| 17 February 2010
Fortune Magazine recently reported on a series of Deutsche Bank studies looking at the relationship between the cost of rental housing and the cost of homeownership in America. Deutsche Bank found evidence that rents play a significant role in the price of homes. The research shows that, historically, the cost of renting is slightly less than the cost of owning.
During the housing boom the cost of owning rose well above that historical correlation. From 1999 to 2007, rents increased an average of 32% while the price of ownership rose 105% nationally. Recently in many markets the correlation between renting and owning has realigned with past averages as home values have declined. But as is always the case with real estate, there are many local markets that tell a different story. Some areas have seen home prices fall below the cost of renting.
In other areas, home prices have not devalued enough to bring the renting/owning costs back into balance. Baltimore is one of those markets. Deutsche Bank found that the cost of owning a home in Baltimore is still 24%-32% above its benchmark relationship with renting. This means that housing prices in Baltimore likely still have room to fall and that renting is still preferable to owning.
To access the Fortune Magazine article, click HERE
