U.S. Housing Market Moving Deeper into Buy Territory
The latest national index produced by 91社区 and FIU faculty indicates the United States housing market is moving deeper into buy territory, suggesting residential housing markets around the country are sound.
In terms of wealth creation, the U.S. housing market, when considered as a whole, has swung marginally more in favor of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory.
The latest national index produced by 91社区 and Florida International University faculty indicates the United States housing market as a whole is moving deeper into buy territory, suggesting that, on average, residential housing markets around the country are sound. 聽
Based on numbers from the end of the first quarter, the latest comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found home prices nationally climbed 5.4 percent since March 2015.
鈥淭his appears to be driven by a steady but strengthening job market, rising rents relative to rising ownership costs and recent slower growth in traditional financial portfolios consisting of stocks and bonds,鈥 said , Ph.D., a real estate economist who is one of the index鈥檚 authors and an associate dean of graduate programs and professor in .听
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 major cities.
In terms of wealth creation, the U.S. housing market, when considered as a whole, has swung marginally more in favor of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory.
The metro areas of Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia and St. Louis remain solidly in buy territory.
鈥淭hese cities should have room for price growth without much worry of overheating,鈥 said , Ph.D., co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. 鈥淭his is especially true for Chicago, Cincinnati, Cleveland and Detroit.鈥
Cities such as Honolulu, Kansas City, Los Angeles, Miami, Pittsburgh, Portland, San Diego, San Francisco and Seattle are hovering around what the index鈥檚 authors refer to as the 鈥渋ndifference point鈥 between buying versus renting.听 In almost all of these metro markets, the BH&J Index score for the quarter moved in the direction of ownership.
鈥淭his movement suggests that most consumers in these markets appear to have learned from the real estate crash and now understand that residential property prices can get too high,鈥 Beracha said. 鈥淭his is a good sign for future housing price stability in these markets.鈥
Meanwhile, two hot housing markets, Dallas and Denver, continued to move deeper into rent territory but at a slower rate than earlier quarters.听
鈥淪trong economic support within these two markets should make for a soft landing in terms of slowing property price growth, increased marketing time for properties and lower probabilities that sellers will actually transact and close during a given marketing effort of their property,鈥 Johnson said.
One particular market, Houston, continues to cause concern. Houston was already deep into rent territory, and its recent BH&J score plummeted significantly toward buy territory 鈥 a scenario that has foreshadowed noticeable property price declines in the past.
鈥淎 perfect storm seems to be developing in Houston,鈥 Johnson said. 鈥淚 expect a lot of folks in Houston to be on the safe side and opt for renting over ownership.鈥
Johnson鈥檚 collaborators in this ongoing independent research are and , Ph.D., director of the T&S Hollo School of Real Estate at . The BH&J Index and other 91社区 real estate activities are sponsored by Investments Limited of Boca Raton.
The BH&J Index is published quarterly and is available online at .听Due to data availability and the time necessary to calculate the most current index values, the index is produced two months after the end of the quarter.听
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