According to the latest national index report produced by Florida International University and Florida Atlantic University faculty, real estate market in the country remains in buy territory.
Beracha, Hardin III and Johnson (BH&J) Buy vs. Rent home price Index has revealed that home prices climbed by about 5.4 percent in December 2015 as compared to the previous year. This price rise rate is the fastest since July 2014. Therefore, homeowners have a lucrative opportunity to accumulate more wealth, on average, than renters.
BH&J examined the entire United States’ housing market, as well as the real estate market trends of 23 key cities and compared the data with, FAU reported. The researchers employed a horse race contrast between an individual who is buying a house and a person who rents a comparable quality residence and reinvests the money on bonds and stocks.
Ken Johnson, a Professor at FAU and Real Estate Economist, has cited that the real estate market in the whole country was in buying mode. His main reasons include the weak stock market performance, continuous low mortgage rates, and the increasing cost of renting as compared to ownership. Therefore, purchase of residential homes is the current market situation is advantageous as a way of producing more wealth through home equity over renting.
Houston, Dallas, and Denver cities are presently deep in renting territory. However, according to Rismedia report, Professor Johnson believes that there is some good news for residential homeowners in these cities. He forecasts that the cost of renting homes is going to be higher based on the current rising trends as compared to the cost of homeownership. This trend will apparently lessen the gains of renting houses and increase the possible gains on residential home ownership.
Buying a residential house has become more financially and socially rational as rents are predicted to increase in the subsequent year.
Meanwhile, several cities including New York, Philadelphia, San Diego, St. Louis, Minneapolis, Boston, Chicago, Atlanta, Cincinnati, Cleveland, Milwaukee, and Detroit are in buying territory. Real estate data in these markets suggests that homeownership provides a lucrative opportunity to build more wealth than renting a comparable residential house and reinvesting the money inbonds and stocks.
Professor Johnson also cited that the cities that have seen no change in their home index score should still see buying of residential homes as good news. In these cities, there is still hope of landing on residential houses at lower prices. Therefore, Professor Johnson encouraged home buyers in these cities to bargain extensively as the opportunity to accumulate more wealth through housing equity appreciation appears to be narrow.
The BH&J Buy vs. Rent home price Index is a quarterly report that endeavors to establish whether it is advantageous to own or rent a residential house based on the current real estate market trends. The real estate activities of BH&J are sponsored by Investments Limited of Boca Raton.
Professor Johnson’s associates in this ongoing self-regulating research include the director at FUI’s College of Business, Dr. Hardi, and Beracha Eli, Assistant Professor at FUI.