“Renting is the cheaper way to go!” Is this widely believed “fact” still true? According to the latest research, renters spend 5% more on housing than home owners. To find out why it’s more logical to just buy a home, rather than rent, and how the times have changed, visit Renters Outspend Owners on Housing.
Good move Fannie Mae: “In a move that provides relief to thousands of renters who face eviction” READ
ACE Development Corporation is celebrating National Homeownership Month with an open house (www.acedevelopment.org for more info. ) and reception . ACE programs help renters save towards the purchase of affordable homes and guard against foreclosure. Open house seminars include such topics as reverse mortgages, down-payment assistance, how to avoid foreclosure, and housing cooperatives. Great door-prizes. Free to the public. John Birdine Neighborhood Center, 215 Lakewood Way. Call or visit
Rents Must Rise to get in Sync With Home Prices
The benchmark ratio of rents to home prices is slowly returning to its long-run average but it could be at the expense of home prices, according to a study by Federal Reserve Board economists and a University of Wisconsin professor suggests.
The ratio, which compares imputed rents of home owners to the value of owner-occupied housing, is a valuation of residential housing that is equivalent to the earnings-price ratio used to value stocks.
The rent-price ratio ranged between 5 percent and 5.5 percent between 1960 and 1995 but fell rapidly after that, hitting a historic low of 3.5 percent by the end of 2006 as home prices grew rapidly.
In the first half of 2007 the ratio started to climb again, and incoming data suggests that the rent-price ratio has continued to increase, the authors note.
The study, however, suggests housing prices would have to fall 15 percent over five years, assuming rents rose 4 percent a year, to be back in sync.
Economist Morris Davis of University of Wisconsin-Madison says that “rapid growth in rents” is crucial to justify the current level of home prices. However, he adds, an increase in unsold properties on the rental market could hinder rent increases.
Source: Reuters News and The Wall Street Journal, Greg Ip (01/03/08)