The difficulty in analyzing home ownership versus renting is that you are comparing apples to oranges. The median rental unit is different than the median house. The square footage per person and occupancy count is similar – but in the rentals there are a higher percentage of multi-family structures. Rental homes are skewed towards zero maintenance types with less land.
But in the years where enough data was available to ensure a relatively exact correlation – it did not appear to distort the median rental rate by more than 5% up or down. The data used in this analysis is from U.S. Census / HUD – and not from the National Association of Realtors (NAR).
Another issue in analyzing this subject is regional differences. There are areas in America relatively unaffected by the housing crisis. And in other areas, the prices have fallen by half. Even within states, there are significant differentials of data. Also, there are areas which have shortages or surpluses of rental properties which would diminish the applicability of this analysis. So in analyzing “median” data, it may not match any area in America exactly.
Looking at these graphs, there does not seem to be any financial reason to own a home – except for appreciation. This is why we buy a home. We purchase it and hold it for a period of time – then we sell it. We psychologically believe we have made a lot of money, but the reality is that the majority just buy another house – so there has been no realized gain.
The graph below shows the appreciation of home values on a monthly basis between 1973 and 2008. Home owners in the past have made significant gains to their net worth. read more
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