best buys in the country appear to be in the Midwest and Northeast, with Chicago and Cleveland possessing the lowest/best ownership scores. Of all the cities in the BH&J Index, Johnson said, Dallas is most alarming with a score of .888.

"Across all of the data for the Index going back to 1982, only 49 times has a market in any given quarter been at this score or higher," Johnson said. "All of these markets experienced significant price declines in their residential housing prices."

Currently, the biggest driver for moving the U.S. into rent territory is the fact the cost of ownership is outpacing the cost of renting a like-kind property, said Eli Beracha, Ph.D., co-creator of the index and director of the Hollo School of Real Estate at FIU.

The BH&J Index is published quarterly and produced two months after the end of the quarter.

© 2018 Florida Realtors®. All rights reserved. Reprinted with permission.


Toby Tobin: REALTOR®, SRES®

I am a REALTOR® licensed by the State of Florida and Seniors Real Estate Specialist, SRES®, with Grand Living Realty, where 'The GoToby Team'  helps fellow aged 50+ buyers and sellers achieve improved outcomes in real estate transactions by integrating real estate decisions with other age-related decisions/plans through my broad network of respected service providers; financial, wills, trusts, probate, insurance, healthcare, home services, recreation, lifestyle, estate planning, and adult living facilities.

Take advantage of my "Been there. Done that." experience, typically at no additional cost to you. Call me at (386) 931-7124 or email me at Toby@GoToby.com.

Be sure to listen to my radio show, Real Estate Mattersevery Saturday morning right after the 11:00 A.M. news break on WNZF News Radio (1550 AM or 94.9 FM). Download the Flagler Radio App from the App Store so you can hear Real Estate Matters anywhere in the world.

 

reader comments
Hi Toby
Posted by Lloyd Perkins
Sep 01, 2018, 10:52 am
What would this mean for future condo construction.

 
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Don "Toby" Tobin is a licensed real estate professional affiliated with Grand Living Realty. Toby is a member of the Flagler County Association of Realtors®, the Florida Association of Realtors, Enterprise Flagler, Flagler Home Builders Association, and the National Association of Realtors.

GoToby.com proivdes real estate news, commentary, and analysis for Palm Coast and Flagler Country Florida, as well as Realtor® referrals and consultation to buyers, sellers, and developers.