RealtyTrac, a source for comprehensive housing data, released an analysis of fair market rents and median home prices in more than 500 U.S. counties which shows that buying still is more affordable than renting in the majority of U.S. housing markets, while the opposite is true in markets with the biggest increase in the millennial share of the population over the last six years.
RealtyTrac analyzed 2015 fair market rental data recently released by the U.S. Department for Housing and Urban Development for three-bedroom properties in 543 counties nationwide with a population of at least 100,000. In the 473 counties with sufficient rental and home price data, the fair market rent for a three-bedroom property in 2015 will require an average of 27 percent of median household income, while buying a median-priced home requires an average of 25 percent of median household income, based on the median sales price in November.
Buying a median-priced home was more affordable than renting a three-bedroom property in 68 percent of the counties analyzed, representing 57 percent of the total population in those counties.
But in the 25 counties with the biggest increase in millennials between 2007 and 2013, fair market rents for a three-bedroom property in 2015 will require 30 percent of the median household income on average while buying a median-priced home requires 36 percent of median household income on average. For the analysis, millennials were defined as anyone born between 1977 and 1992.
“First-time buyers and potential boomerang homebuyers are stuck between a rock and a hard place in today’s housing market: many of the markets with the jobs and amenities they want have hard-to-afford rents and even harder-to-afford home prices; while the more affordable markets have fewer well-paying jobs and tend to be off the beaten path,” RealtyTrac Vice President Daren Blomquist said. “Those emerging markets with the combination of good jobs, good affordability and a growing population of new renters and potential first-time homebuyers represent the best opportunities for buy-and-hold real estate investors to buy low and benefit from rising rents in the years to come.”
Rental trends in markets with biggest increase in millennial population
The top markets with the biggest increase in the percentage of millennials over the past seven years were counties in Washington D.C., San Francisco and Denver, all of which saw an increase of more than 50 percent in the share of the population that is millennials.
Other markets in the top 25 for biggest increase in millennials included counties in New York; Nashville, Tenn.; Portland, Ore.; St. Louis, Seattle, Charlotte, N.C.; Minneapolis, Indianapolis, Atlanta, Orlando, Fla.; Austin, Texas; Des Moines, Iowa; and Midland, Texas.
- The average 2015 fair market rent in these top 25 counties is $1,459, 19 percent above the national average for all counties analyzed.
- On average, 2015 fair rents increased 3 percent from a year ago in these counties, with the standouts being Denver County and Midland County, Texas, both of which saw fair market rents increase more than 20 percent.
- Median home prices increased 9 percent from a year ago in these counties on average compared with an average 6 percent increase among all counties analyzed nationwide.
- The average unemployment rate among these counties was 5.2 percent in October compared with an average of 5.5 percent for all counties analyzed.