Even though home prices in the U.S. have risen significantly in the last year, the gap between buying and renting has narrowed only slightly. Real estate blog Trulia explains:
“One year ago, buying was 46% cheaper than renting. Today’s it’s 44% cheaper to buy versus rent. In fact, home ownership is cheaper than renting in all of America’s 100 largest metros. That’s because falling mortgage rates have kept buying almost as affordable, relative to renting, as it was last year.
We just saw a story on CNBC here in the office questioning the sustainability of present housing activity. Why? Because as posted back in January (see Accelerated Purchases), large institutional investors account for a fair chunk of the action. They buy the homes and then rent them out. Based on the fact that it’s still 44% cheaper to buy than rent, might there be cracks already developing in that strategy?