House price decline indicated by FAU study

by Scot Kersgaard21 Sep 2017
Homeownership remains a better option for building wealth than renting while investing in stocks and bonds, but only just.

A study by the Florida Atlantic University and Florida International University faculty reveals that while homeownership is still marginally the best option, the gap is narrowing and the figures suggest a decline in house prices.

The Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index score for the U.S. as a whole is -.065 and was last in this territory during the run-up in prices of 1999.

"While the index gives consumers additional information over the age-old question of buy versus rent, it also tends to signal a directional change in housing pricing," said Ken Johnson, Ph.D., a real estate economist and one of the index's creators in FAU's College of Business.

"The last 30-plus years of data suggests that scores approaching 1 tend to signal a housing price downturn, while scores approaching -.30 usually signal an upturn in prices," added Johnson.

Twenty of the 23 cities in the index have moved towards renting with Miami, Pittsburgh, Portland and Seattle noticeably so. Only Detroit, New York and St. Louis moved towards homeownership.

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