October 16, 2007

Article: "Now That Housing Has Soured, Renters Are Glad They Didn't Buy". Yup. Damn right. It's the P/E stupid. It's always the P/E.


Fact: It's significantly cheaper to rent than "buy" today.

Fact: Renters today don't face the risk of massive asset price depreciation.

Fact: The housing crash won't be over until it's cheaper to "own" than rent again.

With the housing-market slowdown, tightening mortgage-lending standards and rising home foreclosures, renters are more easily answering the question: "Why rent when you can own?"
Such a question was common during the housing boom, when homeowners, happy with the gains their homes were making -- at least on paper -- would urge non-property-owner friends to join the party.

..Home buyers who bought at the top of the market can find themselves with high mortgage payments for an asset that has lost much of its value. With the housing market in flux, it makes sense to hold off on buying, renters say. Now, these renters are asking, "Why own when you can rent?"

Housing-bubble blogs like Housing Panic and Housing Doom are full of anti-ownership sentiment from renters. Some renters are resentful they can't afford to own in pricey cities, while others are bitter that speculators drove up housing values in their markets. Some are irked that naïve buyers who bit off too much mortgage are calling on lenders and government for bailouts when, all along, they could have held off on buying a place.

9 comments:

Anonymous said...

On one hand, its nice to see the MSM finally starting to do intelligent comparisons b/t renting and owning.

On the other hand I did not like how they ended the article as they seem to still be bought and paid for by NAR. There is no mention as to whether or not the buy vs rent analysis signaled if the DC condo buyer made the right move. I can tell you that there are tons of properties for sale in Metro DC that all say "Price Reduced" "Below assessment value" etc. But when you run the numbers its still a rent signal.

I think that buyer has gotten taken by a bull trap. So the seller lowered the price from one where they would profit to one where they would not lose money. So what, you're still going to catch a falling knife, its just that you it will not penetrate as deeply as it did not fall from a greater potential height!!

My exhaustive search for a home priced in accordance with fundamentals was not to be had in NoVa. I am renting from a long time owner who was too attached to her home and missed out on the bubble prices and instead had to evict the last tenant. Now, the mid 400k prices are gone, but the high 300's are still not in accord with fundamentals. Based upon its rental rate of 1850 it should only be priced in the mid 200k range. Friends of mine down the street in pre-bubble times purchased for around 200k.

Before opting for rent I was looking at a place that in bubble times topped out over 500k but was nothing special. One seller now thinks they are being reasonable by pricing it in the mid 400k range. Yet based upon a mid 2k rental rate it at best should be priced in the low 300k range. They need to at least cut the price to something in the mid 300k range for loan servicing to make sense. Hence I will rent for 2 years and monitor the situation. It may never fully return to fundamentals, but if it gets w/in shouting distance and if I can get the loan servicing down so the P/E is w/in the sweet spot w/ room to spare then I might buy.

PS - I passed on several places because I knew the floplord was either in a huge negative cashflow position or in order to be positive they had to park so much capital that they would have been declared insane.

Good luck.

Anonymous said...

"...Some renters are resentful they can't afford to own in pricey cities, while others are bitter that speculators drove up housing values in their markets..."

in other words, a bunch of morons who missed out on the 200% price appreciation and are now celebrating a 5-10% price depreciation. You guys are real financial wizards, kudos to you

keith said...

Note to troll - most HP'ers were "owners" who saw the bubble and sold at the peak and now smartly rent

Good luck selling your home. Should have listened to us sooner.

Anonymous said...

It must weigh heavy on the mind to have a mortgage that is more than the house is worth. On top of that paying finance charges on that difference.

Anonymous said...

Fact: It's significantly cheaper to rent than "buy" today.
_____________________________________


FALSE!

MY PITI is $612 a month w a garage and the lowest rent in my complex is $699 a month with NO garage.

(Apartment to condo conversion)

So even though my place is cheaper than rent I still can't sell it!!!!

Thank god I have a fixed mortgage to ride this out. I think right now people are just to scared to buy even when the fundamentals are right (as my place is) because they are hoping prices will fall even further. Which they won't because in my case I would actually make more money renting my place out untill the market recovers than selling it at a loss.

Lee said...

"in other words, a bunch of morons who missed out on the 200% price appreciation and are now celebrating a 5-10% price depreciation. You guys are real financial wizards, kudos to you"

No, actually, it was 275% when I sold, moved to flyover country, and rented a small house for $500 less than the monthly interest on my housing fund investments. I increased my six-figure east coast salary by 12%. Oh, and on my street, several "owners" are unsuccessfully trying to sell at a discount of about 17%, which is nothing to sneeze at in my market.

This HP-inspired renter's life is great, thank you very much, and I graciously accept your kudos.

Frank@Scottsdale-Sucks.com said...

It must weigh heavy on the mind to have a mortgage that is more than the house is worth. On top of that paying finance charges on that difference.

I couldn't imagine being upside-down on a car loan let alone a house!!!

As to these trolls, the "owners are better than renters" attitude was always about insecure people needing an ego lift. These trolls have nothing going for them in life so their only solace is in coming here and trying to bash renters when now they just look stupid and have been discredited.

Anonymous said...

" even though my place is cheaper than rent "

It doesn't matter what loan YOU have for your condo. The only notable metric is what the prospective tenant can get for your place.

If the best loan they can get has a monthly payment of $700 or more and yours costs $699 to rent.. then they're making a correct choice to rent.

You clearly have had that property for a while - congrats. However, as with all theoretical ways to make money.. you only get to REALIZE your so-called profit IFF someone purchases it.

Note the use of a second F. that stands for.. if AND ONLY IF

All your gains are theoretical until someone closes. Until then, you get to pay the upkeep and make improvements for the increase to your cashflow of $80 a month.

Hope it's fun!

JimAtLaw said...

Still REIC spin... It ends with the DC girl saying "I got one over on the market" talking about buying in April after a 10% drop from peak, trying to prod people back in... She's bought herself an albatross and extra heavy chain to hang it with, and there's no mention of the continuing and significant drop in prices since then or going forward...