Rent or buy? The math is changing

Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.

Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.

“It just seems like the housing market came back so strongly, so fast, that maybe there’s a little bit of a bubble there,” said Mr. Gasparino, 37, an executive with the San Diego Padres.

Their decision reflects a new reality in many of the nation’s largest metropolitan areas. 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.

The Times also created an online calculator that enables prospective buyers and renters to analyze their own decision. For example, for a typical person considering the purchase of a $500,000 house who expects to live there seven years, it might make more sense to rent if a similar place is available for $1,956 a month or less.

“A lot of these coastal markets look overvalued compared to rents,” said Mark Zandi, the chief economist at Moody’s Analytics. “In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”

For example, Venice, where the Gasparinos are selling their house, has benefited from an influx of tech industry, including from the opening of Google‘s Los Angeles office there in 2011. “You have engineers, visual effects artists, people making 2, 3, 400 thousand dollars a year coming in,” said Tami Pardee, principal of Pardee Properties real estate brokerage in Venice. “The problem I’m having is inventory. There isn’t enough of it.”

Article source: http://www.cnbc.com/id/101696741

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