Rapidly rising rents coupled with smaller wage gains show that it makes more financial sense to buy a home in most areas of the country, according to RealtyTrac’s 2016 Rental Affordability Analysis report. If you’ve been on the fence between renting and buying, here are several reasons why 2016 should be the year to break your lease.
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Buying is more affordable than renting in 58 percent of markets.
RealtyTrac analyzed 504 counties across the U.S. and found that even with home price appreciation outpacing rent growth, buying is still the better option for most.
Rental prices have grown faster than renter paychecks.
Rent on three-bedroom properties will increase an average of 3.5% this year, according to HUD data. Data from the second quarter of 2015 (the most recent wage data available) shows weekly wages were up only an average of 2.6% from a year ago.
Currently the rise in rent is outpacing weekly wage growth in 57% of the housing market.
Renters earning an average weekly wage are cost-burdened by their rent amount.
A renter is considered cost-burdened if they are spending more than 30% of their income on rent. RealtyTrac’s report found that across all 504 counties analyzed, average wage earners will spend 37% of their income on rents for a three-bedroom property in 2016.
Another 2015 rental cost study done by the Harvard Joint Center for Housing Studies found that median renter incomes have actually declined by 9 percent since 2001. While renter incomes have made gains in the last three years, the median renter income is still below the 2008 median and even lower than the 2001 median.
2015 apartment rents increased at their fastest pace since pre-recession.
Average apartment rents increased faster last year than any time since 2007, up 4.6% in 2015, according to a report by real-estate research company Reis Inc.
The average apartment rent now stands at approximately $1,180, an increase of $55 from January 2015.
If you’re interested in finding out what it takes to buy a home in 2016, download our free Mortgage 101 Handbook for everything you need to know about the benefits of buying over renting and the homebuying and financing process.