Source: Phoenix Business Journal | Ashley Fahey

The housing market is hot, and rents are rising at a clip that some describe as unprecedented. It may be putting homebuyers and renters in a bind: Is it more affordable to buy or rent in their markets?

Attom Data Solutions LLC, a property-data provider based in Irvine, California, analyzed where it's more affordable to own a median-priced home or pay the average rent on a three-bedroom unit across 1,154 counties in its 2022 Rental Affordability Report. It found, despite home prices growing faster than rents in 90% of the U.S., it's more affordable to own a home in 666, or 58%, of counties analyzed.

Attom used 2022 fair-market rent data from the U.S. Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics and public-record sales-deed data for the analysis.

Still, median home prices have increased more than average rents and average wages in in 88% of the counties analyzed.

Todd Teta, Attom's chief product officer, was not immediately available for a phone interview about the analysis. In an email, he said while buying a home remains more affordable than renting across the U.S. at the start of 2022, the gap is narrowing — a powerful sign that a decade-long run-up in home prices may be nearing an end, he said.

"While major ownership costs typically still consume smaller portions of paychecks than average rents in a majority of the country, the trend is inching the other way as prices keep hitting new highs," Teta continued.

Santa Clara, California-based Realtor.com is forecasting the U.S. rental-rate growth will outpace home-price appreciation in 2022 — 7.1% versus 2.9%. Some housing economists are predicting double-digit home-price growth in 2022.

Danielle Hale, chief economist at Realtor.com, said in an interview the rapid rate of rent growth could push more renters into the housing market in 2022, despite how competitive the for-sale market has gotten.

"I think the rental market is going to be a strong push factor for renters," she said. "Even though (for-sale home) prices and mortgages are going up, the alternative is higher rent prices. It's a good incentive for people to think about buying their first home to lock in the monthly rate."

Attom found renting is more affordable for average wage earners than buying a home in the most populated areas of the country. It found renting to be more affordable in 21 of the nation’s 25 most populated counties and in 35 of 42 counties analyzed with populations of 1 million or more.

Those counties include:

  • Los Angeles County, California

  • Cook County, Illinois

  • Maricopa County, Arizona

  • San Diego County, California

  • Orange County, California

The largest counties nationally where it's more affordable to buy a median-priced home than to rent include:

  • Harris County, Texas

  • Bexar County, Texas

  • Wayne County, Michigan

  • Philadelphia County, Pennsylvania

  • Hillsborough County, Florida

Still, volatility could factor in to whether potential homebuyers jump into the housing market this year or continue renting. Interest rates, inflation, the stock market and the pandemic could all influence the own-versus-rent affordability gap, Teta said.

"If that gap continues to narrow, or flips toward renting, that could take considerable steam out of a homeownership engine that’s been roaring in high gear for so long," he continued.

And even if owning may ultimately be more affordable than renting in the majority of counties analyzed by Attom, there remain considerable barriers to homeownership for many households. Attom found owning consumes at least one-third of an average worker's wages in about half the country.

"That amount is at the upper reaches of what lenders like to see when issuing mortgages," Teta said. "The percentage pushes over 43% and into the seriously unaffordable lane in about half of the most expensive markets."