Analysts may huff and they puff, but is the market blowing another housing bubble?
Earlier this month Trulia, the online real estate marketplace, released a report detailing its research into the wisdom of buying versus renting. Which option should you choose? As it turns out, buying makes more sense than renting in all 100 of the markets studied, but the devil is in the details.
Using a 30-year, fixed-rate mortgage with a 20 percent down payment as the baseline, Trulia found that on average buying is 38 percent cheaper than renting. However, the advantage dissipates rather dramatically as the size of the down payment and the number of years buyers plan to remain in the dwelling grow smaller. An interactive map compares different scenarios.
Does this mean you should start putting open houses on your calendar? Not necessarily. As this Reuters graphic shows, August prices for the Standard & Poor’s/Case-Shiller 20-city index grew at a 5.6 percent year-over-year average. All 20 markets showed price increases, although the rate of increase slowed for the eighth straight month, which Jed Kolko, Trulia’s chief economist, sees as evidence that we aren’t on the verge of a bubble. As price increases decelerate, speculation shrinks as well.
Taken together, the evidence suggests that buying is advantageous, but not so urgent that one needs to pounce now in order to avoid being left out in the cold.