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An 'evangelist for renting' takes the plunge

May 27, 2008 |  9:50 pm

News item: New York Times "Economic Scene" columnist David Leonhardt, a self-described "evangelist for renting," writes that he and his wife have been lured by falling prices into taking the plunge into homeownership in Washington, D.C. "This month, we found a house that we really liked, and we made an offer. It was accepted," he writes.

His column is worth reading. He lays out a simple formula for evaluating whether a house is best rented or bought: "... divide the sale price by the annual rent.  You can call the result the rent ratio. ... Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14. In the last few years, though, it broke through that historical range and hit almost 19 by the time the housing market peaked ... a rent ratio above 20 is a good indication of a bubble."

FWIW, I just ran this little formula on the house we're renting on the Westside. Our rent ratio (based on a Zillow Zestimate I believe to be pretty accurate) is 20.7. Just saying.

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