BOCA RATON, Fla., Dec. 13, 2016 /PRNewswire-USNewswire/ -- Record high home prices in the U.S. housing market are being driven upward by rising rents in cities across the country, according to the latest national index produced by Florida Atlantic University and Florida International University faculty.
Based on numbers from the end of the third quarter, the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found home prices at a new all-time record and surpassing the highs from before the financial crisis.
Both indexes incorporate property appreciation from housing markets around the country, but unlike Case-Shiller, the BH&J Index adds additional rental, maintenance and alternative investment data streams, among others, to indicate when and why housing markets might be changing direction.
Rents, across all 23 cities in the BH&J Index and the country as a whole, are rising marginally slower than the rate of property price appreciation, resulting in all areas moving ever so marginally in the direction of being rent friendly. Over the last three years, the rate of rent increases are nearly matched by the rate of property price increases resulting in the conclusion that property prices are being supported by rent increases. This suggests stable housing markets around the country.
The U.S. as a whole and 15 of the 23 cities measured by the index are in buy territory implying that ownership is, on average, a better vehicle for creating wealth in these areas. These 15 cities are Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Kansas City, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego and St. Louis.
Eight of the 23 measured cities are in rent territory, suggesting that renting and reinvesting in a portfolio of stocks and bonds will, on average, produce more wealth for a family.
While the market seems stable as a whole, the increase in real estate prices and rents across the country would seem to point to a looming affordability issue given that the easy financing that helped support high prices before the 2008 market collapse are not an option for most anymore.
Sponsored by Investments Limited of Boca Raton, the BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.
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SOURCE Florida Atlantic University College of Business