The time is not to buy not rent.
It is an age-old debate.
Nationally, buying is 38% cheaper than renting.
That is a national average.
Big difference is locally, but why does buying still look so cheaper than renting?
Because mortgage rents at 4.5% are still extremely low.
The mortgage deduction, if that really part of the calculus?
It ships about 10%. so if you are not itemizing your deductions, and we are assuming in your model that you are, if you're not, maybe 25% cheaper to buy than to rent a muslim afebrile difference, but it does not sit in favor -- by van to rents, so it makes a little bit of a difference.
The whole idea of renting versus buying committee live detroit, michigan, it is 66% cheaper to buy than to rent.
The equation changes in austin, texas, 30% cheaper to buy than to rent.
When you go to the other extreme, and honolulu, is only 5% cheaper to buy than to rent.
What accounts for these differences?
A lot are long-term difference is, how much it costs to buy, how easy it is to build, and also what people expect in terms of future price appreciation.
Rice is a much more volatile than rents.
Prices have bubbled.
People have bet on prices expecting them to write or not.
Rent is going to be much more stable.
So in the housing market, going down the price aside more than the rent.
And you have two bedroom, two bathrooms at central park -- and what a privilege, tom.
Hey, but here is the thing, you can look at it like this just by the numbers, side-by-side, but then there is this other thing about having to go to a bank it actually get approved, so how hard or easy is it now for people who actually are trying to do the side-by-side to go to the bank and actually get the money to get the bank to say yes, we will make you the loan?
A lot of people still cannot qualify for a mortgage, keeping rates up 4.5%, that is out of reach for a lot of people.
We are still coming out of the recession, you have got to have a safer down payment, and chemistry, and that you have got to -- my we even see home prices have to widen relative to the rents farther in order to make up for that just because the fact that as he pointed out there are still so many people that can't? it is not the lack of affordability that is holding people back, it is jobs and income.
The groups for which is most important are young adults -- and new households.
For you, adam, just cut out one of the fireplaces.
Then i can afford it?
Quite the hot tub you can keep because you are adam johnson.
He is a senior fellow at milken, joel kurtzman with us.
We are having a discussion in the united states, the optimism of america, this discussion is really not happening in europe or asia, is it?
No, europe and asia are not really looking at the future the way we are.
I mean, conditions here, primarily because of this tremendous energy revolution that we have had over the last few years have changed the equation in the u.s. but i am saying it is behavior and emotion.
Scarlet and her husband want to get the marginal 5000 square feet.
10,000! even so, right now, americans are not as optimistic as they are traditionally.
In that is where i say that people are fearful.
They should not be fearful because all of the trends are working in the right direction.
With that said, what are you seeing, jed?
When we ask people is homeownership part of the american dream, that is climbing back up.
The vast majority of young people are renting and want to buy someday.
The danger is that that optimism translates into unreasonable expectations about what will happen to home prices.
If people start buying homes because they think prices will keep rising at 11% a year, that is a bad thing, that is a bubble.
But we are not to that point yet.
Is homeownership part of the american dream in places like san francisco where you are based?
We see the income inequality debate take on a lot of tension there.
With the city geography and its composition changing so much, how do you see that affecting the property market?
We often focus on the demand side, what are incomes like, can they get a mortgage, but there is a huge amount.
There is essentially no market in the u.s., no city in the u.s., where it is easy to build that is expensive.
Every expense of market in the u.s. is very hard to build new housing.
Especially in san francisco.
Full disclosure, jed and i grew up from each other near rochester, new york.
It is 3 above zero and processors tomorrow.
It is a completely different economy than the cities we are talking about.
How are the economy's doing that never saw the boom and it is dirt cheap real estate?
There are two places that never really had a housing bust.
Places like where we grew up in rochester, new york that never saw the price runoff.
It is still very cheap to buy than to rent, but there are economic challenges.
The other types of places are the ones that are blooming partly because of energy, so texas and oklahoma are the other parts of the country that also had a very mild housing bust, but they are seeing strong progress, that is the difference between texas and oklahoma and upstate new york.
A great map, scarlet.
Colby smith came up with it.
It is gorgeous.
By the way, tom, it makes you realize that real estate is truly local.
You have got to look at separate market, right?
I am thinking of six buildings local limits on manhattan.
Price we are in our own bubble.
Seeking of local, craft beers are all about local,
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