Rent vs. buy: the perennial question gets a new answer
May 2011 11

Only you can decide if it makes more sense to rent or buy.

The way I see it, if you’re settled on living in Boston for awhile, then you might want to own. Better to be your own landlord than pay someone else. Plus, you never know when your landlord might raise the rent. With a condo, you know what your “rent” will be, every month – your mortgage loan payment. Of course, expenses such as condo fees and property taxes are always at risk of rising.

David Leonhardt of the New York Times does an annual analysis of whether it’s better to rent or buy. His analysis is of limited use, of course, since he doesn’t know your personal situation.

As this year’s spring buying season nears its peak, the relative merits of renting and buying are closer than they have been since the housing bubble began inflating almost a decade ago. So the best single piece of advice for most people is to make a decision based mainly on their stage of life, rather than on any complex financial calculations.

If you think you are ready to settle in one place for at least five years, if not more, buying often makes a lot of sense. That’s why I bought my first house, in the Washington area, a few years ago, despite thinking local prices remained high.

Which is, of course, what I suggest.

Mr Leonhardt (whose name I get annoyed at typing every time since it always looks wrong) does a financial calculation for each major US city to determine rent vs. buy affordability.

What he found for “Boston” (meaning, presumably, the Greater Boston metropolitan area) is that the numbers show that it is “cheaper” to rent than to buy.

According to him, it’s been better to rent than buy since at least 2003. Before that, it was better to buy.

The question you have to ask yourself is, do you think the cost of housing will ever go back to the levels it was back when it was considered “cheap” to buy?

My guess is, no. Restrictions on housing construction in most cities and towns in Eastern Massachusetts mean that there will be limited new supply. If our population stays stagnant for the next decade or beyond, you’re not going to find much to choose from.

But, again, in the end, it’s a personal decision. We’ve seen some very attractive apartment complexes go up in downtown Boston over the past five years. If you can afford the rents, they are a viable option.

More: Rent or Buy, a Matter of Lifestyle, The New York Times

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