As rising rents sweep the country, the channel between the cost of owning and the cost of renting continues to slim. According to the latest Florida Atlantic University national index, today’s active rental prices make for a great time to purchase a home.
“We are not where we were in 2012, when nearly any purchase was a sound financial decision,” said Ken Johnson, Ph.D., real estate economist and index authors, in a recent press release. “However, overall, we are now in a situation where aggressive marketing from sellers combined with due diligence and sound negotiation from buyers is creating a housing market that’s more in line with what we’ve seen historically.”
The index, called the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, shows that 15 of the 23 cities studied are set in buy territory, while another five are only marginally in rent territory. This news only further fortifies the positive outcome of the latest S&P/Case-Shiller Home Price Index, which showed home prices rising at the highest annual increase since June 2014, roughly 5.8 percent year-over-year. Out of the 23 cities studied in the BH&J index, the only urban places to show discouraging market conditions are Dallas, Denver and Houston.
“The scores for Dallas, Denver and Houston have worried us for some time now,” said Eli Beracha, Ph.D., co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. “The last time we saw scores of this magnitude, housing market crashes soon followed.”
The overall verdict seems to be, if you can afford to buy in, the time to do so is now.
To reach their finding, the FAU index incorporated property appreciation from housing markets around the country. This data is joined by rental, maintenance and alternative investment data streams. Together, these factors can indicate when (and why) housing markets might change direction.