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Buy vs. Rent Index Sheds Light on Local Housing Market

Real Estate

A "For Sale or Rent" sign in front of property. | Image from Leonardo Patrizi

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Consumers in Dallas are better off renting than buying a home at present, according to a recent study. This is because the overall monthly cost of homeownership rises faster than monthly rents in Dallas, Denver, Houston, Kansas City, and Seattle.

“Renters are better off renting homes than buying them,” said Ken H. Johnson, Ph.D. real estate economist and co-author of the report. “In these five metros, home prices have shot up so fast, and the potential for near-term price declines is just too great. There is strong evidence that home buyers’ prices in these markets are significantly higher than their respective long-term pricing trends.”

Johnson said that renting and reinvesting is also the better option in Pittsburg, Miami, and Portland, Oregon, adding the potential for price declines isn’t as severe in those three markets.

Johnson, along with Florida International University’s Eli Beracha, Ph.D., and William Hardin, Ph.D., are the authors of the Beracha, Hardin & Johnson Buy vs Rent Index. The quarterly index measures the housing market in 23 U.S. metro areas based on home prices, rents, mortgage rates, investment returns, insurance, and other costs.

While the third-quarter data shows that renting and reinvesting is the better option in the eight previously reported cities, the professors advise consumers in the remaining 15 metro areas not to agonize over the buy-rent decision.

The housing market in Dallas-Fort Worth has been labeled as hot based on economic factors. House prices in the area are 37-percent more than they should be. There are fewer houses for sale in the area, and more people are moving in.

Consumers who choose to rent and reinvest are equally as likely to increase wealth as those who opt to own and grow equity in Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego, San Francisco, and St. Louis.

The BH&J Buy vs Rent Index indicates that renting and reinvesting may be profitable for disciplined investors even when property prices are rising. The index’s purpose is to assist customers in better understanding trends to make more educated real estate decisions.

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