Considering buying a home? It may be cheaper to rent, according to a new study.
In most markets, buying a home often results in lower monthly housing payments. In the nation’s most populated counties — including Harris County — it turns out renting is the more affordable option, according to real estate analytics company ATTOM Data.
“(There) are distinct differences between different places, depending on the size and location from core metro areas,” Todd Teta, ATTOM’s chief poduct officer, said in a statement. For example, in the largely rural Liberty County, halfway between Houston and Beaumont, it is still cheaper to buy.
Wages in Harris County have increased at a quicker rate than rents. Home prices, on the other hand, have risen so rapidly that monthly payments on a median-priced home — $251,000, according to the Houston Association of Realtors — would be more than the median rent for a three-bedroom rental.
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Teta said both buying and renting are straining budgets for many throughout the country.
George Ratiu, an economist at real estate listing company Realtor.com, agreed, saying rising housing costs are taking up so much of American’s budgets he is concerned it could hurt consumer spending — which accounts for 70 percent of America’s economic activity — in 2020. Already, 17 percent of adults cannot pay their current month’s bills in full, according to the Federal Reserve. An additional $400 expense would push that figure to 29 percent.
In ATTOM’s study, the company compared federal data for the median price of renting a three-bedroom home to the median wage. It used its own data for median home prices and assumed a homebuyer put 3 percent down on the home, which would result in higher monthly mortgage payments and the need for mortgage insurance.
ATTOM’s findings fell in line with an analysis by economists at Florida Atlantic University. The Beracha Hardin & Johnson Buy vs. Rent Index compares the return on the purchase of a house against renting a similar-quality home and investing downpayment money in stocks and bonds. Recent numbers suggested renting in Houston makes more sense than buying than in any other market in the country.
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Lawrence Dean, regional director of Metrostudy, a real estate data firm focused on new construction, said homebuilders are taking note. In 2019, builders saw the most success putting up affordably priced homes. KB Home’s Westview Landing offerings — homes for sale in North Houston starting in the high $100,000s — far outsold any other line of newly built homes in the city.
The region’s homebuilders have been searching for ways to bring prices down, Dean said. “Whether that’s smaller homes, homes on smaller lots, homes that are farther and farther out in locations where (it’s) less costly… In one way that is a response to the potential that buying a home becomes too much more costly than renting a home.”
Investors take note
Some investors are also cashing in on the demand for rentals. In recent years, investors have bought tens of thousands of single-family homes to rent. Houston is the fifth-largest market in the nation for single-family home rental company American Homes 4 Rent, which owns 3,100 homes in the area. It rents its average Houston property for $1,648 a month, and renters who chose to renew their leases saw rents go up an average of 3.7 percent.
Homes are even being built to rent out instead of sell. Camillo Properties builds homes to rent throughout the Houston, San Antonio, Dallas and College Station areas. American Homes 4 Rent has also begun focusing on building its own single-family rentals.
Between 2 percent and 4 percent of single-family homes under construction are being built to rent, according to Metrostudy data.
rebecca.schuetz@chron.com
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