NAR reviewed employment growth, household income and qualifying income levels in nearly 100 of the largest metropolitan statistical areas2 across the country to determine which areas with employment gains above the recent national average also have the largest share of renters who can currently afford to buy a home. Of the top 10 metro areas with the highest share of renters who earn enough to buy, nine were either in the South or Midwest — including three cities in Ohio.
Lawrence Yun, NAR chief economist, says there’s been a significant increase in renter households — both young adults and those who lost their home — since the Great Recession, and especially in metro areas that have seen robust job creation and a resulting influx of new residents. This has led to a multi-year run-up in rents in several markets that have contributed to many of these renters’ inability to advance into homeownership.
“Even in a time of expanding home sales, steady job growth and historically low mortgage rates, the homeownership rate recently tumbled to its lowest level in over five decades as many renters struggle to juggle escalating rents without commensurate income gains,” he said. “However, this new study reveals that there are several affordable, middle-tier markets with solid job gains and a large segment of renters who earn enough to buy.”
The top 10 metro areas highlighted in NAR’s study were all outside of the West Coast and each had a share of renters who qualify to buy3 that was well above the national level (28 percent).
The top markets with the highest share of renters who can afford to purchase a home are:
- Toledo, Ohio (46 percent)
- Little Rock, Arkansas (46 percent)
- Dayton, Ohio (44 percent)
- Lakeland, Florida (41 percent)
- St. Louis, Missouri (41 percent)
- Columbia, South Carolina (41 percent)
- Atlanta (40 percent)
- Columbus, Ohio (38 percent)
- Tampa, Florida (38 percent)
- Ogden, Utah (38 percent)
According to Yun, it’s no surprise that many of the markets with the most renters qualified to buy are in the Midwest and South. The median existing-home sales price in these two regions continue to be lower than the Northeast and West4, and while many of these areas were slower to recover from the recession, improvements in their local labor markets in the past year have pushed their hiring levels to at or above the national average growth rate.
“Overall housing affordability and local job market strength play a pivotal role in a renter’s decision on whether to buy a home or sign another lease,” adds Yun. “The good news is that other recent NAR survey data shows that those residing in the two regions were the most likely to say that now is a good time to purchase a home.” 5
Concludes Yun, “With mortgage rates now at their all-time low, these identified markets are well-suited for the many renters financially capable and interested in taking advantage of the stability and wealth-building benefits owning a home can provide.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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1 According to the U.S. Census Bureau, the homeownership rate fell to 62.9 percent, which is the lowest since 1965.
2 Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt.
3 Qualifying income is based on a 3 percent down payment in each metro area’s median home price in 2015. Federal Housing Administration (FHA) loans require 3.5 percent down payment. The rankings of these metro areas would all hold if under a 3.5 percent down payment assumption.
4 The median existing-home price in June 2016 was the lowest in the Midwest ($199,900) and South ($217,400) regions.
5 According to NAR’s second quarter Housing Opportunities and Market Experience (HOME) survey, 80 percent of respondents living in the Midwest and 77 percent of those in the South believe now is a good time to buy a home.
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