Tuesday, April 10, 2007

What I've said for awhile

This article in the NYTimes talks about how the rents vs. mortgage payments equation has shifted in many instances such that it actually makes sense to rent now, even if that means foregoing the mortgage interest deduction. Not always the case, and just because it applies on average doesn't mean there aren't good deals out there, but it merits strong consideration. In many parts of Phoenix for example you can rent a $750,000-$1,000,000 home for the same amount that would be going to a mortgage on a home half that value. My friend Eric rents a $800,000 house and pays $2,400 a month. A mortgage payment on that house would be about double that. Even taking into consideration the mortgage interest deduction, it's well it to rent that house.

The market has a long hangover of inventory that is going to be there for some time. Fortunately so many people won't sell at anything other than the peak that prices won't come tumbling down, but the flipside is that you can't expect much appreciation, if at all, over the next 5 years. I said back in mid-2005 that house prices would be where they were then in 5 years in nominal terms and where they were then in inflation adjusted terms in 10-years. I still expect something like that now, but we'll see. These things of course depend on a lot of things, but you can't be super optimistic right now.

Bonus: listen to the realtor's ad in the NYTimes article (they have the audio clip). Notice that they say it is a great time to BUY a home, and then right after it is a great time to SELL your home. Either way a real estate agent gets 3% of your home value that they don't deserve. Never ask the barber if you need a haircut!!!


Blogger Bradley said...

So, should I consider buying or renting in Seattle???

10:16 PM  

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