Why rent matters [View All]

[ckramer]

If home prices in your area are riding high and you're wondering whether it's because of dangerous speculation or a reasonable increase in demand, turn to the rental market.

In most markets, rentals prices have not risen anywhere near as fast as home prices, and in many, markets rents have fallen or remained flat.

Nationally, owning costs 7 percent more each month than renting, according to Torto Wheaton Research. The gap isn't huge but it is the widest it's been in more than a decade.

In a balanced market, say economists, the cost of renting should closely track the cost of owning. When the cost of owning is dramatically higher than the cost of renting similar property, you can guess that buyers are speculating on higher home prices.

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