Thread by @bopinion

Most people make the mistake of evaluating the housing market in terms of whether it's a market for buyers or sellers.

But the better question is whether it's a buyer's market or a renter's market. This ratio can tell you trib.al/IXSejY6

The demand for housing overall is high, and both rents and housing prices are going up. It might be hard to think of it as a better time to rent.

But right now, the increase in housing prices is eclipsing the rents in many places trib.al/IXSejY6

In the U.S.:

🏡Price of single family home rose 24%
🏡Rents are up 5.4%

In big metro areas like San Francisco and New York, housing prices have increased, while rents dropped significantly trib.al/IXSejY6

You're in an overheated housing market and should rent if the ratio between the price of the house and the profit you could make renting it is over 20, according to economist @RobertJShiller trib.al/IXSejY6

Say the home or condo you want to buy is $700,000 and you can get a rental profit of $24,000 per year.

$700,000 divided by $24,000 gets you 29.

The 20 rule says: RENT trib.al/IXSejY6

More than one-third of 84 cities with populations over 250,000 have ratios above 20, meaning you'd do better to rent there than buy an overpriced house.

These U.S. cities include:

🌇Atlanta
🌇Austin
🌇Boston
🌇Denver
🌇Honolulu
🌇Miami
🌇Oakland trib.al/IXSejY6

It makes sense to rent if you're going to live somewhere for less than five years given the associated real estate costs with buying.

Renting may give you more job leverage because you could be perceived as more of a flight risk when negotiating a raise trib.al/IXSejY6

To those who say renting is throwing money away: Homeowners pay interest to a bank.

They are on the hook for maintenance costs and property taxes — money with no guaranteed return.

And there are opportunity costs to the funds used for a down payment trib.al/IXSejY6

Of course, buying a home is valued for a reason:

🏘Neighborhoods with owners are more stable
🏡People have a visceral need to own a house
💰Home equity is a chief source of wealth build up trib.al/IXSejY6

From an economics point of view, renting may make more sense than buying for a while.

The forces pushing up housing demand are overwhelming the forces pushing housing supply, and interest rates are likely to stay low trib.al/IXSejY6

For those in the luxury home market, renting may be even more attractive.

Higher income people accumulated wealth amid the pandemic. Many may be looking to buy bigger homes, resulting in even more competition and inflated home values at the top end trib.al/IXSejY6

Economists predict it'll take a few years for new construction to make the market more balanced.

Until then, consider renting to avoid overpaying in a seller's market trib.al/IXSejY6