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Still cheaper to buy

Posted by Scott Van Voorhis September 20, 2013 09:18 AM

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So says Trulia in its latest buy vs. rent report.

That said, the gap is narrowing, with buying now 35 percent cheaper in most places across the country, compared to 45 percent a year ago.

The gap is closing even faster in Boston and its immediate environs, with Boston buyers seeing their discount shrink to 29 percent from 41 percent a year ago.

OK, so why is buying a house still cheaper than renting, even as prices post double digit gains?

Well, it's those crazy, rock-bottom interest rates, stupid.

In fact, if mortgage interest rates were 8 percent - a fairly normal number in years past - renting, not buying, would be cheaper right now in the Boston area, Trulia notes.

But don't worry, that won't be happening anytime soon.

After edging up to 4.8 percent over the summer, interest rates are now on their way down again on the heels of Big Ben's bombshell announcement earlier this week. (In case you missed it, the Fed chairman ended months of speculation when he scrapped plans to scale back on the central bank's massive, $85-billion-a-month mortgage bond buying program.)

Interest rates began to fall immediately after Bernanke's stunner.

Basically, it is cheaper to buy rather than rent because the Fed is running the biggest home buyer subsidy program in history, dressed up as "quantitative easing."

It makes the old, $8,000 home buyer tax credit look like chicken feed.

Home sales and prices may be back, but this is anything but a normal real estate market.


This blog is not written or edited by Boston.com or the Boston Globe.
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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