Two factors are at play, according to researchers who recently crunched the numbers, Ken Johnson of Florida International University and Eli Beracha of East Carolina University for a paper to be published in Real Estate Economics.
First, rents, though mostly stagnant the past few years, are expected to head higher as more people bitten by the housing bust turn to renting. Rents could rise 7% in each of the next two years, according to Peggy Alford, president of Rent.com.
Second, home prices have finally dropped enough to create a buying opportunity. Nationally, prices are down 32% from their peak, set in 2006.
The net result is that home price gains would need to average only 3.25% annually to beat renting, according to Beracha and Johnson. To make the math work, you have to stay in the home for at least eight years. (Buy or rent? 10 cities rated)
Beracha and Johnson compared the cost of owning with the cost of renting.
Renting has usually come out ahead, they say. Buying typically leads to higher monthly and annual bills once all costs are factored in — mortgage payments, property taxes, maintenance and transactional costs.
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Read: “Buy vs. rent: These days, buying wins,“ an article by CNN Money.