Beracha, Hardin & Johnson Index revealed that homeownership was a much better way to produce wealth than rentals.
BH&J examined the United States' housing market as a whole, as well as the 23 major market trends to compare data with, FAU reported. The researchers utilized a horse race comparison between a person who is purchasing a home and a person who rents a similar quality home and reinvests.
Ken Johnson Ph.D., Real Estate Economist & Professor at FAU stated that the nation as a whole was on buying mode. Continuous low mortgage rates, unstable stock market performance, and rents now beating the cost of ownership such as taxes, maintenance, and insurance, all favor owning and producing wealth through home equity over renting.
Houston, Denver, and Dallas are currently deep in renting territory, but Johnson believed that there is some good news for homeowners as the cost of renting is now increasing at a quicker pace than the cost of homeownership, Rismedia reported. This apparently reduced the advantage of renting over buying.
Purchasing a home has become more socially and financially sensible as rents are predicted to increase in the next year.
Meanwhile, several cities including Boston, Atlanta, Chicago, Cincinnati, Detroit, Cleveland, Milwaukee, New York, Minneapolis, Philadelphia, St. Louis and San Diego are in buying territory. Data is suggesting that in these markets, homeownership builds more wealth on average than renting a similar property and reinvesting in stocks.
Johnson continued by saying that cities that have seen no change in their index score, should still see this as good news as it presents hope for a stable landing in housing prices. Still, he encouraged buyers in these cities to bargain extensively as the chances for building wealth through housing equity appreciation appears limited.
The BH&J Index is a quarterly report that attempts to determine whether it is better to rent or own a home in the current housing market.
