Renting Vs. Buying? The Challenges Remain The Same in 2024 for Housing
When deciding where to live, whether through renting or buying, it's crucial to consider housing expenses and overall financial situations. Which option aligns better with the budget of the typical U.S. worker? According to ATTOM's 2024 Rental Affordability Report, the median rent for a three-bedroom home is more affordable than owning a similarly-sized house in nearly 90% of local markets nationwide.
The report highlights that both renting and owning a three-bedroom home pose significant financial challenges for average workers, using over one-third of their wages in most county-level housing markets. However, median rental rates take up a smaller portion of average wages compared to major homeownership expenses in 88% of the 338 U.S. counties analyzed.
This trend continues into 2023, even though rents have increased more rapidly than home prices in the past year in the U.S.
"Rising home prices contribute to the escalation of rental costs, making both buying and renting challenging across most of the United States," explains Rob Barber, CEO at ATTOM. "However, recent data shows that despite rent increases, renting remains more affordable than owning."
So, does the preference for renting over buying reflect housing market trends that offer limited, straightforward options for home shoppers but ultimately lean towards the advantage of rentals?
The report indicates that in 2023, rental rates and home prices increased in most of the U.S., with rental rates climbing even faster in the majority of counties analyzed. Elevated home prices have become "further and further out of reach" for average workers, limiting their ability to obtain mortgages and leaving them with few alternatives other than renting.
Key Findings from the 2024 Rental Affordability Report
1. Rent Changes vs. Home Price Trends
- Rents are rising faster than home prices in almost two-thirds of the U.S.
- Median rents for three-bedroom homes increased more or declined less than median prices for single-family homes in 62% of the 338 counties analyzed.
2. Affordability Gaps in Populous Counties
- The most populous counties show significant affordability gaps between renting and owning.
- Renting a three-bedroom home will be more affordable in 2024 compared to owning a median-priced single-family home in nearly three-quarters of markets with populations over one million.
3. Regional Affordability
- Renting three-bedroom homes is most affordable in the South and Midwest.
- In 81% of analyzed counties, median three-bedroom rents require over one-third of the average local wage.
4. Home Ownership Affordability
- The most affordable homeownership markets are in the South and Midwest.
- The least affordable ownership markets are in the West and Northeast.
5. Specific Counties' Affordability
Top Five Most Affordable Southern and Midwest Counties for Owning:
- Jefferson County (Birmingham), AL
- Wayne County (Detroit), MI
- Ingham County (Lansing), MI
- Genesee County (Flint), MI
- Caddo Parish (Shreveport), LA
Most Affordable Southern and Midwest Counties for Renting (among those with a population of at least 1 million and excluding Wayne County):
- Cuyahoga County (Cleveland), OH
- St. Louis County, MO
- Allegheny County (Pittsburgh), PA
- Philadelphia County, PA
6. Home Price Trends in 2023
- Home prices continued to rise in 2023 despite higher mortgage rates, mainly due to a tight supply of homes for sale.
Rent Increases Outpacing Wage Growth in Majority of Markets
In 58% of the 338 analyzed counties, rents for median three-bedroom homes are growing faster than average local wages. Notable examples include Los Angeles County, CA; Harris County (Houston), TX; Maricopa County (Phoenix), AZ; San Diego County, CA; and Orange County, CA (outside Los Angeles).
Conversely, wages are outpacing rent growth in 42% of counties, encompassing areas like Cook County (Chicago), IL; Kings County (Brooklyn), NY; Miami-Dade County, FL; Queens County, NY; and San Bernardino County, CA.
A Positive Shift in Wages vs. Home Prices
Nationwide, wages are growing faster than home prices in almost 60% of the country. This reversal of the 2023 trend is observed in 58% of the analyzed counties, including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ; and San Diego County, CA.
However, in 42% of the counties, median home prices are rising faster than average weekly wages. Examples include Orange County, CA (outside Los Angeles); Kings County (Brooklyn), NY; Miami-Dade County, FL; Broward County (Fort Lauderdale), FL; and Middlesex County, MA (outside Boston).
Challenges for Average Workers
"Finding an affordable home remains a daunting prospect for average workers nationwide, whether they opt to buy or rent," expressed Barber, emphasizing the ongoing difficulty in securing affordable housing.
Regardless of the choice between renting or buying, financial considerations are crucial. The quest for suitable housing continues to be a challenge for most Americans, with hopes for a more streamlined process throughout 2024.
