Do real estate market conditions favor buying or renting? The Beracha, Hardin & Johnson Buy vs. Rent Index is designed to provide guidance to consumers struggling with that choice.
The index, conceived by faculty from Florida International and Florida Atlantic universities, compiles data from 23 major metropolitan housing markets and the overall U.S. real estate market, but the data is not current. There is approximately a two-month delay in the availability of data needed to determine the values Those values range between -1 and 1. If the value is 0 or above, conditions support renting. If the value is less than 0, buying is preferred. The further the value is from 0 in either direction, the stronger the suggestion that buying or renting is favored in a given market.
The values are reached through a comparison between a consumer who is buying a home and one who is renting a similar home. The factors in the comparisons include rent-to-price ratio, mortgage rates, the expected rate of inflation, real past stock market long-term returns, long-term rent growth and housing price appreciation, maintenance and property tax costs, and average homeowners’ duration between relocations. The objective of the index is to provide consumers with information on the health of housing markets. With this data, more informed decisions can be made.
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