Rent or Buy? Real-Time Decision Methodology

Rent vs. Own Analysis: Parcl Labs Methodology

Want to see if it's cheaper to rent or buy in your market? Check out our Rent vs. Own view in the Parcl Labs platform. Ready to build your own analysis? Sign up for API access and start working directly with our data today.

Introduction

Is it cheaper to rent or buy right now? This question drives the biggest financial decision most people will make. Today, with uncertain mortgage rates, diverging home prices, and shifting rental markets, answering it requires real-time, local data.

Legacy sources can't keep up – by the time monthly reports are published, market conditions have already changed. Using the Parcl Labs API, our methodology pairs real-time market data with current mortgage rates to deliver clear, actionable insights across U.S. markets.

Data Foundation

Three key data streams power our analysis:

Parcl Labs Price Feed

• Sales Data: Real-time price per square foot derived from millions of market observations, capturing both listed and sold properties across all major U.S. markets
• Rental Data: Market rental rates per square foot, refreshed daily

Additional Sources

• Federal Reserve Economic Data (FRED): Weekly 30-year fixed mortgage rates with a 5-year historical view

Analysis runs where we have both active sales and rental feeds.

The Process

Our pipeline processes data in three key stages:

1. Data Preparation
   • Identify markets with both active sales and rental data feeds
   • Retrieve parallel price histories for both metrics
   • Pull weekly mortgage rates from FRED
   • Match each daily price point with its most recent weekly mortgage rate
2. Payment Calculation - For each daily price point, we calculate the monthly ownership cost using:
   • 30-year fixed-rate mortgage
   • 20% down payment
   • Current market price per square foot
   • Most recent available mortgage rate

The calculation uses the standard amortization formula:

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Where r is the monthly interest rate (annual rate ÷ 12), n equals 360 months, and the loan amount is 80% of current market price.

1. Analysis Output - For each market we produce:
   • Buy/Rent recommendation based on direct cost comparison
   • Cost differential per square foot (e.g., renting is $0.50/sqft cheaper)
   • Percentage difference between options (e.g., renting is 15% less expensive)
   • Full price history showing how the relationship evolves over time

The recommendation is straightforward: if monthly rental cost per square foot is lower than the calculated mortgage payment per square foot, we recommend RENT. If the mortgage payment is lower, we recommend BUY. The size of this difference helps quantify the strength of the signal.

Implementation

The analysis runs continuously, providing daily updates as new price data arrives. We maintain a clean, direct comparison by focusing on core housing costs, deliberately excluding variables like property taxes, insurance, and maintenance that vary by location and circumstance.

Building On Our Foundation

While our core methodology provides valuable baseline signals, you can build more sophisticated models through the Parcl Labs API. Whether you want to use our pre-calculated signals or create custom implementations, our open source Cookbook has everything you need to get started. Get access today and start working with our data.