Oh dear god. Do the "rent vs. own" calculator at CEPR. And get ready for the crash of a lifetime

I did the calculator for rent vs. own for Phoenix. I assumed a $500,000 house, 5% down, sell in 5 years, and finance with a 30 year fixed 6.5%.

Owning would cost $192,000 more than renting over those five years based on their calculations. And that assumes $3000 a month in rent! I think on a $500,000 house in Phoenix you could rent the place for $1200 or so a month. Oh dear god.

Take it for a spin and you'll see why yes, fundamentals do matter. And it's all about the P/E. It's ALWAYS about the P/E.

Costs of Ownership v. Renting:

Your basic costs start at $ 3,400 per month. However, if you can rent a similar home for less than $ 6,000 per month, you may be better off renting.

House Appreciation (real)
-52%
Purchase Price
$ 500,000
Monthly Rent
3,000
Ownership Costs
Sale Price
239,500
Outstanding Mortgage
387,300
Commission and fees
14,400
Total Cash (Owning)
-162,100
Equivalent Rental Costs
Returned Security Deposit Value
2,600
Net Savings (See details)
27,400
Total Cash (Renting)
30,000

Net Cost of Owning
192,100

HousingPANIC Stupid Question of the Day

The US housing bubble is over and it's obvious we are now crashing.

So why hasn't the rest of the world, with so many markets even more manic than the US, seem to have gotten the memo yet?

Will the US housing crash be the start of a worldwide housing crash, or are we on our own?

600 days on the market, eight price cuts, still no buyer. Supply, meet Demand.

From $605,000 to $524,000 and lower, and lower, and lower

Notes on the Desperate Homedebtor vs. Bitter Renter debate

Let me try to clear this one up... Lots of bubblesitters and bitter renters battling desperate homedebtors on HP threads it seems.

If you buy a home today vs. renting, you are a fool. Renting is significantly cheaper on a monthly basis than "owning", and if you "buy" you'll lose not only the extra monthly cash flow vs. renting, but more importantly you'll also the negative depreciation to deal with. In addition, you'll have the transaction costs of buying and selling, and you'll likely be locked into the home or a significant loss for years, unable to move for a new job when you lose your current one or are offered a better one during the upcoming recession.

If you "own" a home you "bought" pre-bubble, you're doing fine (unless you did equity-extraction). "Owning" your home today is likely at a similar monthly cost to renting, if you bought pre-bubble. The only issue you have to sleep on is that you'll be losing some of your possible equity every day now that homes are depreciating vs. appreciating. However, if you took out HELOC's, you screwed yourself.

The smartest financial play for "owners" would have been to sell at the peak, over a year ago, cash in, put the money to work, and rent. Then when prices stopped falling, buy again.

The smartest financial play for renters who've never "owned" would have been to buy a home pre-bubble, then sell at the peak and rent again. If you've always rented and didn't buy and sell, you missed an opportunity to make some money off the stupidity of your fellow man during the greatest ponzi scheme the world has ever seen.

Remember this dimwitted real-estate-clerk-Apprentice-winner-Donald-Trump-spawned "bubbles are for bathtubs" idiot, Kendra Todd?

Ah, let's all revisit the sage advice of little-girl-playing-grown-up-real-estate-investor Kendra Todd, from September 2006. Too bad people can't sue her, or Yahoo for giving her this platform.

But it is nice to know Donald Trump will be declaring bankruptcy soon.

Is the Real Estate Market in Bubble Trouble?

By Kendra Todd, winner of "The Apprentice 3"September 26, 2006

You can't go anywhere without hearing people talk about "the real estate bubble." Such talk drives me to distraction, and I'll tell you why. It's because there is no real estate bubble. Bubbles are for bathtubs.

Despite a thousand articles in Sunday newspaper real estate sections, the bubble is a myth. The real estate markets in many areas are going through a normal correction cycle. I'm going to tell you how to recognize the signs of a correction in your market, how you can avoid getting sucked into "bubble trouble" and how you can even benefit from the current environment.

A bubble is a market in which the value of the key asset is inflated based on speculation and psychology. Because of this, true bubble markets can burst overnight when something happens to shatter the perception of value.

That's why the Internet boom of the late 1990s was a true bubble; people suddenly realized that ninety percent of the dotcoms were companies with no way to make money. Talking about a bubble implies a sudden burst, and real estate does not work that way. You don't go to sleep one night with your house worth half a million dollars and wake up to find it's lost half its value.

Here's the bottom line

If you listened to the NAR and REIC, and bought a home you couldn't afford...

If you lied about your income, and took out a toxic loan with a teaser rate that will now reset...

If you rent the home out and it would only cover 40% - 50% of your monthly costs...

And if you bought that home solely betting on future price appreciation to carry the day...

The bottom line is...

You made your bet, you lost, and now you're f*cked.

And that's the bottom line.