According to ATTOM Data Solutions' 2022 Rental Affordability Report, in 58% of the U.S. counties it evaluated, owning a median-priced home is more affordable than the average rent on a three-bedroom property: "That means that major home ownership expenses consume a smaller portion of average local wages than renting" in 666 of those 1,154 counties.
Using rental data from the U.S. Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics, and sales deed data from public records nationwide, ATTOM analysts found that rising wages and low interest rates counteracted the effects of rising rents and home prices in many markets countrywide.
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While home prices continue setting new records in many markets, for now, homeownership is still the more affordable option for average workers, ATTOM said in its report.
"For now, rising wages and interest rates around 3% are enough to offset recent price run-ups and keep ownership on the plus side of the affordability ledger compared to renting," said Todd Teta, ATTOM Data chief product officer. But, he said, "Prices can only go up by so much more before renting becomes financially easier."
Indeed, in 1,015 of the 1,154 counties analyzed in the report, the report found the median price for a three-bedroom home rising more than the rent for a three-bedroom place. That means 88% of those counties are places where, sooner or later, rental investing might become more attractive in the aggregate than buying and selling.
10 big markets where it's already more affordable to rent and five where buying's better
The ATTOM data shows the average wage earner can better afford to rent than buy in 35 of the 42 counties with a population of one million or more. That includes five markets in California -- Los Angeles, San Diego, Orange, Riverside, and San Francisco -- Cook County (Chicago), Illinois; and Maricopa County (Phoenix), Arizona. Other markets in that category include Dallas, Miami, and New York City.
The largest markets where it remains cheaper to buy than rent include Harris County (Houston) and Bexar County (San Antonio) in Texas; Detroit's Wayne County in Michigan; Tampa's Hillsborough County in Florida; and Pennsylvania's Philadelphia County, the ATTOM report said.
Smaller counties and Southern and Midwestern markets tend to be more affordable
The report adds that while renting is more affordable also in most counties with populations between 500,000 and one million, homeownership takes the lead in counties with 500,000 or fewer residents. "That's especially true in markets with fewer than 100,000 residents," the report said.
The largest counties where owning remains more affordable are Lake County, Indiana; Seminole County, Florida; Knox County, Tennessee; and East Baton Rouge and Jefferson parishes in Louisiana.
The largest of the group in which renting is more affordable now than buying include St. Louis County, Missouri; Honolulu County, Hawaii; Fresno County, California; Collin County, Texas; and Westchester County, New York.
By region, 43 of the 50 most affordable counties for renting are in the South and Midwest, with the most expensive in the West. The variation can be fairly large. For instance, the average renter in Cuyahoga County, Ohio (which includes Cleveland), pays 23.7% of average local wages, while in Santa Cruz County, California, it costs 84.2% of the average local wages to afford the typical rent. That narrows the market.
Like location, affordability matters
Of course, every market is different, as are the opportunities within those markets. But affordability is a good macro factor to consider when deciding where and how to invest. After all, you need buyers or tenants who can afford your product, and the more of them there are, the better your chances of capitalizing nicely on your real estate investment, whether it's a short-term flip or a long-term rental.
