Word: price
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...figure out which is better now, start with the fact that in the long run, the costs of owning and renting stay in fairly steady proportion. Economists call this the price-to-rent ratio - take the average cost of buying a house and divide it by what you'd pay in rent in a year. The analysis shop Economy.com calculates that since 1986, the price-to-rent ratio for U.S. cities has averaged 16.5. In other words, the price of a house is the same as what you'd pay to rent it over 16.5 years...
...since the end of 2005, the price-to-rent ratio has been falling, thanks to the home-price implosion. Across major U.S. cities, the ratio is back to 17.4, practically its historical average. (If you wrap in rural areas, the figure is smaller and the trend less pronounced but still there.) "A year ago, it was a better deal to rent," says Andres Carbacho-Burgos, an economist at Economy.com "Now you have a significant number of areas, especially those hit the hardest by the correction, where, when you compare prices to rents, you'd be led to believe...
...significant number - but not everywhere. At TIME's request, Economy.com ran the numbers for 54 metro areas and compared their current price-to-rent ratios to what their ratios have been over the past 15 years. The result: in 21 cities, renting still looks to be the better bargain. Among the renter-friendly outposts are Baltimore; Raleigh and Charlotte, N.C.; Salt Lake City; San Antonio; Trenton, N.J.; Philadelphia; Honolulu; Seattle; and Portland...
...spectrum: the cities where houses for sale look inexpensive compared with rentals. The top 10 metro areas on that list are Cleveland, Phoenix, Las Vegas, Cincinnati and, in California, Oakland, Riverside, Sacramento, San Francisco, Los Angeles and San Jose. An important caveat: those cities' 15-year price-to-rent ratios include the bubble years. Does Las Vegas appear cheap? Sure. The current ratio there is 14.6, significantly below where it's been over the past 15 years (19.3). But that average has been influenced by the go-go years. Exclude them - by looking at just the 1990s...
...tangled in the numbers. "I wouldn't worry too much about a small amount above or below," says Dean Baker, co-director of the Center for Economic and Policy Research, who has done his own analysis of price-to-rent ratios. "It's when you see large divergences that it matters." After all, there are other considerations that go into the decision to buy a house. When Choe bought last fall, he figured the air was still coming out of real estate, but his older son was about to start kindergarten, and he wanted to settle into the right school...