The cost of buying a home has risen by 14 percent over the past one year. That is more than three times the rate of monthly rental costs, according to research published by Realtor.com on Thursday. The research indicated that as home prices rose across the U.S. renting was becoming increasingly popular.
The analysis also found that the number of places where it was cheaper to buy had significantly declined in the past one year.
“Even setting aside big upfront expenses like a down payment, rising month-by-month costs are likely keeping many people from purchasing,” said Danielle Hale, chief economist at Realtor.com.
The analysis found that only 41 percent of the nation’s population lived in a county where a median-income family could afford to buy a home. While the cost to buy a home rose by 14 percent year over year, cost to rent increased only 4 percent. It was cheaper to buy a home compared to renting in 35 percent of the counties in July, this compared to 44 percent during the same time last year.
“Today only 41 percent of people live in a county where the median income family can afford to buy a home at the median list price, and affordability declined significantly over the past year. Since home ownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long. Still, even in places where renting is currently more affordable, rising home prices provide a wealth-building opportunity for home buyers,” Hale said.
The analysis found that the top five counties where purchasing a home was more affordable than renting were Clayton County, Georgia; Baltimore City, Maryland; Wayne County, Michigan; Cumberland County, North Carolina; and Madison County, Illinois. The share of income to buy was 4 percent to 14 percent lower than the share of income to rent in these counties.
In contrast renting remained less expensive than buying in Manhattan and Brooklyn in New York and in Monterey County, San Mateo County, and Santa Barbara County in California.
Read the full analysis here.