For the second year in a row, homeownership is more affordable than renting in more than half of U.S. markets, according to a new study.
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In its 2022 Rental Affordability Report, property data company ATTOM Data Solutions found that expenses associated with owning a median-priced home take less of a bite out of average paychecks than the cost of renting a three-bedroom property in 58% of 1,154 counties analyzed.
This is despite the fact that median home prices have increased in 88% of those same counties. According to the National Association of Realtors, the median home price in Q3 2021 was $363,700, an increase of 16% year-over-year.
During the pandemic, average wages increased by about 8% while interest rates hovered at 3%, according to ATTOM. This made the prospect of homeownership more realistic for many people. However, the ability to afford a home still hinges in large part on location — less populous suburban areas favor ownership while large metropolitan areas favor renting, per the report.
Record-low levels of inventory squeezed the U.S. housing market in 2021. According to Realtor.com, the nation was short more than 5 million homes in September, an increase of 1.4 million from the 2019 shortage of 3.84 million.
Also at play is the trend of Zillow and other "iBuyers" selling thousands of homes to landlords backed by global finance giants such as KKR & Co., Cerberus Capital Management and Blackstone Inc., according to Bloomberg. Many of these homes never make it onto the market, further amplifying supply constraints.
Inventory shortages played a major role in the stratospheric rise of home prices in 2021, with the Q3 NAR report identifying double-digit rent growth in 78% of 183 major U.S. markets. This could shift the equation back toward renters in the coming months, said Todd Teta, chief product officer with ATTOM.
“Prices can only go up by so much before renting becomes financially easier,” he said in the ATTOM article.
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