•Press Release Inequality Workers
August 3, 2005
For Immediate Release: August 3, 2005
Contact: Lynn Erskine, 202-293-5380 x 115
An online calculator that enables users to compare the cost of owning a home vs. renting was released today by the Center for Economic and Policy Research (CEPR). The Housing Cost Calculator takes into account the unprecedented rise in house prices since 1997, as well as current house and rental costs for 378 metropolitan areas.
The calculator provides potential homeowners with an easy way to calculate how much a new home will cost them over time. It compares the amount of additional cash available to a renter with the amount available to a homebuyer who sells a home at a specified time in the future. Users simply punch in data such as house price, region, down payment, mortgage rate, tax bracket, and year they expect to resell the house.
In the last eight years, there has been a record increase in house prices, with prices rising by more than 45 percent after adjusting for inflation. By contrast, rents have risen only slightly more than the rate of inflation over this period. This run-up in home prices has led to record construction levels, which in turn have led to record rental vacancy rates, depressing rents. The over-supply of housing will continue until prices eventually adjust. People who buy a home at a bubble-inflated price — and then see the price plummet in the crash — may lose much or all of their savings. CEPR's calculator will allow potential homebuyers to evaluate the cost of homeownership, assuming that house prices eventually return to their long-term trend path.
To access the Housing Cost Calculator, click here.
