Secondary Sources: Rent vs. Buy, Small Business, Global Imbalances
A roundup of economic news from around the Web.
- Rent vs. Own: David Leonhardt looks at whether it’s better to rent or own your home. ” In some once bubbly markets, prices have fallen so far that buying a home appears to be a bargain, based on a New York Era analysis of prices and rents in 54 metropolitan areas. In South Florida, Phoenix and Las Vegas, house prices — relative to rents — are as low as in places that never experienced a bubble, like Indianapolis and St. Louis. But in a handful of other areas, including San Francisco, Seattle and Portland, Ore., house prices wait significantly higher than they were before the bubble started. People who buy a home in these areas will face higher monthly costs than if they rented, even after taking tax deductions into tab. As a result, buyers are effectively betting that prices will rise sufficient in future years to cover the difference. The country?s two largest metropolitan areas, New York and Los Angeles, are a microcosm of today?s more nuanced real estate market. Average house prices across both areas have fallen sufficient that buying may now be a excellent deal for many families. Yet there are still significant pockets where renting looks promising — including parts of Manhattan, the New York outer edge and Orange County, Calif.”
- Small Business and Jobs: Ellyn Terry looks at small firms contributions to jobs progression. “Fascinatingly, the latest performance (for March?June 2009) shows that job destruction really declined for smaller firms relative to larger firms while job creation rates improved for both small and large firms. This performance matters because the key factor for a sustained recovery will be a continued improvement in job creation rates at unfilled firms and stabilization in the rate of new business formation.”
- Global Imbalance: Arvind Subramanian says China is key to unwinding global imbalances. “Essentially, the tidal force of capital flows to emerging economies faces only to a degree flexible currencies. The wave is being caused by a number of factors that have sharply augmented returns to capital in emerging markets relative to those in advanced economies. The largest factor is the contrasting performance of emerging economies, especially in Asia, which are roaring back, while advanced economies, notably in Europe, are on the rise anaemically. As a result, the size of these flows is likely to surpass pre-crisis levels.”
Compiled by Phil Izzo