Mortgage payments now more affordable than renting in majority of U.S. markets

A recent analysis from RealtyTrac has found that the monthly house payment on a median-priced home is more affordable than the monthly fair market rent on a three-bedroom property in 76% of U.S. counties.

The analysis included 461 counties with a population of at least 100,000 and sufficient home price, income and rental data. The combined population analyzed was 217 million.

On average,  fair market rents as set by the U.S. Department of Housing and Urban Development represented 28% of the estimated median household income, while monthly house payments on a median-priced home — with a 10% down payment and including property taxes, home insurance and mortgage insurance — represented 24% of the estimated median income.

“From a pure affordability standpoint, renters who have saved enough to make a 10%  down payment are better off buying in the majority of markets across the country,” Daren Blomquist, vice president at RealtyTrac, said. “But factors other than affordability are keeping many renters from becoming buyers, a reality that means real estate investors buying residential properties as rentals still have the opportunity to make strong returns in many markets.

“Also, keep in mind that in some markets buying may be more affordable than renting, but that doesn’t mean buying is truly affordable by traditional standards,” Blomquist added. “In those markets renters are stuck between a rock and hard place when it comes to deciding whether to buy or continue renting.”

There were 351 counties out of the 461 analyzed (76%) where house payments on a median-priced home in the first quarter of 2015 were lower than fair market rents on three-bedroom homes.
Among the 351 counties, there were 56 counties where home prices rose at least 7% compared to a year ago and wages rose at least 3% annually — additional factors that could make owning a home more attractive than renting.