A growing economy during the first quarter meant that the U.S. housing market as a whole moved toward buying a home versus renting, an indication of soundness, according to a quarterly report put together by professors at two Florida universities.
The Beracha, Hardin & Johnson Buy vs. Rent Index for the country was negative 0.16, on a scale of positive 1 to negative 1 where negative values indicate a greater swing toward homeownership, according to the report authored by professors at Florida Atlantic University and Florida International University. That compares to values of negative 0.15 and negative 0.20 in the fourth and first quarters of 2015, respectively.
The index compares building up home equity versus renting a comparable property and investing in stocks and bonds to determine whether buying or renting is a better strategy of building wealth.
"This appears to be driven by a steady but strengthening job market, rising rents relative to rising ownership costs and recent slower growth in traditional financial portfolios consisting of stocks and bonds," said Ken Johnson, one of the index's authors and an associate dean of graduate programs at FAU's College of Business, in a news release.
In addition to the nationwide figure, the index also studies 23 metropolitan markets. During the first quarter, 16 of those markets moved in the buy direction. Cities firmly in the buy territory included Chicago, Cleveland, Philadelphia and New York.
"These cities should have room for price growth without much worry of overheating," Eli Beracha, another co-author and assistant professor in the T&S Hollo School of Real Estate at FIU, said in the release.
Some cities whose values put them on the cusp between the buy range and the rent range, such as Los Angeles and Miami, moved more toward buying during the quarter, which Beracha said could preview improved housing price stability.
Only two housing markets moved toward renting rather than buying: Dallas and Denver. The report's authors also sounded caution regarding the housing market in Houston, which moved sharply in the direction of buying while remaining strongly in the rent territory. In the past, that signaled property price declines.
