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luie1177

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20120521
Postrenting versus buying

Amazing data from zillow.com on rent rates shows rising prices for over a year across many cities in the US, and house prices still falling, but the tide has to turn sometime. The notion that it is better to buy then to rent will soon force lots of people back to home buying and with lower house prices who can blame them. But when? that’s the 100 million dollar question.

Historically the last time there was such a widening gap between the Home Price Index (S&P Case Shiller) and The Rent index as per the CPI numbers was Q1/1989 That lasted up to Q4/1996 and when it was all said and done with the gap had widened to a 45% difference. That was after falling from 54% (formula = S&PCS/RI) after that it kept closing the gap.

In this recent widening of the gap, the difference is coming down from a steeper climb. Therefore I believe that we will see this recovery and the turning tide first, surpassing the previous record of about 45% and second, the recovery from the widening gap will be sooner. Due to more people choosing to buy over renting. I would be completely surprised if it takes more then 2.5 years before the question of buying over renting being

Of course there are many other factors to argue like inventory levels and ease of getting a loan but in a macro view all this would have to sort itself out eventually.

Here is a graph representation of the numbers. >> Click Here
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