Home prices nationally are down to levels of about 10 years ago and a comparison to movements in rents suggest that prices are moving back to where buying is favored over renting. The chart show the price-to-rent ratio going back to 1987. The horizontal line represents the average ratio over the entire time period; the ratio is scaled to average 100. The background is that while prices are back to the levels of 2002, the decline hasn’t erased all of the gains since prices began climbing rapidly in the 1998-2000 period. The price-to-rent ratio is not the whole story of whether buying or renting makes more sense. It simply compares movements in prices in the S&P/Case-Shiller 10 City Index to the rental cost of primary residences in the US Consumer Price Index. There are other expenses and tax impacts that affect both renting and buying.
A bigger factor in the current market is the availability of mortgages. While currently very low interest rates combine with falling home prices to make buying a house easier to afford than a few years ago, buyers still need to qualify for a mortgage. However, data from the Federal Reserve’s Senior Loan Officer Survey for the first quarter show that few banks have eased their qualification guidelines in the last few years.