A version of this post originally appeared on the author’s blog.

Jed Kolko at Trulia shows us some data that buying a house has become substantially cheaper than renting across the country:

First off, asking home prices have started to rebound and have risen by 2.3% year over year in August (3.8% excluding foreclosures); however, rents have risen more (4.7%). This means that prices are lower relative to rents than they were a year ago. But more importantly, mortgage rates have fallen: the best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%. Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average – that’s a savings of $771 a month. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again,it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

Kolko goes on to say that the “big obstacle holding back renters who want to buy is the down payment – even more than getting a mortgage.” I wouldn’t doubt that down payments are a deterrent for folks thinking about buying their first home, but to say that that’s the “big obstacle” misses the point. If you think back to the early aughts, homeownership was in. There were all kinds of mortgages available with all kinds of down payments and all kinds of interest rates, and essentially if you wanted to buy a house you could find bank that would work with you to hash out a deal that would fall within your financial capabilities for at least a little while. That level of flexibility — combined with the apparent cultural desirability of homeownership at that point in time — fed a bubble in the buyers’ market that eventually burst. Next came massive defaults, exploded balance sheets at mortgage-holding banks, financial crisis, recession, and sluggish recovery.

The response to this series of events by prospective homeowners has been to avoid home-buying like the plague. As a consequence, demand has surged in the renters’ market over the past four years while demand in the buyers’ market has plummeted. Whether that’s a sophisticated reaction to market events or simply widespread fear is uncertain. But whatever the case, to say that the reason people are avoiding home purchases right now is simply that they don’t want to make a big down payment is to ignore the dramatic history of the housing market over the past four years.

With low mortgage and interest rates, if people start buying rather than renting again, then eventually we will start to see the price gap between buying and renting begin to narrow. But this is mostly just a matter of demand; given a limited supply of buyable and rentable real estate, demand is naturally going to swing back and forth as people search for the best deal available, and at times that type of behavior will produce huge, unsustainable bubbles as we saw happen a few years ago.

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