Prices Are Not the Issue

Looking at rent-buy comparisons and inflation adjusted home prices shows that prices are not the problem facing the housing market.  The rent-buy ratio is close to the average of the last 25 years.  Although  renting is gaining market share from home ownership, recent increases in apartment construction suggest that rents increases won’t be strong enough to shift the ratio.  Inflation remains quite modest and inflation-adjusted prices are declining, as are all home prices.  On an inflation adjusted basis, home prices are back to levels seen in 2001.  Both these trends argue that prices are not a deterrent to home buyers.  What is the problem? With interest rates at the lowest level most people can remember, the missing elements appear to be mortgage availability and consumer confidence.  The Rent-Buy and real home price charts updated for the end of January release are below.

Renting vs. Owning

Buying Slighlty More Expensive

 

Prices Not a Problem

Inflation Adjusted Prices Back to 2001

The posts on this blog are opinions, not advice.
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