Unexpectedly Intriguing!
April 11, 2007

Via Barry Ritholtz, we've discovered an interactive tool that provides the user with a highly personalized answer to the eternal question "Is it better to buy or rent?" Amazingly, the tool is provided by the New York Times, perhaps better known in recent years for the declining quality and increasing political bias of its news reporting that have coincided with its declining fortunes.

The tool is a marvel of how to do things right in integrating a graphical interface with text data input to provide the user with an extraordinarily rich amount of information for determining whether or not renting or buying a place to live is desirable for them. The image below shows the tool's user interface (click the image for a larger version):

This is a fantastic example of how to do things right. The user may enter numbers at the top of the interface directly related to their local housing market for the costs of renting or buying and owning a house, including the monthly rent, house sale price, mortgage interest rate, percentage of down payment and annual property taxes.

What's more, the tool provides advanced options that allow the user to go beyond these basic categories for their considerations. Here, such things as the security deposit, broker's fee and insurance rate to be considered on the rental side, while a host of options affecting the buying side of the equation may also be considered, including such options as the homeowner's insurance rate, closing costs, mortgages terms, utility costs and the capital gains exclusion amount.

But wait, there's more! The tool also provides an additional advanced option under the "General" link for entering the rate of return the user might receive on investing their money instead (to consider the user's opportunity costs), as well as taking their income tax rate and the general rate of inflation in the economy into account.

Where the tool really stands out though lies in the sliding scale controls on the left hand side of the graphical interface. Here, the user can adjust the home price appreciation rate and the annual percentage change in rent amounts and receive instant graphical feedback. The graph, which shows the annual returns associated with home ownership, provides instantaneous feedback for changes in the data entered by the user.

At a glance, the user can find out how long they must own a home for the benefits to outweigh the costs of doing so compared to renting. Here, a negative value indicates that renting provides the better option (most commonly over the near-term), while a positive value indicates that buying is the better choice (typically over a longer period of time.)

Better yet, clicking on any of the graph's data points provides the associated data that underlies it. The point on the graph is highlighted, while the data is presented in the text output on the lower right hand side of the interface.

Where the tool truly excels however is in showing where the transition point between being better to rent or buy lies. Here, users who are reasonably confident that they will be living in their residence for a certain number of years can tweak the inputs (representing how they might allocate their resources) to make one option clearly better for them over the other.

Beyond these features, the tool is backed by solid data provided by Moody's Economy.com. The tool's developers are the New York Times' Tom Jackson and Archie Tse.

If you're going to be making the choice between renting or buying a place to live, Jackson and Tse's tool will provide you with outstanding feedback based upon your unique inputs. The tool has earned Political Calculations' Gold Standard(TM) and is well worth bookmarking or noting for future reference.

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Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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