Newswise — The latest national index produced by Florida Atlantic University and Florida International University faculty indicates the housing market in the nation as a whole remains in buy territory, meaning homeowners can expect to build wealth faster than renters.
Based on numbers from the end of the fourth quarter, the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found home prices nationally climbed 5.4 percent in December compared with the previous year, the fastest rate since July 2014.
“The increasing cost of renting relative to the cost of ownership, the unsteady performance of the stock market and the continuation of incredibly low mortgage financing are creating an environment in which the majority of U.S. housing markets are in buy territory,” said Ken Johnson, Ph.D., a real estate economist who’s one of the index’s authors and associate dean of graduate programs and professor in FAU’s College of Business.
The BH&J Index measures the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds. It examines the entire housing market in the United States and isolates the markets of 23 key cities.
Several cities — including Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia, San Diego and St. Louis — are in buy territory, suggesting that in these markets homeownership, on average, produces more wealth than renting a comparable property and reinvesting in stocks and bonds. While cities such as Dallas, Denver and Houston remain deeply in rent territory, Johnson said, there is some degree of good news from these markets for homeowners as the cost of renting is now increasing at a faster rate than the cost of homeownership—reducing the advantage of renting over buying.
“Basically, all three cities have seen a slightly downward or no change in their index score,” Johnson said. “This is good news as it presents hope for a soft landing in housing prices.”
The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.
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