Better to Rent Than Buy in Brooklyn Now?


    The rent vs. buy equation has changed again in places like Brooklyn, where home prices are now so high it might make more sense to rent, according to a story in The New York Times. In fact, the market turnaround may show we’re in a bubble that is going to crash soon, the story said:

    An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.

    …But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.

    It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.

    This viewpoint comes as a surprise to us: Even as housing prices in Brooklyn have risen steeply in the last six months or so, so have rents — or so it seems to us.

    But an analyst at Moody’s sees it differently: “A lot of these coastal markets look overvalued compared to rents. In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”

    If you are considering a house that costs $500,000, it might make more sense to rent if a similar place is available for $1,956 a month or less, said the Times. Do you agree?

    Rent or Buy? The Math Is Changing in the Northeast and Coastal California [NY Times]

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