Buying is becoming a better bargain than renting in many metropolitan areas in the U.S., according to a new report.
In 94 of the nation’s 100 biggest metros, renting is proving more costly than buying, according to a Zillow report. Unlike the housing market, rentals did not suffer a large drop in prices following the financial crisis, and so rental rates have steadily trended upwards. Renters, the study found, spend 29.5 percent of their income on rent on average, compared to buyers who spent 15.3 percent on their income on home mortgages.
“As rents keep rising, along with interest rates and home values, saving for a down payment and attaining home ownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt,” Stan Humphries, Zillow chief economist, said in a statement. “In order to combat this phenomenon, wages need to grow more quickly than they are, particularly for renters, and growth in home values will need to slow.”
Another rent increase driver is a recent uptick in the number of all-cash home buyers. In the second quarter of 2014, 38 percent of all sales were cash purchases — although that’s down from 42 percent during the first quarter. Then again, all-cash buys during the first three months of the year hit a level not seen in three years. [Main St.] — Julie Strickland