The U.S. is in buy territory, with 65 percent of cities measured in the recent Florida Atlantic University (FAU) and Florida International University (FIU) Buy vs. Rent Index posting more favorable outcomes when buying a home than renting one—implying that homeownership is, on average, a better vehicle for wealth creation. The cities in buy territory include Atlanta, Ga.; Chicago, Ill.; Cleveland, Ohio; Honolulu, Hawaii; Los Angeles, Calif.; Minneapolis, Minn.; Philadelphia, Pa.; and St. Louis, Mo.
Housing in these and other areas, however, is becoming less within reach, as record-high rents drive record-high prices, says FAU Professor Ken Johnson, one of the authors of the Index and a real estate economist. While the market overall reads stable, costly prices and rents indicate an impending—and potentially widespread—lack of affordability.
“With both significant increases in rents and property prices, the issue of housing affordability is quickly becoming a major concern again across many areas of the country,” Johnson says. “Given the country’s experience during the run-up to the housing crash in 2008, it’s doubtful that we will again respond to the housing affordability issue with easy and flexible access to credit.”
Some cities, still, are in rent territory, according to the Index. These include Dallas, Texas; Denver, Colo.; and Houston, Texas, though all three show stalled out rents in relation to prices. Importantly, and in addition, rents in all of the cities analyzed in the Index are slowing.
Over the last three years, the rate of rent increases has been matched by the rate of price increases. This suggests stability in the housing market nationwide, says FIU Assistant Professor Eli Beracha, one of the authors of the Index.
“Increasing employment and increasing income combine with rising rents to provide a sound economic environment for the country’s housing markets, in general,” Beracha says.
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