Renting a three-bedroom home is cheaper than owning one in 90% of the US

Renting a three-bedroom home is cheaper than owning one in 90% of the U.S., per ATTOM.

Meanwhile, areas where owning is more affordable than renting include Riverside County, Calif., and Detroit.

A recent report from Attom, examining the cost of renting versus owning three-bedroom homes across various U.S. real estate markets, indicates that in the majority of cases, renting remains a more cost-effective option than owning.

Despite a decline in mortgage rates from their two-decade highs, the relentless surge in home prices is preventing any respite for prospective homebuyers. The analysis underscores that the cost of homeownership remains high due to the persistent upward trajectory of home prices.

In contrast, renting proves to be a more economical choice, with median rental rates demanding a smaller share of wages compared to the costs associated with buying a home in 88% of U.S. counties, totaling 296 out of 338 counties, according to Attom.

The real estate data analytics firm conducted its analysis by examining single-family home prices from January to November 2023, along with rental and wage data, focusing on 338 U.S. counties with sufficient data for comprehensive evaluation.

Rob Barber, the CEO of Attom, noted that the continuous escalation of home prices contributes to the rise in rental costs, making both buying and renting challenging endeavors across most of the United States. However, the latest data reveals that despite the faster growth in rents, they remain more affordable than homeownership.

While mortgage rates are starting to show a decline, providing some relief for potential homeowners, the surge in home prices, fueled by a shortage of available homes for sale, offsets these gains. With the median home price reaching a record high of $389,800 in 2023, according to the National Association of Realtors, the reluctance of homeowners to sell in the face of elevated mortgage rates creates what is termed the "lock-in effect."

This combination of the lock-in effect and heightened home prices contributed to a significant drop in home sales in 2023, plummeting to their lowest level since 1995. Conversely, rents have been decreasing for at least the past three months, as per private data sources.

Attom's report highlights that the current trend favoring renting over buying reflects a complex mix of housing-market dynamics, offering limited straightforward options for home seekers but ultimately leaning toward the advantage of rentals.

Comparing the most populous U.S. counties, the report identifies areas where renting consumes a significantly smaller share of average local wages compared to owning:

• In Honolulu, owning would require 134% of a person's average local wages, while renting demands only 67%.
• In Brooklyn, N.Y. (Kings County), owning would consume 136% of average wages, while renting would take up 72%.
• In Oakland, Calif. (Alameda County), the share of wages needed to own would be 108%, versus just 51% for renting.

Conversely, some counties offer a more affordable scenario for owning rather than renting. In Riverside County, Calif., the median rents consume 101% of average local wages, whereas typical homeownership costs would only account for 91% of those wages.

Similarly, in Wayne County, Mich., where Detroit is located, owning a home would only take up 19% of average local wages, compared to 22% for renting.

The report assumes a 20% down payment on the home. Other affordable markets where owning is economically viable include Montgomery County, Ala.; St. Louis city and county; Bibb County, Ga.; and Caddo Parish, La.