The goal of this study is to investigate an important but often overlooked factor in the rent vs. buy decision of a primary residence, the home price-to-rent ratio. The price-to-rent ratio varies significantly across the spectrum of home values and can create a situation where, all else being equal and following a utility maximization framework, at one price point it may be advantageous to purchase a home and at another price point it may be advantageous to rent a home. This information is specifically impactful to Millennials and military households with their more frequent move cycles. We use Zillow typical home value and average rent data to construct a price-to-rent ratio at the ZIP code-level and then link that ratio to the 2021 wave of the National Financial Capability study to test the following hypotheses: H1: Home price-to-rent ratios are positively associated with home values at the ZIP code-level. H2: For Millennials (age 25 to 40) and military families, the home price-to-rent ratio is negatively associated with the decision to own a primary residence.

Accepted Oral Presentation