BH&J Latest Summary
FAU Buy vs. Rent Index Shows Rising Rents Making This a Good Time to Buy a Home in Most Cities in U.S.
BOCA RATON, Fla. (March 8, 2017) – Rising rents and narrowing spreads between the cost of ownership and the cost of renting are making this a good time to buy a home in most cities in the U.S., according to the latest national index produced by Florida Atlantic University and Florida International University faculty.
“This is great news for home ownership and the financial returns to ownership,” said Ken Johnson, Ph.D., a real estate economist who is one of the index’s authors and an associate dean of graduate programs and professor in FAU’s College of Business. “We are not where we were in 2012, when nearly any purchase was a sound financial decision. However, overall, we are now in a situation where aggressive marketing from sellers combined with due diligence and sound negotiation from buyers is creating a housing market that’s more in line with what we’ve seen historically.”
Based on numbers from the end of the fourth quarter of 2016, 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 that home prices rose 5.8 percent year over year, the highest annual increase since June 2014.
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.
These latest numbers show 15 of the 23 cities in the index are solidly in buy territory, while another five are only marginally in rent territory. Only three cities — Dallas, Denver and Houston — present scores that are worrisome in terms of local housing market conditions.
“The scores for Dallas, Denver and Houston have worried us for some time now,” said Eli Beracha, Ph.D., co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. “The last time we saw scores of this magnitude, housing market crashes soon followed.”
The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://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.
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About Florida Atlantic University
Florida Atlantic University, established in 1961, officially opened its doors in 1964 as the fifth public university in Florida. Today, the University, with an annual economic impact of $6.3 billion, serves more than 30,000 undergraduate and graduate students at sites throughout its six-county service region in southeast Florida. FAU’s world-class teaching and research faculty serves students through 10 colleges: the Dorothy F. Schmidt College of Arts and Letters, the College of Business, the College for Design and Social Inquiry, the College of Education, the College of Engineering and Computer Science, the Graduate College, the Harriet L. Wilkes Honors College, the Charles E. Schmidt College of Medicine, the Christine E. Lynn College of Nursing and the Charles E. Schmidt College of Science. FAU is ranked as a High Research Activity institution by the Carnegie Foundation for the Advancement of Teaching. The University is placing special focus on the rapid development of critical areas that form the basis of its strategic plan: Healthy aging, biotech, coastal and marine issues, neuroscience, regenerative medicine, informatics, lifespan and the environment. These areas provide opportunities for faculty and students to build upon FAU’s existing strengths in research and scholarship. For more information, visit www.fau.edu.
To the knowledge of the co-developers (Beracha, Hardin and Johnson) of the BH&J Index, there is no perfect information source that guarantees optimal results when choosing between buying and renting. Accordingly, the BH&J Index, and any sponsoring university or universities, DO NOT make any such claim. Thus, viewers/consumers of this information use it at their own risk and agree to hold Eli Beracha, William G. Hardin III, Ken H. Johnson, and any sponsoring universities, harmless.
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