Cheaper to Rent in Many Places

Time reports:

So while buying a home is more affordable that it has been in decades, in a lot of large American cities, despite the housing price drop, renting is still more affordable. Moody's Analytics puts together something they call the rental ratio. Here's the list (via the NYT's Economix blog). The rental ratio is computed by dividing the average price of a house by the annual cost of renting. When the figure falls below 17, the monthly cost of a mortgage, taxes and maintenance is less expensive than that of signing a lease. The striking thing about this data is how many cities it are still more affordable to rent. For example, despite the housing bust, it's still 65% more expensive to own than it is to have a landlord in San Francisco. In Seattle, Austin, Nashville and Raleigh, N.C., the purchase premium remains above 20%. Yes, it is now cheaper to buy then it is the rent in Philadelphia, but that was always the case. In general, the cities that have always been cheaper to buy have become even more so. Few cities have crossed the boundary, and in the places that have, like Miami and Las Vegas, the housing markets are so depressed that it's hard to believe, despite the affordability, that values are going to come back soon. So people put off buying.

Renting: an implied put option.