Both renting and owning a three-bedroom home are significant financial burdens for households around the U.S., consuming more than one-third of average wages in most major housing markets. But average rents still require a significantly smaller portion of wages than major home-ownership expenses on three-bedroom properties.
That gap has emerged even as rents have risen faster than home prices over the past year in roughly half the nation.
The analysis for this report incorporated 2023 rental prices and 2022 home prices, collected from ATTOM’s nationwide property database, as well as publicly recorded sales deed data licensed by ATTOM (see full methodology below). Those two data sources were combined with average wage figures from the Bureau of Labor Statistics (see full methodology below).
“What a difference a year makes,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Last year our study concluded that it was more affordable to own than to rent in 60 percent of the markets analyzed. But with mortgage rates doubling, monthly payments for new homeowners rose by 45-50 percent compared to a year ago, even though home price appreciation has slowed down dramatically. This has made renter more affordable in the majority of markets, despite rental rates continuing to rise over the past year.”
The report shows that renting is more affordable in most of the country following a year of mixed market patterns around the country, flowing from a rapidly changing housing market. Average three-bedroom rents climbed more than median sales prices on single-family homes in 46 percent of the markets analyzed. That happened at a time when a decade-long run of price spikes slowed considerably across the U.S., amid rising mortgage rates, high inflation, a declining stock market and other factors that cut into what potential buyers could afford.
Still, rents didn’t go up fast enough to keep them from being the more financially viable option for workers earning average local wages in most markets. Average rents commonly consume a smaller portion of average wages than major home ownership by anywhere from 5 to 30 percentage points.
The patterns hold throughout the country, but are most pronounced in the most populous urban markets.
Rents rising faster than home prices in half the nation
Average rents for three-bedroom homes are increasing more than median prices for single-family homes in 103 of the 222 counties analyzed in this report (46 percent). Counties were included in the report if they had a population of 100,000 or more, at least 100 sales from January through November of 2022, and sufficient data.
The most populous counties where three-bedroom rents are rising faster than median sales prices for single-family homes are Cook County (Chicago), IL; San Diego County, CA; Orange County, CA (outside Los Angeles); Kings County (Brooklyn), NY, and Miami-Dade County, FL.
The largest 119 counties where sales for single-family homes are rising faster than rents are Los Angeles County, CA; Harris County (Houston), TX; Maricopa County (Phoenix), AZ; Dallas County, TX, and Clark County (Las Vegas), NV.
Widest affordability gaps between renting and owning in most populous counties
Renting the average three-bedroom home is more affordable compared to owning a single-family home in the nation’s largest counties, with populations of at least 1 million.
Among 46 counties with a population of at least 1 million included in the report, the biggest gaps are in Honolulu, HI (average three-bedroom rents consume 66 percent of average local wages while single-family home ownership expenses consumes 140 percent); Alameda County (Oakland), CA (47 percent for renting versus 110 percent for owning); Santa Clara County (San Jose), CA (28 percent versus 83 percent); Orange County, CA (outside Los Angeles) (73 percent versus 125 percent) and Contra Costa County, CA (outside San Francisco) (49 percent versus 90 percent).
The only county with a population of more than 1 million where it is more affordable to buy than rent is Cook County (Chicago), IL (average rents consume 40 percent of average local wages while home ownership consumes 38 percent).
The biggest gaps among counties in the report with populations of less than 1 million are in San Mateo County, CA (outside San Francisco) (average three-bedroom rents consume 39 percent of average local wages while single-family home ownership expenses consumes 103 percent); Alexandria City/County, VA (outside Washington, DC) (46 percent versus 101 percent); Loudoun County, VA (outside Washington, DC) (44 percent versus 97 percent); San Francisco County (41 percent versus 92 percent) and Utah County (Provo), UT (37 percent versus 84 percent).
Renting three-bedroom homes difficult for average wage earners, but most affordable in South and Midwest
The report shows that renting the typical three-bedroom property requires more than one-third of average local wages in 174 of the 222 counties analyzed for the report (78 percent).
Among the 48 markets where average three-bedroom rents require less than one-third of average local wages, 44 are in the Midwest and South.
The most affordable counties for renting a 3-bedroom property are Jefferson County (Birmingham), AL (20 percent of average local wages needed to rent); Pulaski County (Little Rock), AR (23 percent); Cuyahoga County (Cleveland), OH (23 percent); Wayne County (Detroit), MI (24 percent) and Summit County (Akron), OH (25 percent).
Aside from Cuyahoga and Wayne counties, the most affordable counties for renting, among those with a population of at least 1 million, are St. Louis County, MO (25 percent of average local wages needed to rent); Allegheny County (Pittsburgh), PA (26 percent) and Philadelphia County, PA (26 percent).
The least affordable counties for renting are spread through the South, Northeast and West, including Kings County (Brooklyn), NY (126 percent of average local wages needed to rent); Indian River County (Vero Beach), FL (100 percent); Charlotte County, FL (outside Fort Myers) (84 percent); Monterey County, CA (outside San Francisco) (82 percent) and Riverside County CA (outside Los Angeles) (77 percent).
Aside from Kings and Riverside counties, the least affordable for renting among counties with a population of at least 1 million are Orange County, CA (outside Los Angeles) (73 percent of average local wages needed to rent); Palm Beach County (West Palm Beach), FL (71 percent) and Westchester County, NY (outside New York City) (69 percent).
South and Midwest also have most-affordable home ownership markets; least affordable are in West and Northeast
The report shows that major expenses on a median-priced single-family home requires more than one-third of average local wages (assuming a 20 percent down payment) in 206 of the 222 counties analyzed for the report (93 percent).
The most affordable markets for owning are Wayne County (Detroit), MI (24.1 percent of average local wages needed to own); Montgomery County, AL (27.6 percent); Cuyahoga County (Cleveland), OH (27.7 percent); Richmond County (Augusta), GA (28.7 percent) and Allegheny County (Pittsburgh), PA (29.2 percent).
Aside from Wayne, Cuyahoga and Allegheny counties, the most affordable for owning among counties with a population of at least 1 million are St. Louis County, MO (32.9 percent of average local wages needed to own) and Cook County (Chicago), IL (38.3 percent).
The least affordable markets for owning among those analyzed are Honolulu County, HI (139.8 percent of average local wages needed to own); Kings County (Brooklyn), NY (125.9 percent); Orange County, CA (outside Los Angeles) (124.7 percent); Monterey County, CA (outside San Francisco) (117.3 percent) and Alameda County (Oakland), CA (110.1 percent).
Aside from Honolulu, Kings, Orange and Alameda counties, the least affordable county among others with a population of at least 1 million is Queens County, NY (102.6 percent of average local wages needed to own).
Rents growing faster that wages in almost three-quarters markets
Average fair-market rents are increasing more than average local wages in 156 of the 222 counties analyzed in the report (70 percent), including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; San Diego County, CA, and Orange County, CA (outside Los Angeles).
Average local wages are growing faster than average rents in 66 of the 222 counties in the report (30 percent), including Maricopa County (Phoenix), AZ; Dallas County, TX; Clark County (Las Vegas), NV; Tarrant County (Fort Worth), TX, and Hillsborough County (Tampa), FL.
Home prices rising faster than wages in more than 90 percent of nation
Median single-family home prices are rising faster than average weekly wages in 207 of the 222 counties analyzed in the report (93 percent), including Los Angeles County, CA; Harris County (Houston), TX; Maricopa County (Phoenix), AZ; San Diego County, CA, and Orange County, CA (outside Los Angeles).
Average weekly wages are rising faster than median home prices in just 15 of the 222 counties in the report (7 percent), including Cook County (Chicago), IL; Cuyahoga County (Cleveland), OH; Westchester County, NY (outside New York City); Washington, D.C., and Jefferson County (Birmingham), AL.
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