commissioner.org
| Source | Dean Baker |
| Date | 08/03/03/07:33 |
| ...The issue is the annual cost of owning compared to renting a comparable unit. As a result of the unprecedented run-up in house sale prices (rents have increased only slightly more than inflation), the ratio of house prices to rents on comparable units (e.g. different houses in the same development) is about 20 to 1. If a homeowner gets a 6 percent mortgage, and has to pay 1 percent of the value in property taxes and another percent in annual maintenance costs, then the cost of owning is 8 percent of the sales prices. This compares to being able to rent at 5 percent of the sales prices. In this scenario, ownership costs are 60 percent more than the cost of renting. (This is likely a conservative estimate, since subprime mortgage holders are not likely to get a 6 percent mortgage.)
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