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Buy or Rent in 2020? Top Counties Where It’s More Affordable to Buy vs. Rent (for Now!)

Expertise: Mortgages & Creative Financing, Business Management, Landlording & Rental Properties, Commercial Real Estate, Real Estate Deal Analysis & Advice, Real Estate Investing Basics, Personal Development
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Aerial view of of a residential neighborhood in Hawthorne, in Los Angeles, CA

It’s no secret that housing prices have been rising rapidly for close to a decade. The coronavirus has almost certainly brought this trend to a halt.

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Even still, at the beginning of the year, owning a house was actually a more affordable option than renting in 53 percent of U.S. housing markets, according to the 2020 Rental Affordability Report released by ATTOM Data Solutions. While figures may be in flux, currently this data is still relevant.

ATTOM looked at the 50th percentile average for three-bedroom properties from the Department of Housing and Urban Development, the second quarter of 2019 average weekly wages from the Bureau of Labor Statistics, and the January to November 2019 home price data from publicly recorded sales deeds in 855 counties nationwide. And contrary to popular wisdom, ATTOM found that in 455 of those 855 counties, owning a three-bedroom home was more affordable than renting one.

“The analysis shows a split between different-sized markets, with ownership more affordable mainly in lightly populated counties and renting more affordable in more populous suburban or urban areas,” ATTOM noted.

The report, however, did not include data on apartment rentals.

Click here for interactive map.

As one might expect, the more densely-packed urban areas tended to be the least affordable to buy. In 94 of the 136 counties (69 percent) with a population over 500,000, renting was more affordable than buying. Furthermore, in counties with a population of over 1 million—36 of the 43 counties (84 percent)—renting was more affordable than buying.

Anyone who’s ever lived in Manhattan or San Francisco can surely attest to this without looking over any studies.

On the other side of the coin, the trend was the opposite in many less-populated counties. In such counties, buying was more affordable than renting, which is likely surprising to some.

Related: How to Rent Your Property to the Right Tenants—Fast

Housing Affordability in the U.S.

The report notes that renting a three-bedroom home costs an average of 37.6 percent of the average income for the same area. In some of the markets you might expect, these rents are downright unaffordable. This is particularly true for dense counties on the coasts, as well as some in Colorado and Hawaii.

California appears to have it the worst, however. For example, the worst ratio belongs to Santa Cruz County in California, where rent averages 82.1 percent of the average wage. Marin County comes in at 75.3 percent—not much better. It should thereby not be surprising that one poll found half of the people in California (which has many of the most unaffordable counties) have considered leaving the state and cite housing costs as the number one reason.

Indeed, how is anyone supposed to live in places like Santa Cruz County, when the average rent eats up almost the entire paycheck of the average worker?

On the other hand, the most affordable counties were Roane County, Tennessee (population: 53,140) and Steuben County, New York (population: 98,990) at 20.1 and 22.2 percent respectively. Both are relatively small, which fits with the nationwide trend of less populated counties faring better in terms of housing expenses.

Rising Home Prices vs. Rental Prices & Wage Growth

The report further notes that home prices have risen faster than rental prices in 575 of the 855 counties (67 percent). In addition, home prices rose faster than wages in 567 of 855 counties (66 percent). These trends are likely tied at the hip. As housing prices outpace wages in most areas, renting becomes a more desirable option for most people.

Wage growth itself outpaced rental prices in 484 of the 855 counties (56.6 percent), however.

Key Takeaways

The United States has likely just ended its longest-ever economic expansion. The coronavirus and subsequent lockdown (as well as other systemic issues like mounting government and consumer debt and the yield curve inversion last year) should spell downward pressure on housing prices in the future.

ATTOM’s report doesn’t speculate on the future of housing prices, but it would seem unlikely that housing prices can continue to outpace wage growth indefinitely.

That being said, any correction will likely vary dramatically by location. In areas where housing is becoming increasingly unaffordable, both home prices and rents will likely fall—and possibly by a very substantial margin.

Related: Recession Prep 101: Investing in Real Estate During a Financial Crisis

In less populated parts of the country, home prices are less likely to be affected—especially since those areas make up the bulk of the 53 percent of counties where homeownership is already more affordable than renting.

A general recession would still hurt such prices, but given people in less-populated counties spend significantly less on housing as a percent of their overall income (whether owning or renting), the effect should be substantially smaller. Of course, any speculation needs to be heavily qualified as economic predictions have a very poor track record overall.

Regardless, the report has some very interesting insights into the U.S. housing market, which real estate investors may find particularly useful. Check it out for yourself here.

Recession-Proof Real Estate book blog ad

In which counties are you considering investing? Why?

Comment below!

Andrew Syrios has been investing in real estate for over a decade and is a partner with Stewardship Investments, LLC along with his brother Phillip ...
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    Farrukh Madaminov Rental Property Investor from Jersey City, NJ
    Replied 3 months ago
    Great breakdown. Thank you
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 3 months ago
    Glad you found it helpful Farrukh, thanks!
    Nathan G. Real Estate Broker from Cody, WY
    Replied 3 months ago
    Thank you for the information. The next year should prove interesting.
    Brian Gray
    Replied 3 months ago
    As a resident of Taxifornia, I'd submit that one of the reasons it is more expensive to buy than rent is because of rent control. I know a family paying $2450 a month for a 3/2 1500 sq ft in the hills of Oakland (a good area.) Comperable rent for this house should be ~$3500, but because of the city ordinance the rental increase percentage is limited to the annual Consumer Price Index change which usually runs .5% to 3.5%.
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 2 months ago
    Taxifornia... LOL! I also like The Democratic People's Republic of California
    Alan DeRossett Investor from Thousand Oaks, CA
    Replied 2 months ago
    I prefer to own only in California while the property taxes might be high and it's a relatively secure and stable government. Taxation is higher but that keeps a secure government I also can be assured that the property will not suddenly lose 50% value when municipal water supply becomes toxic or Materials used in homes will not harm tenants. I now only will buy something I d trust to live in. In the 2008 recession, we barely noticed an interruption. This will be worse and expect prices in certain areas to falter. But one thing is clear is Ill continue to buy in California as the economy here is much stronger. We will want to upgrade many properties to include all Solar and Smart home features like indoor air quality and add life support air filtration. and add electric vehicle charging. new Tenants will pay more for these features. also will add units on existing properties where zoning has increased density and land area permits.
    Christopher Smith Investor from brentwood, california
    Replied 2 months ago
    You don't need to worry about a 50% decline in your CA properties and you hardly noticed a blip in 2008? What channel were you watching? I bought into that CA market during exact time just after nice new homes in good neighborhoods had dropped a whopping 65% and these were not isolated cases by any means. In fact it was rampant and pervasive all over CA at that time, it was like shooting fish in a barrel in almost any area of the state.
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 2 months ago
    The stability you're describing is because California is a rich state not because it's a high tax state. And I'm glad you got through 2008 well but California on the whole was ravaged. California, Arizona, Nevada and Florida were the four states hit the hardest.
    Vaughn K. from Seattle, WA
    Replied 2 months ago
    Haha. You may wish to sometimes look at statistics that don't confirm to your confirmation bias... A lot of what you say had as much or more evidence to disprove your assumptions than to support them. Not trying to be mean, but to only look at one side of an argument is ALWAYS a bad way to go about it.
    Craig Browning
    Replied 2 months ago
    I like your attitude. I think it's a lot better than some we see. Too many people are only selfish about property.
    Tomer Versano Investor
    Replied 2 months ago
    Great insights, thank you!
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 2 months ago
    Thanks Tomer!