Renting vs. Buying

David Leonhardt at the New York Times reports on a recent study comparing the costs of renting vs. buying in 54 US metropolitan markets.

A simple way to do the comparison is to look at something called the rent ratio: the purchase price of a house divided by the annual cost of renting a similar one. The number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.

With the decline in housing prices, renting looks less attractive in many markets.