Rent vs. Buy Analysis Now a 50-50 Proposition, Nationwide

IMG_3259Rent or buy, rent or buy? Good reasons always exist to do either. Renting offers flexibility, protection from getting in over your head financially and being foreclosed on, yet limited freedom within one’s space; buying offers a chance to build equity, get a dog, and paint the walls burgundy red.

As for the straight financials, however, there’s a ratio that can help you figure out what’s most advantageous. It’s called the “price-to-rent ratio,” calculated by taking the median sale price to buy a home in your area and dividing that by the average amount you’d pay per year to rent a similar abode. 

A ratio under 15 means that for what you’re paying in rent, you might just as well buy a home; a ratio over 20 means homes may be overpriced, and staying put as a renter might not be a bad idea.

Across the U.S., the current ratio is, at 14.8; perilously close to an even 15, as reported on in the article “Better to Buy or Rent,” by Patricia Mertz Esswein in the June, 2014 edition of Kiplingers (figures from real estate research firm Marcus & Millichap). 

The U.S. is, to state the obvious, a pretty big country. So what you really want to look into is the price-to-rent ratio in your own area. Trulia offers a nationwide map of the figures for major cities. And here’s Nolo’s Rent vs. Buy calculator, and additional discussion on whether to “Rent or Buy a House?“.