renting vs owning

"The Times analysis made a number of assumptions favorable to buyers, like giving them full credit for the deductions for mortgage interest and property taxes, noted Mark Zandi, chief economist of Economy .com, a research company. Still, the monthly costs of buying were more expensive than those for renting in any market where the price of a typical house was more than 20 times larger than the annual rent to live in it.

In the Bay Area, this "rent ratio" exceeds 33. In New York, Boston, Los Angeles and Miami, it is just above 25. A typical four-bedroom house in Brookline, Mass., for example, costs about $1.2 million to buy and $4,500 a month to rent, according to Chobee Hoy Associates Real Estate, a brokerage there.

At 20, Washington is right near the cutoff. But renters who live in apartment buildings, like Mr. Baker, often get an extra benefit: some portion of their utilities bill is typically covered by the building's owner.

Mr. Owen, the loan officer in Miami, and his girlfriend, Polly Thompson, pay $1,700 a month for a top-floor apartment that has views of both the city's skyline and the Atlantic Ocean. After talking to brokers, he said he thought that the apartment would sell for close to $650,000, giving it a rent ratio of more than 30.

"It's obvious," he said, "that renting is such a better deal."

But to many people, the psychological benefits of buying are almost impossible to overcome. Owning makes them feel that they have achieved the American dream, or it gives them the secure sense that, if nothing else, they have a tangible asset where they can sleep at night.

Those are nice feelings, indeed. The question is how much they are worth to you."

from NYTimes, 25 Sept 2005