by Calculated Risk on 5/10/2011 11:25:00 PM

From David Leonhardt at the NY Times: Rent or Buy, a Matter of Lifestyle

...Mortgage rates are near record lows and will probably rise in coming years. Home prices may not be done falling, but they probably don’t have much further to go in most places either. Rents, on the other hand, seem set to increase, thanks to low vacancy rates.
...
[Y]ou can make just as strong a case in many places for renting. For starters, neither mortgage rates nor rents are likely to rise rapidly. Even more important, house prices, relative to rents, remain higher than their long-term average, especially in much of California, the Pacific Northwest and the New York region. In these places, among others, renting is often cheaper than buying — still.

I’ve made a near-annual habit in this column of looking at the rent-versus-buy decision, and The Times has built an online calculator so that readers can make their own comparisons. The idea isn’t only to help potential buyers but also to figure out whether and where house prices are overvalued. ....

As this year’s spring buying season nears its peak, the relative merits of renting and buying are closer than they have been since the housing bubble began inflating almost a decade ago.

The rent vs. buy decision is getting closer, but nationally the price-to-rent index is still a little high. Earlier today I updated the price-to-rent index using the CoreLogic House price index. The index has fallen to 1999 levels and is now only about 10% above the lows of the '90s. Of course there are also local supply-and-demand issues (many areas are seeing a high level of distressed properties coming on the market again), but with house prices still falling - and rents rising - this measure is getting close to normal levels.

Earlier:
• NFIB: Small Business Optimism Index declined in April
• CoreLogic: House Prices declined 1.5% in March, Prices now 4.6% below 2009 Lows
• Real CoreLogic House Price Index, and Price-to-Rent Ratio, back to 1999 Levels