By DON FENLEY
Buying a three-bedroom home is still more affordable than renting in most Tri-Cities area counties, according to Attom Data Solution’s 2020 Rental Affordability Report. At the same time, Realtor.com’s Rent v. Buy Report comes down on the side of renting in all the Tri-Cities region’s NE Tenn. counties and Washington Co. Va.
Both are accurate. In many ways, they tell the same story. But the conclusions are based on different models and data sets. Before we get to the data and conclusion here’s an overview of each organization’s methodology.
Attom’s reading on rental affordability is average fair market rent for a three-bedroom property as a percentage of the average monthly wage (based on average weekly wages). The same report offers some context by offering a home buying affordability model based on the monthly house payment for a median-priced home (based on a 3% down payment plus mortgage payment, property tax, homeowner’s insurance, and private mortgage insurance) as a percentage of the average monthly wage.
Realtor.com’s Rent vs. Buy Report compares the median monthly costs of renting and buying relative to the median county income. The buying costs are based on its weekly county-level residential listing price data. Rental prices are sourced from the Department of Housing and Urban Development data for 2019 rental estimates 50th-percentiles. Household income comes from the Nielsen Pop Facts Demographics.
A factor that is often not included in the cost of ownership is maintenance. One rule of thumb is homeowners should budget 1% of the value of their home each year for maintenance.
Homeownership is a better deal than renting for the average wage earner in a slim majority of U.S. housing markets,” Todd Teta, chief product officer at Attom Data Solutions, said in the report that found buying a median-priced three-bedroom home was more affordable than renting in only 53% of the 855 counties analyzed.
“Either buying or renting is a financial stretch or out of reach for individual wage earners throughout most of the country in the current climate,” he added. “But with interest rates falling, owning a home can still be the more affordable option, even as prices keep rising.”
Here’s how Teta’s assessment can be applied to the local markets and housing economy. And remember Census data show 74% of the housing in the four-county Kingsport-Bristol metro area is owner-occupied. In the three-county Johnson City metro area owners occupy 65% of that area’s housing.
In the five local counties included in Attom’s report, the 2020 rental price for that three-bedroom home increased less than 1% in all but one county. In Greene County, the increase was 9%. The next highest increases were in Carter and Washington counties at 0.9%. Hawkins and Sullivan counties had a rent increase of 0.3%.
That sets up the next benchmark. Rents are increasing faster than wages in Carter and Greene counties and home prices are increasing faster than wages in all but Hawkins County. The one comparison where all the counties came up equal was home prices are increasing faster than rents. That’s the big take away when looking at the single-family housing norm – a three-bedroom home.
When Attom’s rental affordability and buying affordability models are compared, they show it’s cheaper to rent than buy in Washington County, but only by 0.5%. And Carter County was the only place where renters would be classified as housing stressed. That’s defined by spending more than 30% of income on housing.
Realtor.com’s study is expressed in an infographic where visitors can point their cursor to a state then a county and hover over the image to get a popup with the rent v. buy details expressed by the percentage advantage of renting or buying.
Johnson County has the dubious distinction of having the region’s highest rent advantage. Renting is 27% cheaper than buying. The Tri-Cities’ two Washington counties and Greene County are in the areas where renting is a better deal than buying by double digits. And if you’re looking for a balanced rent v. buy county Carter gets the nod.
The only counties where the economic advantage is buying are Scott, Lee, and Wise in SW Va.
The one thing that neither study addresses head-on is the apartment factor. That’s a big deal because multi-family construction has and continues to increase penetration in the region’s housing market, and apartment communities are attracting a bigger share of Millennials and retirees.
Categories: REAL ESTATE