Renting is cheaper: Now they tell us
Center for Economic and Policy Research says most Americans can now save money by renting instead of owning
Updated: Remember when real estate people used to tell us that owning had become cheaper than renting?
Not anymore. The left-leaning Center for Economic and Policy Research, which counts economist Joseph Stiglitz among its backers, is agitating for "Right to Rent" legislation.
This would let homeowners who can't pay their inflated mortgages stay on past foreclosure as tenants, and force banks to be their landlords. Court-appointed appraisers would set the rent, based on average local rents. It's a way to push banks to negotiate easier loan terms, so they slow down on all the foreclosures, center co-director Dean Baker told me. It's longshot legislation that never made it out committee last year.
The interesting part is that the center has put out a report that shows how much money you're losing if you're making 30-year fixed-rate mortgage payments on a home worth a modest 75 percent of the median housing price in your area (think of that price as a proxy for "existing" as opposed to higher-priced "new" homes), as compared to the typical U.S. Department of Housing and Urban Development -calculated "fair-market rent" for apartments in the same markets.
"Bubble-inflated" markets in California and metro New York are the furthest out of whack, with monthly ownership costs roughly double what modest apartments charge. Boston, Portland and Baltimore are also egregious.
Metro Philadelphia is a somewhat better value for homeowners. Monthly ownership lists at less than $1,200, after taxes, vs. $1,000 for rentals, in the center's calculation. Of the 16 major markets, only blue-collar-disasters Detroit and Cleveland have a smaller rental-vs.-owner saving.
Read a little deeper, and you'll find there are depressed markets around the country where low-end home ownership is still cheaper than renting. Scranton, for example. Buffalo. Most of Texas.