The Rental Decision
Long-time renters often cite all the negatives of home ownership, and there are some to be sure. But many of these oft-cited reasons have a valid counterargument OR these old paradigms are no longer accurate:
Lets take a close look at this.
Current Conception #1: It’s More Expensive to Own Than to Rent — This is probably the biggest myth out there that many proponents of renting continue to propagate. Primarily, at this point in time, with home prices having crashed and interest rates at record lows, the rent-to-buy ratio is favoring “buy” in many parts of the country, more so than at any point in recent history.
Now this isn’t just a rah-rah “buy a home” Note, and I would concede that it is entirely plausible that home prices continue to decline for several more years. But if you’re not buying to sell, but rather buying to live, it can be MUCH more economically efficient to own over rent, especially at this time.
Here is the data (rent vs buy favors buy in 75% of US cities), aside from the other intangibles listed below: https://money.cnn.com/2011/08/16/real_estate/buy_rent/index.htm
Let me repeat: It is becoming cheaper to own and it is becoming more expensive to rent.
In my analysis, this trend will continue for years.
Why? First off, the Fed‘s policy has been to reward debt holders and punish savers with the unprecedented a) zero interest rate policy and b) projecting out through 2013 that rates will stay low. This in turn, is pushing up gold prices and equities prices, and investors are pricing in future inflation. This bodes well for landlords, and poorly for renters. See, this interest rate/inflation phenomena mixed with the new ratio of renters over owners is flooding the market with renters and starving the market for buyers. This makes homes more affordable, while landlords are embarking on higher annual rent increases.
We will look at another Conception on our next blog. Stay tuned.
Lastly, I’m here to HELP you, only and always. Let us help you through the important financial decisions in your life, while taking a holistic view of ALL of the costs.
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