S&P: Buying, renting costs draw closer

by ANDREW SCOGGIN

An index from Standard & Poor's shows a narrowing gap between the cost of buying a house and renting.

David Blitzer, chairman of the company's index committee, said the rent-buy price ratio from October "shows not extreme favoritism" either way, as it moves toward a long-run average near 90.

S&P calculates the index using the 10-city composite of the S&P/Case-Shiller home price index, as well as the consumer price index for rental of a primary residence.

The most-recent HPI showed home prices declined about 1.1% in the 10-city composite for October from a month earlier.

The rent-buy ratio has a 1987 benchmark reading of 100. Vertical movement on the index indicates a price difference, with upward movement showing an increase in rental prices, and vice versa.

Rental costs peaked in the late 1990s when the index approached 120, and buying costs topped out at a reading near 50 in the housing boom of the mid-2000s. The index has moved closer to average levels since the ensuing housing bust.

Some housing analysts look positively on rentals in projections, including Stuart Eisenberg at BDO USA, who sees residential rentals as one of the few bright spots in 2012.

In a separate measure, S&P said house prices fell in comparison to disposable income per person. The ratio fell to 90, well below the average value of 102 since 1987. "Houses are almost cheap" according to the measure, Blizter said.

URL to original article: http://www.housingwire.com/2011/12/30/sp-buying-renting-costs-draw-closer

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