Cheaper to rent than to own*

rent1.jpgThe housing bust has left potential buyers wondering - with good reason - whether purchasing a home is such a good idea. That probably explains a small drop in the homeownership rate. Thing is, renting can be a much better deal: No worries about a mortgage or about the plumbing going kablooey. No taxes either. And if you want out, you don't have to worry about commissions or other fees. A Moody's report finds that renting is a better bet than buying in 71 percent of metro areas, up from 54 percent a decade ago. All told, three million more households rent today than during the height of the housing bubble. Writing in the WSJ, Yahoo economics editor Daniel Gross sees this as a positive development:

While downgrading the place of ownership in the American psyche may sound like a traumatic task, the cold, unsentimental fact about the American dream is that Americans never really owned it in the first place. For the past three decades, especially, consumers haven't so much bought their quality of life as they've borrowed it from banks and credit card companies. And since the Great Recession, Americans have been busy rebuilding their balance sheets and avoiding new financial encumbrances. When American consumers can't--or won't--borrow to purchase the goods and services they've come to consider part of their standard of living, how does the economy get back on its feet? The answer lies in consumers following the example of corporations--that is, becoming more efficient. The reaction to extended leverage and foolish borrowing isn't to stop consuming and buying; it is to consume and buy more intelligently.

Rents are going up, of course, but so are multi-family properties. At some point, we'll see a better balance of supply and demand.

*Matthew Yglesias questions whether the flurry of multi-family construction is all that it's cracked up to be:

With the population growing, rents high and rising, household credit impaired, and building trades unemployment high, the reasonable thing for the economy to be doing would be to build lots of rental housing. And indeed there's a certain perception out there of a multifamily construction boom. But compared to where we were in the 1980s, it's actually incredibly tepid. What's more, rather than rents falling in response to all this construction they actually continue to rise. The risk is that if we can't build enough new houses quicklly enough, the Fed is going to call in the inflation police and bring rent hikes to a halt by increasing unemployment.

More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent Real estate stories:
Socal housing market going nowhere fast
Stability returns to housing market
Home flipping by and for the favored few
LA to get denser and denser and denser
Home sales cooling off a bit

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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