Relative to Renting, Cost of Owning Rises
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The cost of owning a house rose somewhat from 2004 relative to renting, but not so much as to make houses overvalued in most cities, according to a study the National Bureau of Economic Research released yesterday. In the 1980s, it found, houses looked most overvalued in many of the same cities that subsequently experienced the largest house price declines. The study is more accurate than the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio, the bureau said, because such metrics do not take into account the pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets.
