![\"\"](\"https:\/\/biznews.fiu.edu\/wp-content\/uploads\/2011\/03\/tn_ken_johnson.jpg\" "\\"IF\\"")
<\/a>The study, which took place over the period 1978 through 2009, assumed an eight-year holding period and factored in adjustments for property appreciation, property maintenance, tax savings from mortgage interest deductions and other standard adjustments in the buy versus rent decision. Data on rental and purchase of similar homes in the same area were used in the analysis.<\/p>\n
\u201cOur study disputes the commonly-accepted wisdom in the United States that renting is always \u2018throwing away money,\u2019\u201d said Johnson, Knight-Ridder Research Fellow at FIU and editor of the Journal of Real Estate Practice and Education<\/em>. \u201cAs a government and a society, we recognize that home ownership has multi-dimensional benefits: increasing civic pride, improving self-esteem, crime prevention, child development, and better educational outcomes, among others. Yet our findings show that financially, if renters exercise disciplined investing over time, they can be more successful in accumulating wealth than those who own a home.\u201d<\/p>\n At the same time, Beracha said, \u201cthe study reinforced previous research that found home ownership to be a better option for individuals who might otherwise spend the difference between the costs of renting and owning.\u201d<\/p>\n \u201cPeople who own typically wind up with more value, because a home appears to be a forced savings account,\u201d Beracha said. For financial value to emerge in a rental situation, \u201cthe key question is whether individuals have the discipline to invest the cash savings they\u2019d have from renting their home rather than buying it \u2013 a pattern that\u2019s not typical of American renters.\u201d<\/p>\n \u201cThere is research to indicate that the person who rents probably won\u2019t have the financial discipline to save,\u201d Johnson said. \u201cHe\u2019ll spend it on education, or health care, or beer and cookies. If you didn\u2019t have the financial discipline to invest the difference, you probably should have been buying.\u201d Additional research removing the renter reinvestment requirement is underway by Johnson and Beracha to settle this concept of an owned residence being a forced saving account.<\/p>\n The study uses data collected in 23 different MSAs, and uses an eight-year holding period for comparative purposes. Factoring in costs associated with homeownership, tax benefits and home price appreciation and considering returns on similar risk portfolio, Beracha and Johnson were able to compare the homeowner proceeds from the sale of their home relative to the value of an investment portfolio held by a renter.<\/p>\n \u201cThis is the first \u2018horse race\u2019 that anyone\u2019s ever done comparing home ownership versus renting, with the maximizing of wealth as the \u2018finish line\u2019,\u201d Beracha said. While renting and investing did not provide better value in every period analyzed, he said, \u201cit came out ahead a majority of the time.\u201d<\/p>\n One notable exception to the rule was the period between the early 2000s, at the start of the housing boom, and 2006, when homes began their dramatic decline in value. Another exception is today. Current home market prices make today\u2019s market the most compelling for home ownership in the buy versus rent equation. With the onset of depressed home prices, there are current indicators in place that strongly favor buying over renting. These indicators include higher than average rent-to-price ratios, near record low mortgage rates and favorable reinvestment opportunities.<\/p>\n The study\u2019s findings could have potential implications for government programs that encourage home ownership for a wide segment of the population, using the accumulation of wealth as motivation.<\/p>\n \u201cWe\u2019re one of the more mobile societies of the western developed economies, yet we have one of the highest rates of home ownership,\u201d Johnson said. \u201cIn general, mobility decreases the ownership period making renting relatively more favorable.\u201d<\/p>\n