Things Are Getting Better: Rent vs. Buying

From Business Insider.com.

"There was once a time when buying a house was considered a guaranteed winner of an investment.

But the inflating and subsequent burst of the housing bubble has left many skeptical of the long-term value of owning a home.

Further, many households are less willing to take on such a large fixed liability.

As a result, rentals have been hot.

And while home prices and sales have rebounded recently, it continues to be much cheaper — on average — to make mortgage payments than rental payments in the U.S.

"Nationally, the share of income that households must devote to rent has increased steadily and consistently since 2000, as the increase in rent has dramatically outpaced the growth in income over the same period," Zillow's Krishna Rao said.

"Over the period from 2000 to 2014, median household income has increased by 25.4 percent, while rents have increased over 52.8 percent, more than twice as much. On the heels of our recent analysis showing the erosion of affordability of homes for purchase, this represents even more bad news for those looking for housing," Rao said.

Check out this chart {above} from Zillow for some historical context."

My comment:  One of the greatest economic multipliers is housing.  The reason for that is that the purchase of a new house also usually brings the need for all sorts of other products.  Think for example furniture and appliances.  Housing construction remains below population growth and has been that way since the start of the Great Recession.  Slowly we've seen a steady build up in this area and it can only be helped by the statistics on affordability shown in the article above.  I know that in the suburb where I live there are more young families moving in than I remember probably in the past ten years.  Lower prices, historically low interest rates are a potent mix that is an important tailwind to the economy.  Housing starts  and construction have slowed over the past few months.  I'm blaming the winter on that.  I expect we'll see a pick up as warmer weather moves its way north.  I do know that one of the common denominators on my most recent trip was the amount of new construction I witnessed every place I went.

Link:  Business Insider.com:  Rent vs. Mortgage Affordability.