HOUSTON – (By Dale King, Realty News Report) — Deciding whether it’s better to rent or buy a home remains a complex question.
The right choice depends on an individual’s finances, career plans and a number of local variables—monthly housing costs, median rents and sale prices, property taxes and insurance—all of which factor into the decision, says Rick Sharga, CEO and founder of CJ Patrick Company, a consulting firm serving real estate, financial services and technology companies.
Sharga recently analyzed rent-versus-buy costs across the 50 largest U.S. metropolitan areas using data from First American DataTree.
He developed a rent-to-buy ratio in which a value of 1.0 or higher indicates renting costs more than homeownership costs, while a value below 1.0 indicates monthly home payments exceed rental payments.
The results revealed a nearly even split: of the top 50 metros, 24 favor buying while 26 favor renting, Sharga reported.
All four major Texas metros fell on the side of renting.
In Houston, Sharga said, the market “tilted toward being a rental market,” with median rents of $1,035 versus median monthly home payments of $1,161 for properties around the 25th percentile—homes most likely to be purchased by first-time buyers. That produced a rent-to-buy ratio of 0.89, a figure below 1.0 that leans toward renting.
Other Texas metros showed even stronger rental orientation: San Antonio at 0.87, Dallas at 0.81 and Austin at 0.72.
John Nugent, chairman of the board of the Houston Association of Realtors, shared his perspective on Houston’s housing market. “The market is really tight. Buyers face challenges finding homes, and when desirable properties appear they can receive multiple offers,” he said.
Nugent also cited past flooding issues that displaced some residents and constrained inventory growth. Today, Houston’s inventory sits at roughly three and a half months, he noted, with a shortage of homes in the affordable range around $250,000 to $275,000. “Good homes go quick,” he added.
Buyers, he said, are often searching for a home that fits their needs precisely, which intensifies competition.
Real estate professionals offer varying advice. “Whether to buy or rent depends on each individual and their situation,” said Gloria Moorman of Bernstein Realty in Houston.
Moorman pointed out that many millennials graduate with student loan debt and limited savings for a down payment, so renting for a few years can help them save for the 20 percent down payment that avoids private mortgage insurance (PMI).
She added that some recent graduates have managed to save enough to take advantage of the current low interest rates and purchase a home soon after finishing school.
“I agree with Gloria,” said Amy Bernstein. She emphasized that many buyers are taking advantage of exceptionally low mortgage rates, which make homeownership more affordable even with minimal down payments.
According to Freddie Mac, the average 30-year fixed-rate mortgage stood at 3.47 percent, down from 4.37 percent a year earlier.
Bernstein noted that some buyers plan to live in their newly purchased home and later rent it out when they move, turning the property into an investment and benefiting from current low borrowing costs.
Comparing Texas to the national picture, Sharga observed that some expensive and fast-growing cities—New York City, Washington, D.C., Chicago, Austin and Denver—weren’t necessarily the most renter-friendly. “This suggests that rents in those markets have kept pace with home prices, reducing any advantage of renting over owning,” he said.
He added that Midwest and Southeast cities generally offer more affordable homebuying opportunities, while West Coast home prices have surged. “There were a few surprises, like Memphis being comparatively expensive for renters versus first-time buyers,” Sharga said. “And in California—San Francisco, San Jose, Los Angeles and San Diego—conditions are challenging for both renters and owners. Those metros have some of the lowest homeownership rates and some of the lowest apartment vacancy rates.”
Feb. 18, 2020 Realty News Report Copyright 2020
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