Cost Gap of Being a Tenant Vs. Owning Hits Widest Level In More Than a Decade The longstanding rule of thumb has been that buyers need to stay put for five to seven years to justify the closing costs and other outlays involved. But in the hottest markets, says Raphael Bostic, director of the real-estate development program at the University of Southern California, that length of time has shrunk, in part because home prices have moved up so rapidly. "I see a lot of people who are choosing not to stay very long and are still buying," says Lauren Goloboy, a sales associate with Coldwell Banker in Brookline, Mass., a suburb of Boston. Ms. Goloboy says she is frequently asked how long you have to own a home to receive favorable tax treatment on capital gains. (The answer: more than one year to qualify for the 15% rate.) Mara Schonberg, an attending physician, bought a two-bedroom condo in the Boston area last summer for about $295,000, even though she may move in three to five years. "I would probably spend less per month on a rental," she says. But, she adds, "I'd rather take a risk on the real-estate market. I'm tired of having landlords." The rental bargains aren't limited to the nation's hottest housing markets. Steve Hendry of Re/Max Associates of Dallas says he recently found a tenant for a home in Plano that had been vacant for four months by agreeing to a lease that runs for six months instead of a year. "I've reduced the price on probably all of the listings I have at least once to create more activity," adds Mr. Hendry, who recently dropped the price on a home in Allen to $1,200 a month from $1,295. "For the near term, it's pretty clear that rents are a bargain in many places relative to the cost of buying the same unit," says Eric Belsky, executive director of Harvard University's Joint Center for Housing Studies.
March 22, 2005