March 29, 2023

Bucks Blog: Rising Rates, and the Rent vs. Buy Decision

Mortgage rates have been rising, making it a bit more expensive to borrow to buy a home.

Home prices have been on the upswing, as well. (The Standard Poor’s Case-Shiller home price index showed a 12 percent gain in home prices in 20 cities from April 2012 to April 2013.)

But some perspective is warranted. Mortgage rates are still historically low — they’re expected to hover around 4 percent for the second half of the year, according to Freddie Mac. (The average rate for a 30-year, fixed-rate mortgage was 3.93 percent last week; a year ago, the average was 3.71 percent).

And while home prices are rising, they are still relatively affordable. According to a Freddie Mac statement on June 18, “At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent” before the typically priced home would be unaffordable for most families making a typical income.

Jed Kolko, chief economist at Trulia, a real-estate site, wrote in a recent blog post that despite the recent upswing in mortgage rates, the cost of owning a home is still low when compared to the main alternative: renting. In most markets, he argued, buying is cheaper than renting, and it will remain so until mortgage rates move significantly higher.

To see how much rates would have to rise before it becomes cheaper to rent, Trulia updated its “rent vs. buy” analysis to reflect home prices and rents (based on properties listed for sale and for rent on Trulia) from March, April and May. The result? Rates would have to rise to an average of 10.5 percent before the scales tip in favor of renting nationally, Trulia found.

In some markets where home prices are much higher, like many cities in California, the calculated “tipping point” is much lower. In San Francisco and San Jose, rates have to climb just over 5 percent to make renting more attractive. In New York and New Jersey, the tipping point comes around 7 percent.

While such rent vs. buy comparisons can be informative, they are, by necessity, made using a series of assumptions, which may or may not reflect your personal financial situation, said Daniel McCue, research manager at the Joint Center for Housing Studies of Harvard University.

For instance, he noted, Trulia’s calculator assumes a 20 percent down payment. For a $200,000 home, that is $40,000 — an amount the typical renter is unlikely to have handy.

The site’s rental listings also may not capture many individual apartments owned by smaller landlords, which may be less expensive than large, investor-owned apartment complexes, he noted.

The analysis also assumes that the buyer will stay in the home for seven years and so will   benefit from a modest appreciation in price. But if you are young and mobile, you aren’t necessarily going to stay in a house that long — so you lose out on the chance to earn back closing costs and other home-buying expenses.

(A complete list of the calculation’s assumptions is available on Trulia’s Web site).

In short, rent vs. buy calculations can help track trends, but it’s hard to say that there is a single, magic number where home buying must be cheaper than renting — for you.

Are rising mortgage rates affecting your decision to buy a home? Do you think continuing to rent makes sense?

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You’re the Boss Blog: B&B Owner Responds to Web Site Review

Site Insight

What’s wrong with this site?

Criticism can be hard to take, especially when your business is your home. Last week, however, Nancy Galloway and Andre Laporte welcomed our comments and suggestions as to how to improve their inn’s Web site. “It is like having a great editor,” Ms. Galloway said. “You need someone who is looking at your work with a fresh perspective. I am too close to our site and the comments were quite helpful and we are taking many to heart.”

In a recent conversation that has been condensed and edited, Ms. Galloway and I discussed the various opinions — including the 17-minute video that one commenter posted.

Many people focused on the need for new photos. Do you agree they need to be improved?

Yes, we agree with the emphasis on bigger pictures. We checked out the Four Seasons Nevis site, and that was very instructive. Actually it wowed us — that site will be our guide.

There was a push for more information on local activities.

We definitely need to sell the area, as well as ourselves. We will add more on the local artisans, including links to their sites. Those artisans actually sell themselves; we have the broom maker who supplied brooms for Harry Potter, glass blowers, blacksmiths, hand weavers and a phenomenal sculptor — all within a five-minute drive.

How did you react to some of the uneasiness commenters expressed with the social element of a BB?

I was surprised that so many thought it would be too social. No one is forced to hang out together. There is plenty of space, including separate tables for breakfast and lounging. We will look into that and make it more clear in the description. Also, we do allow kids, as long as they’re babies or 5 and up. Our place is simply not childproof.

It makes sense that reserving a room online would be a core part of a redesign. One reader said people want to be able to book a room at 1 a.m. in their pajamas. Where do you stand on adding that functionality?

We’re working on getting the online reservation system up and running. Not being techies, it’s a bit difficult for us, but we’re getting there. We initially thought we would use Easy InnKeeping because we already use their offline system. But the cost is very hard to digest — the setup is $365, then $65 per month, and $15 per reservation. One reader recommended Rezovation, and they run $649 for the initial start-up, $250 per year, $99 per month and $15.50 per reservation. We are looking into other options.

How do you attract reviews and how have you worked with TripAdvisor?

For the past year we have given each guest a postcard to take home and sent an e-mail a week after their stay asking them to review us. It works, especially the e-mail, because asking people to remember a URL is just too much work. We currently don’t pay TripAdvisor for the extras they can provide to attract viewers but are taking a close look at putting marketing budget toward TripAdvisor. The other key site for us to work with is

There were a few design-oriented comments. Were they helpful?

Someone pointed it out, and we have been wondering about the wasted space on our site. Many sites we see have huge color blocks on either side of a center panel of text. I actually thought ours looked rather cluttered. Another tough one to act on is the recommendation to include people in photographs. I have received the opposite advice over the years — to leave the pictures without people, so people can envision themselves in the photo. I am not sure what to do with those two points but will discuss both with our new designer.

Are you open to a redesign of the inn?

One or two mentioned that we needed an interior decorator. Sorry, that’s not happening. But I am decluttering!

Would you like to have your business’s Web site or mobile app reviewed? This is an opportunity for companies looking for an honest (and free) appraisal of their online presence and marketing efforts.

To be considered, please tell us about your experiences — why you started your site, what works, what doesn’t and why you would like to have the site reviewed — in an e-mail to

Richard Demb is co-founder of Abe’s Market, an online marketplace for natural products that is based in Chicago.

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You’re the Boss Blog: Can Entrepreneurship Solve the World’s Problems?

You’re the Boss offers an insider’s perspective on small-business ownership. It gives business owners a place where they can compare notes, ask questions, get advice, and learn from one another’s mistakes. Its contributors also interpret news events, track political and policy issues, and suggest investing tips.

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You’re the Boss: Is America Really the Land of Entrepreneurship and Small Business?

You’re the Boss offers an insider’s perspective on small-business ownership. It gives business owners a place where they can compare notes, ask questions, get advice, and learn from one another’s mistakes. Its contributors also interpret news events, track political and policy issues, and suggest investing tips.

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You’re the Boss: The Quagmire of Design I.P.

Is TerraCycle free to copy a design that hasn't been protected?Courtesy of TerraCycle.Is TerraCycle free to copy a design that hasn’t been protected?
Staying Alive

Intellectual property is a complicated subject. At TerraCycle, I regularly face I.P. decisions, and I have developed a point of view on them — but I would welcome some feedback. I’m particularly interested in your perspectives on unprotected design.

Generally speaking, my understanding is that if you come up with a unique name for something, such as a company, you have the legal right to register the trademark, the service mark and the logo. If your name and logo are important to your business, you probably want to protect them in other countries as well — or, someone can take them and use them there. The same goes for unique inventions — you can file a patent and receive 20 years of protection around your idea.

But your work isn’t done. Even if you have a trademark or a patent, to get the benefit of your rights, you need to police them, meaning that you have to watch to see if others are infringing on your I.P. If they are and they continue to do so after a notice and warning, you have to pursue them legally. This requires time and attention and — most important — money. At TerraCycle, we spend more than $75,000 per year just on filing for various forms of I.P. — and that doesn’t include policing.

Although TerraCycle has come up with many innovations involving collecting waste and making products and materials from waste — (including making a textile from juice pouches and a cushion type material from chip bags) — in most cases, I’ve decided against spending money to seek patents. That’s because I’d rather not take on the time and expense of policing and licensing the patents. From my perspective, the time and money can be better deployed collecting waste and coming up with additional innovations.

But there’s a flip side. What about the unprotected I.P. of others? If I see a design I like that isn’t protected, I don’t see any reason not to copy the concept. For example, someone else came up with the design for a clock made from an old vinyl record. This design concept probably could have been patented before commercial use (there are design patents). But maybe the designer was not well versed in the world of I.P. or more likely didn’t have the capital to invest in a patent. Or perhaps, like me, he or she decided the design wasn’t worth protecting, given the costs involved in policing and licensing. But as I understand it, once the design is used commercially without protection, it is effectively public domain.

Not everyone agrees with me on this. I’ve had a long-running argument with our chief designer, Tiffany Threadgould, who is a world class upcycling designer. Our disagreement revolves around how to deal with the lack of I.P. in design. While my view is that TerraCycle is free to copy a design that is not protected, Tiffany says that this is unfair to designers and that we should not copy designs — or we should compensate them proactively for building on their designs.

Protecting designs can be even more complicated than protecting literary works or songs — perhaps because it takes you into a very gray area. Where do you draw the line between being “inspired” by a design and simply its copying elements? If the law doesn’t define that line, isn’t payment to a designer for use of an unprotected idea a form of charity? And if so, why would there be a problem with just copying an unprotected design?

As the chief executive of the company, I acknowledge the I.P. challenge that designers face — but I sense a higher duty to my shareholders and employees. Of course, I’m happy to pay a designer a royalty to design a new product for TerraCycle, and it’s my job to protect that design if I don’t want others to copy it. But if we get inspired by a vinyl record clock that I see selling in a boutique for $49.99 and I want TerraCycle to make a version that can retail at Target for $12.99, I see no reason to seek out the designer and pay something for an unprotected design. And the upshot is that instead of diverting thousands of vinyl albums from landfills we’re diverting millions.

What do you think? I welcome your views.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton, N.J.

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You’re the Boss: Tracing a Decline in New Businesses

You’re the Boss offers an insider’s perspective on small-business ownership. It gives business owners a place where they can compare notes, ask questions, get advice, and learn from one another’s mistakes. Its contributors also interpret news events, track political and policy issues, and suggest investing tips.

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