The New York Times has contributed two very valuable tools for people considering buying and renting single family homes or multi-family apartments. Both tools use algorithms to find an individualized “optimum point” for home price based on a series of personal preferences and predictions instead of a static, homogenized formula that is less likely to be personally compelling.
For renters, the “Divide Your Rent Fairly” tool allows you to split the unit’s total rent among roommates based on each roommate’s personal preferences instead of a percentage-based “value”. The tool shifts away from the idea that pro-rating rooms can be done with a price-per-square foot formula (for example, if your bedroom is twice the size of your roommate’s then you pay twice the rent), and instead acknowledges that a “fair” split of rent is one in which every roommate feels that he or she is getting a good deal. It operates under the assumption that every person will value a room’s attributes differently: would you pay more for a greater amount of natural light, a room facing the street, a greater number of air vents, doors, closets, etc? It asks the question, “what is it worth to you?” Would you still push for the largest bedroom if it was $2,500, or $3,000? Would you elect to live in the smallest bedroom if the rent was $400, or $200, or free? Would you feel like you’d gotten a good deal? The New York Times article explains, “What this method guarantees is that the solution is ‘envy free,’ as game theorists put it. No one will want to swap his room and price for someone else’s.” Read the article here and use the tool here.
For potential home-buyers, there are an overwhelming number of factors to balance, prioritize, and foreshadow, making it difficult to uncover an optimum point on your own. The biggest question for home-buyers is, “what can I afford?” The “Is it Better to Rent or Buy?” tool answers just that–at what price point is it worth it to buy your home, factoring in inflation, mortgage rates, up-front payments, fees, taxes, etc, as opposed to renting it? The tool is much more personalized than any standalone formula would be, asking the prospective owner how long they plan to stay in their new home and assuming that if they choose not to devote a high portion of money to their down payment that they would be investing it instead. The tool covers every base down to broker’s fees and renter’s insurance, acknowledging that renters face their own additional set of costs that homeowners do not incur. The tool is helpful to visualize future projections and gives the home-buyer a good baseline to keep in mind. The result of the interactive tool is a statement: “If you can rent a similar home for less than $X per month, then renting is better.” Try it here and read the theory here and here.