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Renting vs. Buying - 5/19/14

As long as anyone can remember, buying a home has formed an important part of the American dream.  But in recent years, more people seem to have concluded that renting is preferable.  Reinforcing this view has been a recent run-up in home prices, which has made renting to appear to be even more of a bargain. 

According to the National Association of Realtors, the median sales price of existing single family homes expanded 11.4 percent in 2013 from the prior year, the largest annual increase since 2005.  Prices in many markets expanded even faster than that, including in Lost Angeles, Portland, Oregon and Baltimore, Maryland. 

As reported in the Wall Street Journal, Deutsche Bank calculates the cost of owning versus renting a residence in 54 markets across the U.S. based on average local rents and median home sales prices.  Renting has been less expensive than buying on average across all the communities Deutsche Bank monitors since at least the early 1990s.  That changed during the financial crisis, however, as home prices plummeted and mortgage rates fell.  Mortgage rates are not as low now as they were then, and home prices have bounced back, which has again increased the relative appeal of renting.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.