IS IT BETTER TO RENT OR BUY?

US Housing Market Swings in Favor of Homeownership

According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, homeownership is a better way to produce greater wealth, on average, than renting. The results from the first quarter index showed that "16 of the 23 metropolitan markets investigated moved in the direction of buy territory." The BH&J Index is a quarterly report that attempts to answer the question: Is it better to rent or buy a home in today's housing market? "The U.S. housing market, when considered as a whole, has swung marginally more in favor of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds." The latest results were released shortly after the S&P/Case-Shiller Home Price Index, which reported that home prices had climbed 5.4% nationally since March 2015. Ken Johnson Ph.D., Real Estate Economist & Professor at Florida Atlantic University, and one of the index's authors states: "This [growth] appears to be driven by a steady but strengthening job market, rising rents relative to rising ownership costs and recent slower growth in traditional financial portfolios consisting of stocks and bonds." Dallas and Denver are two of the major cities that continued to move deeper into rent territory, but they moved at a slower rate than they had in previous quarters. Johnson believes that, in these two markets, "strong economic support...should make for a soft landing in terms of slowing property price growth, increased marketing time for properties and lower probabilities that sellers will actually transact and close during a given marketing effort of their property." Bottom Line Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, so lock in your housing cost with a mortgage payment now. To Find Out More About the Study: The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.