Sullivan and Washington counties are among the 345 counties nationwide where buying remains cheaper than renting. That’s according to ATTOM Data Solutions current Rental Affordability Report.
The analysis focused on the 540 counties that had at least 900 home sales during the second quarter. Data for the analysis incorporated 2017 fair market rent data, wage data from the Bureau of Labor Statistics along with public record sales deed data from RealtyTrac’s database.
Primary factors that have so far kept it cheaper to buy than rent in the local counties include conservative sales price increases despite a tight inventory, rents are trending lower, and wages have seen conservative increases that are in line with home price increases.
The exception to the wage and home price balance is in Washington County where home prices grew fast than wages during the analysis period. Washington County is also the most expensive market in the region.
According to ATTOM’s study, renting a three-bedroom home cost a Sullivan County family earning a median income 25.4% of their wages on rent. Buying a median priced consumed 18.5%. That included mortgage, property taxes and insurance.
The same comparison in Washington County put the rental cost at 28.1% of family income and buying at 25.1%. It also said home prices were increasing faster than wages, unlike the Sullivan County situation where wages were growing faster than home prices.
While the analysis points to the economic advantage of buying, the rental proposition favors renters over landlords.
Home prices grew faster than rents during the analysis period because rents have declined. But at the same time, the analysis shows wages are rising faster than rents, and there’s a substantial increase in the apartment inventory in the pipeline for Sullivan County.
Sullivan County has extended TIFs to builders in both Bristol and Kingsport to encourage apartment construction.
Kingsport has aggressively promoted more apartments as one part of its quest to attract new residents. It’s an issue because the Legislature ended forced annexations as a growth model for cities and since the region has a higher death rate than birth rate stabilizing population requires attracting new residents.
Another factor to watch is increasing interesting mortgage rates. Higher mortgage rates mean higher mortgage payments and that lowers affordability. The conservative estimate is rates will be in the 4.8% range by year’s end. Rates are not projected to pinch home sale all than much until they hit 5%.
The rental-ownership situation will likely be a bigger future issue for local markets. That’s driven by the region’s aging population and a situation where some seniors are selling their homes and renting to take advantage of their one-time capital gains break on home sale equity to pad out their retirement. Dovetailing with that trend is the issues Millennials are having dealing with their student loans before they can buy and popularity of multi-generational households. Both are negatives for home ownership.
So far this year both Sullivan and Washington counties have seen brisk home sales. During the first 11 months of this year, they’re up 14.6% in Washington County and up 10.5% in Sullivan County.
The average year-to-date sales price in Washington County is 2.1% higher than the first 11-months of last year. In Sullivan, the average sales price is up 2.9%.