BluefoxToday blog : Homeownership again making financial sense over renting

Homeownership again making financial sense over renting

The recent real estate boom created quite a few imbalances in several marketplaces. One of them was the owning vs. renting question. When property values kept soaring to new heights, many would-be buyers simply couldn't qualify for a mortgage any more or just didn't want to pay for it even if they had the means. Renting had become so much less damaging to the budget that people chose to do that instead.

The red-hot housing market reached its peak around 2006 when after-tax home loan payments could go as high as 66% more than what rents were then, as was reported by Green Street Advisors, a real estate consultant in California. For many it was hard to justify dealing with such a large gap, so they became renters. A totally understandable decision.

But, as it so happened, the real estate market tanked badly and threw prices into a free-fall. That has steadily brought down mortgage payments and at the same time gradually narrowed the wide discrepancy with rents. Green Street Advisors say that by the end of 2008 in the 50 largest metropolitan areas the gap had closed to about 24%, on average. In Las Vegas and Los Angeles, for instance, where prices have been butchered, the ratio actually is under an 18-year average.

For a while it looked like high home values would shrink homeownership across large sections of the country, but in a stunning reversal it's again becoming achievable and in fact making financial sense to many consumers. In select areas, Southern Nevada could be one of them, mortgage payments might now actually be less than rents for comparable space.  Market forces, in essence, are organically creating demand and that's what it now sorely needs



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 14 commentsEsko Kiuru • February 26 2009 07:13PM


Esko, very interesting. We did not see near the slide here so the renter to home owner has not been pronounced.

Posted by Tim and Pam Cash, Real Estate Professionals - Clarksville TN (Crye-Leike (Sango)) over 11 years ago

Rents here are only down a little, and prices are way down - if you do the math, yes renters should be thinking of buying!

BTW - how ya doin?  Our mutual clients will be in town this weekend.

Posted by Virginia Hepp - Mesquite NV REALTOR, Mesquite NV Homes and Neighborhoods - Search MLS (Desert Gold Realty - Mesquite NV Homes For Sale) over 11 years ago

Esko, thank you for the insight.  I am in full agreement with you.  In fact, in Brevard County Florida where our office is located, it is actually less expensive to own than it is to rent.  The PITI is actually lower than going rental rates.  It really does make sense.

Posted by Christopher McClatchey (THM Investments, LLC) over 11 years ago

Esko, don't you LOVE reporting good news?  This would definitely qualify as good news.

Posted by Maggie Dokic | Miami, FL | 888.883.8509 X101, GREEN, CDPE, SFR, Pinecrest | Palmetto Bay | (eXp Realty LLC) over 11 years ago

I agree with Maggie what great news.  We are always looking for a sign that we have weathered the storm and it sounds like you may have the start of a rainbow.  Good Luck

Posted by Vanessa V. Simmons, Realtor (Real Living HER) over 11 years ago

Esko we are also seeing a closing of the gap between rents and mortgages here in Connecticut.  This is a great opportunity for people to think about buying NOW.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 11 years ago

Tim & Pam,

It again seems to make financial sense to buy, in many areas at least.

Posted by Esko Kiuru over 11 years ago


Excellent buyer's market in Southern Nevada now. Everything's good, hopefully we'll hear the good news soon.

Posted by Esko Kiuru over 11 years ago


It appears that in the hard-hit states like Florida, Nevada, California and Arizona this is especially true.

Posted by Esko Kiuru over 11 years ago


I fully agree with you on that.

Posted by Esko Kiuru over 11 years ago


This definitely ought to help the housing market recover.

Posted by Esko Kiuru over 11 years ago


Nice to hear that it's happening in other states as well, not only in the four famous ones.

Posted by Esko Kiuru over 11 years ago

Esko - If the banks start lending to the masses again, I think this could be the greatest opportunity for the first time home buyer. (Come on banks!)


Posted by Todd Clark, Principle Broker Oregon (eXp Realty LLC) over 11 years ago


That's what we need, lenders easing up on mortgage requirements and this market would really start  moving along.

Posted by Esko Kiuru over 11 years ago