Is the Market Moving Deeper into Buying Territory?

The latest national index produced by Florida Atlantic University and Florida International University faculty indicates the United States housing market as a whole is moving marginally deeper into buy territory. According to the recent report from the university, this trend suggests that, on average, the majority of housing markets around the country are in good shape and remain a sound investment.

The report states that based on numbers from the end of the second quarter, the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found home prices climbed nationally 5.1 percent since June 2015. The report also states that both indexes incorporate property appreciation from housing markets around the country, but unlike Case-Shiller, the BH&J Index adds additional rental, maintenance, and alternative investment data streams, among others, to indicate when and why housing markets might be changing direction.

"Housing prices, in general, continue to slow and when considered in light of the recent trends in the Buy vs. Rent Index signal that ownership remains an excellent investment for the majority of Americans," said Ken Johnson, Ph.D., a real estate economist who is one of the index's authors and an associate dean of graduate programs and professor in FAU's College of Business.

The report states that they believe the U.S. housing market has moved marginally more in favor of homeownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. The report also states that overall, 15 of the 23 metropolitan markets investigated are trending more in favor of ownership since last quarter.

Additionally, the report shows that cities such as Honolulu, Kansas City, Los Angeles, Miami, Pittsburgh, Portland, San Francisco and Seattle are considered to be minimally in rent territory and show signs of slowing. It is also noted that the U.S. as a whole and all but three of the remaining metro areas remain in buy territory, favoring ownership as a way to create more wealth, on average.

"Many of the hardest hit metropolitan areas during the real estate crash are showing signs of resilience as the cost of ownership relative to the cost of renting remains more in balance," said Eli Beracha, Ph.D., co-author of the index and assistant professor in FIU's T&S Hollo School of Real Estate. "There are very few signs to indicate a market crash in these cities."