Did you see the headline from last week? “It costs more to own a home than to rent one in every U.S. state.” For a link to the article, click here.
The story talks about how using US Census Bureau data, CNBC was able to compare the median cost of renting a home to the median cost of owning a home.
Remember what a median is? A median is “the value or quantity lying at the midpoint of a frequency distribution of observed values or quantities.” In other words, if you have 1,001 houses, exactly 500 will cost more and 500 will cost less.
And this is where the methodology is screwed up. RentCafe took the same data that CNBC used and figured out that in the US, there are 73% more apartments rented than houses. And the Terner Center at Berkley took that same data and determined that “Today, single-family detached homes make up more than 62 percent of the housing stock in the United States…” .
So the median rental is way more likely to be an apartment, while the median home that’s owned is way more likely to be a house.
Here’s another way to think of it. Jennifer Lopez has a $28 million home. So she and all the other millionaires who own mansions skew the median cost of home ownership up. But unless
there are a lot of millionaires out there renting apartments for like $2 million a month, it’s a pretty safe bet that median rental doesn’t skew as far north.
If all those numbers make your eyes glaze over, let me frame it one more way. The common
sense way.
The CNBC story implies that in every single state, people who rent out their homes are, on
average, losing money. In other words, we have a country full of generous landlords.
Sorry, that just doesn’t fly.
As a realtor®, it’s important to stay informed. But it’s way more important to think.