Thank you doctor, that's exactly what I needed. I don't know what I would have done without that hour long wait in the waiting room. I'm sure that as most people do I rummaged through all the magazines to find something of interest. Alas, a magazine made it's way into my hands. Of course the front cover said nothing of interest, so immediately I start fanning the pages. I was drawn to this magazine for a reason. What could it be.
Two-thirds of the way I found the article that had summoned me, Rent vs Owning. With todays market it is very likely that many people are in the position to move into a home of their home. With foreclosures and REO's abound, all one has to do is determine the house best suited for them. Thanks to the implosion in home prices, the ratio of rent to own has returned to the historical average of 17.4.
The average is figured by taking the cost to buy a house and divide it by what you would pay in rent for a year. Since 1986 the US average has been 16.5, which means the price of the house is the same as you would pay to rent it over 16.5 years. The averages began to climb in 2001 and by 2003 with the increase of home prices it reached 24.7 in 2005. At this point the average began to fall bringing us to todays average of 17.4.
To determine rent over owning, you want to find a house with a price so great that using a 15 year average ownership, you beat the average of what rent would run for that same period. Part of the consideration should be the tax deduction for interest. In many instances the tax deduction will bring a close ratio down to a more favorable ratio. To help you find your price-to-rent ratio you can find a rent -vs.-buy calculator on the Ginnie Mae web-site.
Again, thank you doctor. With an hour in the waiting room, I have found more information to share with my clients. I think that as a Realtor, we can never have too much information. So every chance you get, pick up a magazine. It just might have something useful for you and your clients.
