The rise in home prices means that the cost of homeownership is outpacing that of renting in more markets, with values rising almost three times as much as rents in some areas.
A new analysis by Realtor.com shows that the monthly costs of owning a home have jumped 14 percent in the last year, compared to an average 4 percent rise in monthly rental costs.
As such, just 41 percent of U.S. citizens now live in a county where the median income can afford them a home at the median listing price.
At present, the top five counties where it’s cheaper to buy a home than rent one are Clayton County, Georgia.; Baltimore City, Md.; Wayne County, Mich.; Cumberland County, N.C.; and Madison County, Ill., where the costs of owning come in between 4 and 14 percent lower than the costs of renting.
However, renting is much less expensive than buying in Manhattan, N.Y.; Brooklyn, N.Y.; Monterey County, Calif.; San Mateo County, Calif.; and Santa Barbara County, Calif.
“Even setting aside big upfront expenses like a down payment, rising month-by-month costs are likely keeping many people from purchasing,” said Danielle Hale, Realtor.com’s chief economist.
“Today only 41 percent of people live in a county where the median income family can afford to buy a home at the median list price, and affordability declined significantly over the past year. Since homeownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long. Still, even in places where renting is currently more affordable, rising home prices provide wealth building opportunity for home buyers.”
Homeowners’ costs have been continuing to rise. In July, the median monthly cost to buy a home was $1,647, compared to the average cost to rent a home at $1,267.