Home prices have dropped so much in the past two years that if they continue to fall as expected, monthly ownership costs will be less than monthly rents in a number of major markets, according to a new study from the Center for Economic and Policy Research and the Low Income Housing Coalition.

 

Lower home prices in these markets will allow first-time home buyers to accrue the equity they need to buy faster by a year or more than the normal five years, the study found.  Calculations of homeownership costs included property taxes, mortgage interest and principal, down payment, insurance and maintenance.

 

The rent-buy ratio is most favorable in markets that were not greatly affected by the housing boom.  Even though home prices have fallen 32.3 percent on average over the past two years, "bubble" markets like Las Vegas, Phoenix, Los Angeles, Riverside, New York and Washington DC still have large gaps between average rents and low-cost home purchase prices.

 

By contrast, the gaps are much smaller in "non-bubble" markets.  Markets where home prices have fallen enough to make monthly mortgage payments as cheap or almost as cheap as monthly rent include Bakersfield, Stockton, Fort Myers, Jacksonville, Miami, Sarasota, Des Moines, Indianapolis, New Orleans, Omaha, Buffalo, Rochester, Syracuse, Toledo, Oklahoma City, Philadelphia, Pittsburgh, Memphis, Salt Lake City, Richmond and Milwaukee.

 

The changing relationship between buying and renting is due more to falling prices than rising rents.  Though on average rents will likely continue to increase, the study found, the trend has been moderating, and in some of the hardest hit cities, average rents are showing a decline as the middle and upper ends of the markets become soft with increasing supply. Rising unemployment and declining incomes generally dampen the demand for housing: fewer new households form, households combine, immigration declines, and some households become homeless.

 

"This analysis indicates that in a growing number of metropolitan housing markets, the costs of homeownership are falling back into their historical relationship with rents. As this occurs, it seems likely that housing values have or ill soon reach bottom and stabilize," concluded Danilo Pelletiere, Hye Jin Rho, and Dean Baker, the study's authors.

 

For a copy of the study and more on the real estate econony, go to Real Estate Economy Watch.com.

 

 

1 Comments on Buying is Becoming as Cheap as Renting

AUG
12
2009
712,458 Points 118 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Steve,

Washington DC should spend some money on billboards with your message!  Thanks for the post.

Mike in Tucson

8:22am • #1


What does the graphic say?
Leave a response…


(optional)
Spam Prevention:
 
Sc-july28_2011 Rainmaker_large

Steve Cook

Silver Spring, MD

More about me…

Reecon Advisors

Address: Silver Spring, MD, 20904

Office Phone: (202) 257-3652

Email Me



Listings

Links

Archives

RSS 2.0 Feed for this blog