Rent vs. Own
Rent vs. Own ratio expected to
spur real estate sales in 2011
Americans are beinning to feel more optimistic about the economy with national unemployment numbers now below 9%. Renewed confidence in the economy, lower home prices, higher rents and low mortgage rates all point toward an upswing in the real estate market in the second half of 2011.
Mark Zandi, Chief Economist at Moody’s Analytics, suggests “By mid 2011, and certainly by end of 2011, buying will be superior to renting in most parts of the country.” 39 of the 54 U.S. metropolitan areas fell into the category ‘better to rent’ for over a year, with real estate prices at their current levels, this is expected to change in 2011.
Moody’s Analytics latest price-rent ratio calculates the Los Angeles area at 14.99, which is great news for our area. As a general rule, one should often buy when the ratio is below 15 and rent when the ratio is above 20. When a ratio falls between 15 and 20, lean toward renting.
The current housing market is still heavy with inventory, which has kept prices low, while rents have been steadily increasing and are expected to continue rising modestly throughout 2011. It is quickly becoming more affordable to own a home versus renting with the affordable home prices and low interest rates.
