Rent vs. Buy

CATHERINE RAMPELL

Dollars to doughnuts.

For years my colleague David Leonhardt has been helping people calculate whether it makes more sense to rent or buy a home, based on the relative costs of each decision. This week, the economists at Capital Economics noticed an interesting phenomenon related to this tradeoff: For the first time in three decades, the median monthly mortgage payment is about the same as the median rental payment:

Dollars to doughnuts.

Of course, this chart is a little bit misleading because it excludes many of the upfront expenses of buying a home, such as a down payment and closing costs. Perhaps more important, not everyone has the option to buy.

Credit conditions are still significantly tighter than they were a few years ago, despite the Federal Reserve’s efforts to loosen credit markets. Many lenders now require a credit score of 700 as opposed to 650, the previous standard. Capital Economics estimates that that requirement alone has shut 13 million households out of the mortgage market.