Rising home prices and mortgage rates are further eroding affordability, according to the Realtor.com’s Q4 2018 Rent vs. Buy [1] report released on Tuesday. This has led to buying more affordable than renting in only 17 percent of counties across the U.S., dropping from 25 percent a year ago.
The report illustrates the nationwide issue of affordability, wherein 51 of the larger U.S. counties analyzed shifting from being more affordable to buy to more affordable to rent in the last quarter of 2018. South and Midwest are the only markets where buyers still have an advantage over renting.
The median monthly home payment in Q4 2018 was $1,578, an increase of 13 percent over the previous year—accounting for 31 percent of the nation’s median income. On the other hand, the median monthly rent payment increased 4 percent to $1,267 from $1,216, which accounts for 25 percent of the median income., the report found. It also indicated that the monthly mortgage payments now account for 31 percent of income.
According to the report, though the ratio of mortgage payment to income has been on the rise, purchasing a home is still an affordable option in 60 percent of the 593 counties with populations more than 100,000 analyzed, down from 62 percent a year ago.
“Pockets of affordability persist, but they are getting harder to find. Many parts of U.S. have seen relative home buying affordability erode as a result of rising home prices and interest rates, and slower rising rents,” said Danielle Hale, Chief Economist at Realtor.com [2]. “Still, while the short-term math may be challenging, in the long term, rising rents tend to eventually outpace the cost of principal and interest on a fixed rate loan, which can make a home purchase the better long-term decision.”
In rank order, the top 10 areas with the greatest benefit to buyers in fourth quarter of 2018 include: Clayton County, Georgia; Delaware County, Indianapolis; Baltimore City, Maryland; Richmond County, Georgia; and Madison County, Indianapolis—were among the top five counties—where buying a home is relatively affordable. The report stated the median listing prices in these counties were, on average, 60 percent lower than the national median listing price of $289,000. Median rents were 19 percent cheaper on average than the national median.
Delaware County, Baltimore City, Vigo County, and Wayne County all recorded increase in listing prices outpacing the national rate of 7 percent at 11 percent, 13 percent, 28 percent and percent 26, respectively. New York County, New York; Kings County, New York; Monterey County, California; and Santa Cruz County, California were among areas that favored renting in the fourth quarter of 2018.