More Affordable to Own than Rent?
Economists have all kinds of indices and formulas to determine whether it’s more affordable to own a home in a given city than to rent an apartment there. Moody’s Economy.com is a respected organization that recently published new calculations for the top metro markets in the U.S. and Crain’s Chicago Business laid out the results this week in their June 29th edition.
After spiking in the beginning of 2006, the cost of owning a home in Chicago has come back down. The change has made homeownership relatively cost-effective in comparison with renting in the Windy City. The data contrasts the average amount for one year’s rent* with the Case-Shiller Home Price Index for single-family homes to get an index number. Basically, the lower the number the better it is own.
According to the article, Moody’s rent/own index dropped 6 points in less than two years for Chicago, from 23 in 1Q 2006 to 17 in 4Q 2008 (which is also Chicago’s 20-year average). The U.S. metro-area average is 19.8, which means it’s cheaper to be a homeowner in Chicago than in many other major cities.
Not only is it getting more economical to own a home, but government incentives such as the $8,000 First-Time Home Buyers Tax Credit are making it more affordable to buy a home. With programs that offset upfront closing costs and contribute to down payments, buying a Chicago home in 2009 is really becoming the more inexpensive housing option.
* Source: Property Portfolio Research
Posted at 02:03PM Jun 30, 2009 by Spencer Mason in General Comments[0]
