2021 RealTrends 500 Now Live!

The RealTrends 500, now in its 34th year, remains the undisputed leading report ranking the performance of the top residential real estate brokerage firms.

Gathering of Eagles

The Gathering of Eagles conference is the Trusted Source, offering brokers, managers and leaders valuable insider industry information on how to run a profitable business.

RealTrending: eXp’s Glenn Sanford

Glenn Sanford, CEO of eXp World holdings, addresses his critics about his agent referral program, where he is taking the company next and growth limiters for the brokerage.

Newsletter

The RealTrends monthly newsletter is known as the trusted industry source for information on trends, strategies, analysis, people and news shaping the real estate industry of tomorrow.

Is it a Renters Market? It’s Moving That Way

U.S. Housing Markets Moving into Rent Territory for First Time in Over Eight Years, Latest BH&J Buy vs. Rent Index Shows

U.S. housing markets, when viewed as a whole, are now in rent territory, meaning renting and reinvesting, on average, will outperform owning and building equity in terms of wealth creation, according to the latest national index produced by Florida Atlantic University and Florida International University faculty.

The last time U.S. markets as a whole crossed from ownership territory into rent territory was in June 1999. In January 2010, U.S. housing markets crossed back into ownership territory and have remained there until now. U.S. homeowners have, on average, outperformed renting and reinvesting in terms of wealth creation ever since.

Currently, 16 of the 23 cities covered in the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index are in rent territory. Those cities include Atlanta, Dallas, Denver, Honolulu, Houston, Kansas City, Los Angeles, Miami, Minneapolis, Philadelphia, Pittsburgh, Portland, San Diego, San Francisco, Seattle and St. Louis, all of which will be experiencing downward pressure on the demand for ownership.

What does this mean for the future of U.S. housing prices? While residential real estate cycles are a relatively new phenomenon, making predictions difficult, the Index does have more than 36 years of quarterly pricing data, which allows its creators to draw some insight as to what is ahead.

“It is clear that we are at a point where markets will begin to see downward pricing pressure, implying in some markets annual pricing increases will begin to slow,” said Ken Johnson, Ph.D., a real estate economist and one of the index’s creators in FAU’s College of Business.

The best buys in the country right now appear to be in the Midwest and Northeast, with Chicago and Cleveland possessing the lowest/best ownership scores. Of all the cities in the BH&J Index, Johnson said, Dallas is most alarming with a score of .888.

“Across all of the data for the Index going back to 1982, only 49 times has a market in any given quarter been at this score or higher,” Johnson said. “All of these markets experienced significant price declines in their residential housing prices.”

Currently, the biggest driver for moving the U.S. into rent territory is the fact that, while both are rising, the cost of ownership is outpacing the cost of renting a like-kind property, said Eli Beracha, Ph.D., co-creator of the index and director of the Hollo School of Real Estate at FIU.

“Cycles appear to be with us to stay and that the tradeoff between renting and reinvesting versus owning and building wealth, as well as the cost of ownership relative to the cost of renting like-kind property, will be fundamental drivers of housing prices,” Beracha said.

William G. Hardin, Ph.D., director of FIU’s Jerome Bain Real Estate Institute and associate dean of the Chapman Graduate School of Business, believes U.S. housing markets are clearly heading toward the peak of the current cycle.  However, the perfect storm that was present in 2007-08, which preceded the last crash of the real estate markets, is not around today.

“Interest rates are low and few junk mortgages are out there,” Hardin said.  “Additionally, employment, income, and borrower credit ratings are all up. These are all good signs for a smoother transition this time around.”

The BH&J Index is publish quarterly and is available online athttp://business.fau.edu/buyvsrent. 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.

Most Popular Articles

RealTrending: eXp’s Glenn Sanford reveals what’s next for company

Glenn Sanford, CEO of eXp World holdings, addresses his critics about his agent referral program, where he is taking the company next and growth limiters for the brokerage.

Apr 12, 2021 By

Latest Articles

How to turn FSBOs into clients

Luke Babich digs into how you can find current FSBO sellers who you may be able to convert to clients, and learn how to win over sellers who are thinking about taking the FSBO route.

Apr 20, 2021 By