Families trying to decide whether they would be better off buying or renting a three-bedroom home in the Chicago area face a tough decision: Both renting and buying require more for monthly payments than what the average wage-earner in the region can afford, according to a study released Thursday by Attom Data Solutions.
The exception is Lake County, where renting the average three-bedroom apartment could be handled with the average wage earned in that county, Attom Data reported.
A person earning the average weekly wage of $1,263 could stay within the rule of thumb of financial planning: devoting no more than 28 to 30 percent of pay to rent. If they instead bought a home at the median price in Lake County, they’d have to devote 36 percent of their pay to monthly payments.
The average rent on a three-bedroom dwelling in Lake County is $1,569, according to Attom Data’s numbers, which were gathered from the U.S. Department of Housing and Urban Development. The researchers compared the rent with wage data for the county from the Bureau of Labor Statistics. Attom Data is a curator of housing-related data.
As rents have soared the past few years, and home prices have recovered from the housing crash, Attom Data studied markets throughout the country to determine whether renting or buying a home made more sense based solely on the percent of income a person would need for each of the housing choices. Due to the sharp rise in rents, buying now makes more sense in about two-thirds of the nation’s counties, said Daren Blomquist, economist for Attom Data.
In the Chicago area, however, renting in most counties takes less pay than buying homes. The exceptions are Will County, where an individual would have to spend about 41 percent of pay on rent and 35.5 percent on monthly house payments, and Kendall County, where renting would take 56.9 percent of pay and home payments 52 percent.
Despite soaring rents in luxury apartments in downtown Chicago, the average rent for a three-bedroom home in Cook County takes less income than buying the median home. The average rent of $1,569 in Cook County requires about 31.6 percent of the average person’s pay, compared with 32.4 percent for house payments on the median home priced at $207,800.
Of course, prices vary widely from the median level throughout the county, and both homes and renting would be more affordable for households with two-income earners versus just the one that went into the analysis. So homebuyers could end up in a very different position than the averages imply. The average person makes $1,146 a week in Cook County.
One finding by Attom Data provides a warning for people who want to buy and could afford homes now, but have delayed purchasing property. Rising interest rates are making homes more expensive, and probably will continue to do so throughout 2017, Blomquist said.
In the past few months, Blomquist noted, the median-priced three-bedroom Cook County home has moved from being affordable to being borderline affordable. With the current mortgage interest rate of 4.32 percent on a typical 30-year mortgage, he said, homebuyers would need to pay $1,611 for the median-priced home in the county. That includes property taxes, insurance and the mortgage payment. Since the average person in Cook County earns $1,146 a week, Attom calculates they’d need to devote 32.4 percent of pay to the monthly payment, assuming they buy with a 3 percent down payment.
On the other hand, with interest rates at 3.47 percent only a few weeks ago, the same house would have meant spending only 30.5 percent of pay. Payments then were $1,513.
gmarksjarvis@chicagotribune.com
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