Rent or own: where is it cheaper to rent than to own?

Americans have been moving in the past two years, and three recent studies of migration patterns show they’re heading West – though a National Board of Realtors analysis found those who move may find more affordable to rent than to own their new homes. .

Let’s first look at where the Americans moved and why.

The Tax Foundation, an independent tax policy nonprofit, used demographic data from the US Census Bureau, as well as recently released data from U-Haul and United Van Lines, to determine – unsurprisingly – that the tax relief of the tax burden was one of the reasons for migration.

“The picture painted by this population displacement is clear, of people leaving high-tax, high-cost states for low-tax, lower-cost alternatives,” the foundation reported. He noted that six states (Florida, Tennessee, Texas, Nevada, New Hampshire and South Dakota) in the top third of those with April 2020 to July 2021 immigration do not impose income taxes on specific to residents.

However, the four states that have seen the most immigration in the past year have personal income taxes. The Tax Foundation acknowledged in its analysis that taxes may play little or no role in a family’s decision to move.

Technology and the pandemic-induced push for remote work have enabled and encouraged many workers to live where they love to play, the Deseret News reported. Healthy economies and job prospects, which can also be affected by corporate taxes, have also been factors influencing people to look west.

“The pandemic has accelerated changes in the way we live and work, making it much easier for people to move around – and they have,” the foundation concluded. “As states strive to maintain their competitive edge, they need to pay attention to where people are moving and try to figure out why.”

The U-Haul study of where customers drop off their rental vans found the western states of Arizona, Colorado, Idaho and New Mexico among the top 10 growing states, based on transactional data compiled for the U-Haul Annual Growth Index. Growth states are calculated by the net gain of one-way U-Haul trucks entering a state versus leaving that state in a calendar year.

Texas ranked No. 1 in the U-Haul Growth Index, while California headed in the opposite direction. “California remained the top state for emigration, but its net loss of U-Haul trucks was not as severe as it was in 2020,” the company said. “Part of this can be attributed to U-Haul simply running out of inventory to meet customer demand for outgoing equipment.”

The study did not speculate on why people were packing up and heading West.

Now let’s look at analytics that could help these on-the-go Americans decide whether to rent or own their new home in parts of the West, where high demand is driving up home prices and rents.

The National Association of Realtors found that in the third quarter of 2021, renting was significantly more affordable than owning a home in 56% of the 178 metro areas measured.

“Many of these metropolitan areas are located in the western part of the United States (Pacific, Mountain, Central-Northwest, and Central-Southwest geographic divisions),” wrote the Scholastica Gay Fellowship Research Economist. Coronation.

The association found that nationally, the sum of the monthly mortgage, property taxes and maintenance expenses is 70% higher than the average asking rent (a ratio of 1.7). Of the top 20 metropolitan areas where the cost of owning to rental ratio is above the national average, 13 are in the West.

Here are the association’s top 20 neighborhoods where it is cheaper to rent than to own:

Own or rent

subway station Median Selling Price ($000) Sum of mortgage, property tax and 3% maintenance and insurance Asking for rent on a multi-family property Mortgage to rent ratio
subway station Median Selling Price ($000) Sum of mortgage, property tax and 3% maintenance and insurance Asking for rent on a multi-family property Mortgage to rent ratio
San Jose-Snnyvl-Santa Clara, CA $1,650.0 $11,291.00 $2,709.00 4.2
San Francisco-Oakland-Hayward, California $1,350.0 $9,244.00 $2,404.00 3.8
Urban Hololulu, Hawaii $1,047.8 $6,814.00 $2,038.00 3.3
San Diego-Carlsbad, California $850.0 $5,837.00 $2,156.00 2.7
Boulder, CO $769.4 $5,166.00 $1,805.00 2.9
Seattle-Tacoma-Bellevue, WA $708.4 $4,965.00 $1,854.00 2.7
Bridgeport-Stamford-Norwalk, Connecticut $658.9 $5,118.00 $2,396.00 2.1
Boston-Cambridge-Newton, MA-NH $657.8 $4,781.00 $2,482.00 1.9
Naples-Immokalee-Marco Island, Florida $640.0 $4,432.00 $2,180.00 2
Town of Barnstable, MA $615.9 $4,297.00 $1,423.00 3
Denver-Aurora-Lakewood, CO $614.8 $4,126.00 $1,689.00 2.4
Reno, Nevada $553.9 $3,719.00 $1,471.00 2.5
Portland-Vancouver-Hillsboro, OR-WA $549.2 $3,856.00 $1,508.00 2.6
Wash-Arlington-Alxndria, DC-VA-MD-WV $548.6 $3,884.00 $1,949.00 2
Fort Collins, CO $538.2 $3,610.00 $1,520.00 2.4
Riverside-San Bernardno-Ontario, CA $524.0 $3,636.00 $1,850.00 2
Sacramento-Roseville-Arden-Arcade, CA $512.0 $3,546.00 $1,701.00 2.1
Salt Lake City, UT $500.8 $3,373.00 $1,445.00 2.3
Austin Round Rock, TX $498.4 $3,857.00 $1,581.00 2.4
Boise City – Nampa, ID $480.8 $3,259.00 $1,410.00 2.3

But all is not lost for frustrated potential buyers hoping to create wealth by owning real estate, according to scholars from Florida Atlantic University and Florida International University.

The authors of the Beracha index, Hardin & Johnson Buy vs. Rent Index, said renters in high-priced housing markets may as well reinvest their rental savings in stocks, bonds and other investments, according to a Globestreet.com report.

The article stated that renting and reinvesting would make sense for consumers in Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego, San Francisco and St. Louis.

“People living in one of these areas can hardly go wrong no matter what they decide,” said Beracha, director of Florida International’s Hollo School of Real Estate. “If they find a good house for sale at a fair price and plan to stay there for more than a few years, the purchase certainly makes sense. If they find a better deal on the rental market, they can accept it while being confident in their ability to build long-term wealth.

The researchers called for particular caution when buying in Dallas, Denver, Houston, Kansas City and Seattle.

“Across these five metros, home prices have climbed so fast, and the potential for near-term price declines is just too great,” said Ken H. Johnson, real estate economist and associate dean at Florida Atlantic’s College of Business. , at Globestreet. .com. “There is strong evidence that home prices in these markets are significantly higher than their respective long-term price trends.”

contributor: K. Sophie Will

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