Though home prices are rising, rental rates are as well, so much so that when it comes to buying versus renting, it's the former that serves as a more financially sagacious move, the results of a newly released study suggest.
In nearly two dozen metropolitan statistical areas, it's a better bet to buy than it is to rent, due primarily to the return on investment being far greater. According to Florida Atlantic University's latest Beracha, Hardin and Johnson Buy vs. Rent Index, of the 23 cities tracked in the closing quarter of 2016, 15 were ideal buyers' markets. Those that were more conducive to renting were predominantly in Texas, including Dallas and Houston.
Ken Johnson, a real estate economist and associate dean of graduate programs at FAU's College of Business, indicated that even though asking values are climbing, buyers are making a smart play with their hard-earned money.
"This is great news for home ownership and the financial returns to ownership," Johnson explained, alluding to the results of the BH&J Index. "We are not where we were in 2012, when nearly any purchase was a sound financial decision. However, overall, we are now in a situation where aggressive marketing from sellers combined with due diligence and sound negotiation from buyers is creating a housing market that's more in line with what we've seen historically."
Yet despite these signs of optimism, renters are hedging their bets. Fifty-six percent of them, in a recent poll done by the National Association of Realtors, considered the present housing situation to be one that was favorable to buying a new home. While this represents a majority, it's down from 57 percent when a similar poll was conducted in the closing three months of 2016. Furthermore, 62 percent thought it was a good time to buy this time last year.
Homeowners have different view of things
Meanwhile, current homeowners are much more inclined to believe buyers' market conditions prevail. Eighty percent indicated as much in the NAR poll, up from 78 percent this past December, but down slightly from March, then at 82 percent.
Lawrence Yun, NAR chief economist, said that renters' outlook is being swayed by the headlines, detailing how housing supply levels are at record lows and asking prices at all-time highs.
"Inventory conditions are even worse than a year ago and home prices and mortgage rates are on an uphill climb, Yun explained. "These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow."
Yun added that assuming inventory shortages continue, the spring homebuying season will get off to a slow start.
Most homeowners believe market is favorable to selling
Ideally, a pickup in activity both for housing starts and listings would help alleviate the supply crunch, but even if just one of the two comes to fruition, sentiment would no doubt improve. Still, nearly 70 percent of homeowners believe it's a good time to have a house up for sale, NAR reported from the poll's findings. That's a substantial increase from the fourth quarter, when 62 percent thought it was a sellers' market and 56 percent 12 months ago.
NAR President William Brown urged those who are contemplating putting their houses on the market to be sure they cross all their t's and dot all their i's, as effectively advertising a residence takes time and effort to yield dividends.
Indeed, in a separate poll performed by Zillow, sellers pointed to better preparation as what they spend more time doing if they could go back in time and start the listings process from scratch.
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