HousingPANIC Stupid Question of the Day

In your neighborhood, how much cheaper (%) per month is it to rent than "own"?


Hint - for those looking to call bottom in housing, there's your key number...

Bubble Sitters: How much longer do you plan on renting?

1) Should be a matter of months

2) This is gonna take awhile - likely a few years

3) No timeframe - will rent until the fundamentals make sense again

4) Don't plan on ever "owning" again

5) I'm not renting yet - still can't unload my debt-trap

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.

Non-housing thread on cubicles, working fo the man, mortgages, taxes, geo-arbitrage, global living, and life happiness

The mix of HP'ers is interesting - some folks just starting out, saving for a house at the right price. Some full-time renters. Some bubble sitters who cashed out at the peak. Some IT pros making bank and saving it. Some business owners. And some consultants, authors, retirees and freelancers.

What I want is for people who've found a better way - who don't work for the man, who don't work 60 hours a week, who don't commute to work, who don't spend 70% of their income on housing and taxes, who don't spend their lives in one place, who don't stress about their next paycheck and who above all don't work in a cubicle - for these folks to tell their stories.

There is some new thinking out there when it comes to work and life and happiness.

Geo-arbitrage is one idea - downsize your life, slow it down, save, spend less money and live somewhere more desirable (thank you high-speed internet)

Living globally is another idea - globalization, technology and democracy have opened up the world, borders have come down, and it's now possible to essentially live anywhere you'd like to live in this world.

And renting - not being tied down to a home and a place, having a mobile career, and consuming your shelter versus "owning" your shelter, is probably the most radical idea, but one worth exploring.

Do you like your job? Do you like your life? Do you want more? Do you know how to get it?

Have a good chat. And a good life of course.

Bubble Sitters and Bitter Renters - will you ever "buy" a home again?

Will you either "buy" or "rent money from the bank" to "own" a home again?

Why?

When?

Where?

Renting is hazardous to your wealth. Oh, really?

Are You Throwing Away Money by Renting? Maybe Not

It’s something we’ve all been told for so long we don’t even question it: if you’re paying a mortgage, you’re making an investment; if you’re paying rent, you’re making a mistake. But is it true? Are you making your landlord rich at the expense of your own wealth? The answer’s not as simple as you might think – for a lot of people, and in a lot of situations, paying rent is the smartest thing you can do.

While housing prices soared, rents merely chugged along. Between 2004 and 2006 home prices nationwide rose 16%, while rents inched up just 1.2%.

If you can satisfy your needs by renting a house at $1000 a month instead of paying a $2500 a month house payment then that’s $1500 a month you can invest in the stock market or elsewhere. Add the $10,000 or $20,000 you would have put up for a down payment and that investment turns into a healthy nest egg. After a few years if you decide it’s time to buy a house then you have enough saved for a healthy down payment.

"10 Reasons to Sell Your House Now"

Nice to see others finally figure this out a couple years after HP'ers. Only problem? In a sea of dead inventory and increasingly desperate homebuilders and homedebtors, it might be too late - good luck finding a buyer, at any price.

Man, this is getting ugly now. When the collective consciousness changes, when people around the world paying 50% of their income to housing (instead of 10% if they rented) figure out that home prices are declining, and that the Big Bet on future appreciation is a bad one, then the rush for the exits will be fascinating. And ugly, so so ugly.

Jul 06, 2007 -- Worried about the state of the housing market? You should be. Millions are expected to be financially devastated by the downturn. Don't be one of them. Read up on the situation and find out what's happening. To get you started, here are ten reasons why you need to sell your house NOW.

1. Renting is Cheaper

Renting is almost always cheaper than buying. You know why? Because when you rent, you pay for a roof over your head and that's it. When you buy, you pay for a roof over your head, you pay a bank for the privilege of borrowing money, you pay property taxes to the government, and you pay any and every maintenance fee associated with the upkeep of your house. Imagine how much money you can save every month because you chose to pay rent rather than all of the other costs associated with owning. Now imagine what you could do with that money every month. Sounds nice, doesn't it?

2. The Joneses are Crazy

Houses are status symbols to Americans. (For more evidence see the show Cribs on MTV.) But just because the Joneses own a home, it doesn't mean you should too. The Joneses may look cool, calm, and collected on the outside, but chances are they cry when they open their credit card and mortgage bills and are so overextended that the idea of being debt free is laughable.

3. Real Estate is a Terrible Investment

Unless you are able to pay for a home in cash (no loans), real estate is a terrible investment. Repeat. Your house is not an investment vehicle. Not anymore. Nowadays, it's just a dead asset. If you want to invest your money or create a next egg, invest in an IRA or something that is more likely to give you the return you are looking for.

4. Selling is More Profitable Than Renting

If you are thinking that you may be better off renting the house rather than selling it, think again. Unless you live in a rural area or an area where prices haven't been affected by the bubble, you will probably not make enough money in rental income to pay the mortgage payment and cover the hassles that come with being a landlord. Selling and washing your hands of the whole matter is most likely the more profitable choice.

5. The Market is Cooling

Home sales are slowing, foreclosures are rising, and inventory is growing. Bottom line, the market is getting colder, not hotter. If you are waiting for buyer interest to get to the level it was a few years ago, you will be waiting a long time indeed. Your best bet will be to sell now and take what you can get before the competition gets worse than it already is.

6. Home Values Will Plummet

Home prices couldn't be more disconnected from fundamentals. In many areas, individuals who make the median income can't afford a median priced home. For this reason alone, current home prices cannot be sustained. Experts are predicting price drops of 25 to 60 percent in large areas. Think about where you will be if your home loses 10 percent of its value. How about 20 percent, 40 percent, or 60 percent?

7. Because Japan Says So

If the beliefs of housing experts aren't enough for you to base a decision on, then you should consider what happened to Japan when they experienced a similar boom. After home prices doubled nationally and tripled in Japan's largest cities, they fell sharply to pre-boom levels. Homes in Tokyo lost as much as 80 percent of their value and to this day the country is still is still struggling with the aftermath of a housing induced recession.

8. Location is Irrelevant

Many people think that because they live in a desirable area that they will not be affected by falling home prices. This assumption is generally incorrect. If prices have reached an unsustainable height, they are going to fall regardless of how nice it is to live there.

9. Recession is in the Air

Talk of a recession is at near manic levels. If the market crashes (and it will) the U.S. will be tipped into a recession that rivals the one seen during the Great Depression era. Selling now ensures that you won't have to struggle with a mortgage payment later.

10. Because the Consequences of Not Selling are Too Ghastly to Consider

If you don't sell now, you might not have the chance to walk away later. Once prices fall, you could lose your ability to refinance, to borrow from equity, and to sell for a profit (or to break even). If you are left owing more on your house than it is worth and find yourself unable to meet your mortgage obligations for any reason, you're stuck. The bank will take your house and you'll be left in the col

Warning: The NAR has not approved this message... Motley Fool: Homes - "The Worst Investment Ever"

Nice to see the MSM giving some space to the reality that renting is much more favorable than buying today, and that homes are not a great investment historically.

Sacrilege! Hersey!

Think about it for a minute. What characteristics do Fools look for in a great investment? Positive cash flow, low expense ratios, low transaction fees, and historically proven returns. Using these criteria, the average house falls well short of the all-time best.


Positive cash flow

If you buy a house, how much money goes into your pockets every year? How much goes out? That's right -- a house clearly produces negative cash flow. Mortgage payments, maintenance, and taxes add up to a lot of money heading out and none coming in.

Historically proven returns

The Fool has long advocated shares of individual companies as the best road to wealth, because of their inflation-crushing performance over very long periods of time.

For any time period longer than the past few years, residential housing prices fall far behind these returns.

Final thoughts

Those who think renting is "throwing money away" should consider that mortgage interest, maintenance, taxes, and insurance are also "thrown away." Having a place to live costs money no matter what, and a rational evaluation of your local market should let you know which one is a better value.

Before you start plugging overly optimistic numbers into the rent-vs.-buy calculator, just remember that past performance may not be indicative of future returns.

Slowly and surely, the MSM is going HousingPANIC - Forbes on how it's cheaper to rent than buy

I think I'm turning HousingPANIC, I think I'm turning HousingPANIC, I really think so...

I think I'm turning HousingPANIC, I think I'm turning HousingPANIC, I really think so...

Only problem with this MSM article (one day they'll think, not just type) is that they say rents are too low. Uh, rents are where the market says rents are, and hint, they're going lower, not higher.

Cheaper To Rent

These are scary days in the housing market. Sales of existing homes in the first quarter of the year were down 8.4%, but prices have barely budged, dropping only 1.8%. Many potential buyers are wondering if it makes sense to rent for a year and hope that as sales slow even more, prices will finally come down significantly.

In most cities, renting rather than buying is a good idea for now. Green Street Advisors, a research firm specializing in real estate investment trusts, looked at a 19-year average ratio of monthly mortgage payments to monthly rent payments for the 50 largest markets in America. They then looked at a current snapshot of that same ratio and calculated how much rents would have to change to bring the ratio back to its 19-year average.

In 80% of markets, rents are more than 10% below their historical averages, and home prices are too high.

If you're looking to buy in Portland, Ore., you should probably think twice. Rents there are 61% too low. The current ratio of monthly mortgage payments to monthly rents in Portland is 2.04, versus a 19-year average of 1.27.