Florida Atlantic University issued the following announcement on Sept. 9.
Lingering issues involving supply chains and the employment outlook are contributing to widespread economic uncertainty, but the U.S. housing market bucks that trend as it continues to sizzle during the COVID-19 pandemic.
U.S. job growth stalled in August amid the delta variant surge, and consumers already were dealing with materials shortages caused by a supply squeeze that began last year at the start of the pandemic. But COVID-19 has not hurt housing in the least.
Strong demand for homes, near-record-low mortgage rates and a shortage of properties for sale keep pushing prices higher in much of the country, making it more advantageous for consumers in many markets to postpone ownership, according to second-quarter figures from a national housing index created by researchers at Florida Atlantic University and Florida International University.
The latest results from the Beracha, Hardin & Johnson Buy vs. Rent Index show prices at or near their peaks in Dallas, Denver, Houston, Kansas City, Seattle and Miami. As a result, residents in those areas would be better off renting and reinvesting the money they would have spent on ownership.
“In these housing markets, worries of a correction continue,” said Ken H. Johnson, Ph.D., co-author of the index and a real estate economist and associate dean in FAU’s College of Business. “At this time, buying carries considerable risk. Consumers can build wealth faster if they sit out these sharp price increases and instead rent a similar property and reinvest their savings in a portfolio of stocks and bonds.”
The FAU and FIU researchers analyze 23 major U.S. metropolitan markets, factoring in home prices, rents, mortgage rates, home maintenance costs, homeowner association dues and other household expenses.
The index also shows renting and reinvesting beats buying in: Atlanta, Los Angeles, Pittsburgh, Philadelphia, San Diego, Minneapolis and Portland, Oregon.
Buying and building equity makes more sense in Chicago, New York, Honolulu, San Francisco, Cincinnati, Boston, Cleveland, Detroit, Milwaukee and St. Louis.
“In these metros, the cost of renting is outpacing the cost of ownership, resulting in some surprising recommended buys,” said FIU’s William Hardin, Ph.D., an index co-author.
The index helps to counter the traditional argument that homeownership is far superior to renting over the long term. The BH&J Buy vs. Rent Index, first published in 2013, shows that renting and reinvesting can be equally or more lucrative for disciplined savers.
One option consumers never should do is rent and pocket the savings each month, said Eli Beracha, Ph.D., index co-author and director of FIU’s Hollo School of Real Estate.
“That’s one of the worst things you can do if your goal is to build a nest egg,” Beracha said. “If you’re not inclined to invest your savings, you might as well buy a house, even at the top of the market, because owning a home would at least force you to save.”
In a separate report, Johnson and Beracha study and rank the most overvalued of the nation’s 100 largest housing markets.
Original source can be found here.
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