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FAU BH&J Buy vs. Rent Index Shows Most Major Cities in U.S. Experiencing Downward Pressure on Housing Markets

BOCA RATON, Fla., June 5, 2019 /PRNewswire/ -- Most major cities in the U.S. are experiencing downward pressure on the demand for homeownership, according to the latest national index produced by Florida Atlantic University and Florida International University faculty.

"This is not surprising as the nation's housing market enters the late stages of the current housing cycle," said Ken H. Johnson , Ph.D., a real estate economist and one of the creators the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index in FAU's College of Business.

BH&J Index scores approaching 1 indicate very little chance for families that own to outperform those that rent and reinvest in terms of wealth creation. Scores approaching 0 suggest indifference in terms of wealth accumulation between owning and building equity versus renting and reinvesting. Scores approaching -1 strongly favor homeownership to produce greater wealth for families.

Currently, 19 of the 23 metropolitan markets tracked in the index are in rent territory suggesting that, on average, an individual family would be better off renting and reinvesting in a portfolio of stocks and bonds as opposed to building wealth through equity accumulation from homeownership. Markets experiencing dramatic to slight downward pressure on the demand for homeownership are Dallas (.978), Denver (.867), Houston (.773), Seattle (.424), Pittsburgh (.414), Kansas City (.392), Miami (.349), Portland (.327), San Francisco (.311), Atlanta (.276), Los Angeles (.224), San Diego (.159), Philadelphia (.147), Minneapolis (.107), Honolulu (.076), St. Louis (.076), Boston (.041), Milwaukee (.030), and Cincinnati (.025).

"For markets near zero, I have very little concern about future home prices," Johnson said. "Clearly, however, Dallas, Denver and Houston are the canaries in the coal mine. As they go, so should markets like Seattle, Pittsburgh, Kansas City, Miami, Portland and San Francisco."

Cleveland (-.124), Chicago (-.119), New York (-.079) and Detroit (-.007) are the only four metro areas remaining in buy territory. 

"All four of these areas are currently experiencing slight upward pressure on the demand for homeownership," said Eli Beracha , Ph.D., real estate economist and co-creator of the index in the Hollo School of Real Estate at FIU. "The coming peak in the housing cycle should have very little impact on these markets."

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