In Pierce, Thurston counties, it's still cheaper to buy than rent

Tacoma News TribuneFebruary 19, 2014 

In every place in Washington other than King County, it still is less expensive to buy a home instead than to rent it.

According to data crunched by national real estate data firm RealtyTrac, the monthly payment for a median-priced 3-bedroom home in Pierce and Thurston counties is $400 to $500 less than what it would cost to rent that same-size home. The analysis also showed the housing in Pierce and Thurston counties is generally affordable by people making even a little bit less than the median household income.

RealtyTrac built in some assumptions to arrive at the monthly house payment: A 20 percent down payment on a 30-year fixed rate mortgage of 4.46 percent; a 1.04 percent annual property tax rate; 0.40 percent of the purchase price in annual maintenance costs; 0.35 percent of the purchase price in annual home insurance costs; and the subtraction of the tax benefit from the mortgage interest and property tax deduction using the 30 percent income tax rate.

The firm used fair market rent data from the federal Department of Housing and Urban Development.

With those qualifications in mind, here's what RealtyTrac found for 2013:

People in Pierce and Thurston would pay about $1,400 to rent a three-bedroom home, but a mortgage would be between $918 and $961. 

Basic income to qualify for a mortgage in Pierce County is about $44,000, and the county's median household income is $57,629. In Thurston, it would take about $46,000 to qualify and the median household income is $58,239.

Those trends are backward in King County, the data show. It costs about $1,627 to rent that three-bedroom home but $1,715 a month to buy it. Mortgages in King County also are requiring an annual income of $82,341 to qualify, but the median household income is just $69,047.

Nationally the cost of owning a home is still less than renting in a majority of markets, RealtyTrac said in a news release. But the trend isn't looking great.

"The cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes," Daren Blomquist, vice president of RealtyTrac, said in a news release.

Why are prices outpacing income? It's not the same problem as before the real estate crash, when anyone with a pulse could get a mortgage on a six-figure home. Now it's the presence of "investors and other cash buyers (who) are not tethered to the typical affordability constraints," Blomquist said.

Translation: Companies or people who have enough money to pay cash for homes are buying them up, and they don't have to worry about whether they can make a mortgage payment. These deep-pocketed buyers are inflating the market -- not enough to make a bubble in most places, but enough to affect regular people who just want to buy a home to live in.

 

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