BOCA RATON, Fla., June 4, 2021 (GLOBE NEWSWIRE) – Property prices are escalating rapidly in Dallas and a handful of other US cities where consumers would be better off financially by renting and reinvesting the money they would otherwise be for Would have issued home ownership.
That’s the result of the first quarter numbers in the Beracha, Hardin & Johnson Buy vs. Rent Index, a national housing barometer compiled by professors from Florida Atlantic University and Florida International University. The index analyzes 23 metropolitan US markets and determines whether consumers create wealth faster by buying a home and building stocks or renting a similar property and investing their savings in a portfolio of stocks and bonds.
Dallas is the US metropolis where it made most sense to rent in the first three months of 2021. Also in the following areas: Denver, Houston, Kansas City, Miami, and Seattle, it was advisable to rent and avoid the overheated housing markets.
“The BH&J scores for these areas suggest that they will be most affected by price revisions in the event of a property downturn,” said Ken H. Johnson, Ph.D., co-author of the index and real estate economist and associate dean of the college for FAU economy. “Buyers are offering real estate prices at almost the highest level. It is probably wiser to rent and reinvest in Dallas and these other markets at this point. “
The decision to buy or rent was not as clear-cut on the following metros, although renting is still a better option: Atlanta, Los Angeles, Philadelphia, Pittsburgh, Portland, and San Diego.
Consumers determined to buy a home and build stocks should consider settling in Chicago, the U.S. market that made most sense to own in the first quarter. According to the index, New York and Cleveland also favored ownership.
“Prices are rising more moderately in these three metropolitan areas, which leaves room for future price increases,” said Johnson.
The index also showed that buying in these metropolitan areas was a wise one: Boston, Cincinnati, Detroit, Honolulu, Milwaukee, Minneapolis, San Francisco, and St. Louis.
The index studies the US real estate market by considering home prices, rents, mortgage rates, investment returns, property taxes, insurance, and house maintenance costs.
Many consumers want to buy now because the persistently low mortgage rates allow them to get more home for their money. But the country’s housing market would take a hit if interest rates rise, say the professors.
“All markets are exposed to the potential for high interest rates as we are at all-time lows,” said William Hardin, Ph.D. by the FIU, co-author of the index.
Homeownership has traditionally been considered a far better option than renting and reinvesting, but the historic 2006-2011 real estate crash changed that perception for many Americans. The BH&J Buy vs. Rent Index, published for the first time in 2013, shows that even when home prices rise, rents and reinvestments can be the same or more lucrative for disciplined savers.
“Most people used to believe that renting their money down the drain every month without getting anything in return,” said Eli Beracha, Ph.D., index co-author and director of the FIU’s Hollo School of Real Estate . “But research has shown that renting and investing the money that would otherwise be spent on property can build a nest egg that is superior to owning and building equity.”
All three professors stressed that consumers have three main choices: buy and build equity, rent and reinvest money that would otherwise have been spent on property, and rent but spend on consumption rather than saving. The first two options are viable strategies for wealth accumulation, while the third should be avoided as it prevents wealth accumulation.