I’ve always seen rent to buy ratios as the end all, be all. For rentals and primary homes, it’ a simple formula and one that can predict the future better than anything else. We can talk doomsday all day long, but the masses tend to rent when it’s cheaper and they tend to buy when it’s within 10 or 15% of rent after tax deductions. Once it starts getting above that, renting becomes more attractive and more popular, hurting appreciation (but the last boom defied that theory, temporarily). Since the end of 2008 we entered something I’ve never seen, where renting costs more than owning, I’m surprised it’s lasted and I doubt it will continue. After looking at that map, it’s obvious that all areas are not experiencing the same percentages and I believe if we look back in 5 years, the greatest appreciation will be the areas with the best ratios right now. Many areas exceed 40% cheaper to buy than to rent, that will not last forever, mark my words.[/quote]
I agree re rent vs buy ratios as a buy signal. No need for $600/plate macro presentations ala Bruce Norris. Only thing I would add is an adjustment for historical rent vs buy as places like La Jolla “proper” (not Santee!) never approach the rent vs buy ratios of say a San Marcos or Riverside
and such.
