Climbing home prices and less than significant increases in wage growth have contributed to renting becoming a more affordable option for Americans, according to ATTOM Data Solutions‘ latest Rental Affordability Report.
In 59% of U.S. metros studied, renting a three-bedroom property is less expensive than purchasing a median-priced home. That’s a whopping 442 out of the 755 counties, according to the report.
Notably, ATTOM discovered that renting is also a more affordable option in 18 of the nation’s most populated counties and 93% of counties with a population consisting of more than 1 million people.
“With home price appreciation increasing annually at an average of 6.7% in those counties analyzed for this report and rental rates increasing an average of 3.5%, coupled with the fact that home prices are outpacing wages in 80% of the counties, renting a home is clearly becoming the more attractive option in this volatile housing market,” ATTOM Data Solutions Director of Content Jennifer von Pohlmann said.
The latest Employment Situation Summary report released from the U.S. Bureau of Labor Statistics indicated that the average hourly earnings for all employees on private non-farm payrolls only increased by 3.2% in 2018.
ATTOM points out that home prices are climbing faster than wages in 80% of U.S. markets. In fact, median home prices increased at a faster pace than average weekly wages in 601 of the 755 counties analyzed in its report.
Furthermore, home prices outpaced rents in 70% of housing markets, and median home prices rose faster than average fair market rents in 531 counties, according to ATTOM.
ATTOM’s latest Home Affordability Report revealed that the home affordability index fell from 94 in Q3 to 91 in Q4, marking the second lowest reading since Q3 of 2008 when affordability fell to 87.
“While poor home affordability continues to cloud the U.S. housing market, there are silver linings in the local data as home price appreciation falls more in line with wage growth,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in the report. “Affordability improved from the previous quarter in more than half of all local markets, and one in five local markets saw annual wage growth outpace annual home price appreciation, including high-priced areas such as San Diego, Brooklyn and Seattle.”
That being said, 76% of the 469 counties analyzed in ATTOM’s Home Affordability Report posted an affordability index below 100 in Q4 of 2018, according to ATTOM’s analysis.
“With rental affordability outpacing home affordability in the majority of U.S. housing markets, and home prices rising faster than rental rates, the American dream of owning a home, may be just that — a dream,” Pohlmann concluded.
NOTE: The Rental Affordability Report analyzes average rental data for three-bedroom properties in 2018 and early 2019 from the U.S. Department of Housing and Urban Development, along with wage data from the Bureau of Labor Statistics.