December 19, 2005

Fortune Magazine: Could renting be smarter?


Good series in Fortune today posted here at Housing Panic:

Article 1 - renting is smarter
Article 2 - cashing out
Article 3 - declining markets expected

Bottom line - watch that rush for the exits speed up

And of course, TODAY, in most markets, renting is smarter. Do the math. And avoid the pending downfall. I emphasize TODAY, because in a normal market, home ownership is much smarter. But no longer folks. Things have changed.

"Everyone told us to just get in and the rising market would take care of us," Andy says. "But I thought, who is going to buy this house from me for $850,000?"

Once again they crunched a few numbers. This time they decided to rent -- and they're saving a bundle. For $2,350 a month, they have a four- bedroom, 2,100-square-foot home. If they were to purchase that same home today for $700,000 (the going rate for a similar house in the neighborhood), the monthly payment on a 30-year, $630,000 mortgage at 6.1 percent would run them more than $3,800.

The rental market, in fact, can be an excellent tool for gauging the health (and risk) in a local market -- particularly in cities where home prices have risen much faster than rents.

2 comments:

mtnrunner2 said...

We're doing this also. We're in escrow on a custom house we just finished and moved into 3 months ago, and will rent for about $2500/month, until the correction is complete. After a 50% drop, which will take 3 - 5 years, we'll buy again.

keith said...

amen brother