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Top U.S. Cities Where Buying Beats Renting
By EconMatters
Morgan Stanley (MS) published a research analysis in July 2011 predicting America is well on its way to becoming a renter society amid high rate of mortgage delinquency, foreclosures and liquidations slashing home ownership, while driving up rental demand.
Morgan Stanley noted that during the housing bubble, home ownership rates increased from 66% to 69%, an all-time high. Today, that number is just below 65% and that ratio is expected to decline further to 59.7%, driving multifamily vacancies down and rents up:
".....the U.S. will become a Rentership Society, in which the home ownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come."
Indeed, the mortgage rate might be at multi-decade low, but amid high unemployment rate and the growing number of the long-term jobless, not everyone can qualify or afford a home loan. Falling home prices, of course, has not been a positive influence on owning a home.
While declining home ownership could be an incoming trend thanks to the Great Recession, I think people who lost their homes for whatever reasons would first crash at their parents' or relative's place first.
Home ownership could be well on a declining curve based on current economic outlook, but that does not necessarily translate into a corresponding increase in rentals either
Moreover, renting does not make that much economic sense, as the infogragphic below by Mortgagesum.com shows buying still beats renting and the top U.S. cities to do just that. So it is hard to see how after losing a home due to financial stress, renting could be a viable option.
On a side note, in light of the world's faith in the U.S. dollar whenever there's a crisis situation, we should also see increasing foreign ownership of the domestic real estate, particularly in the commercial office and multi-family unit sectors. That would be the subject of another research or infographic endeavor.
Infographic Source: Mortgagesum.com
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So according to the infographic, if I buy an average home for $271,600 and hold it for 30 years, I will have paid $15,000 less than a renter?
So I get a 5% return, not per year but over the complete 30 years???
And what risks do I take - you know like about having a job for the next 30 years?
You must be f'ing kidding me.
Nuttin' wrong with buying a house, you've got to live somewhere and wherever it is you choose to live will cost you.
... unless you want to live in an old car, that is ...
'Cheap' isn't always the most important characteristic. If you wanna live in a box (like I do) one apartment is the same as another. The roof leaks, the bugs talk to each other, the neighbors are from Guatamala and let everyone know it @ 3am. There is free parking and the rent is cheap but I don't have a car so the parking is wasted.
Best way to save money, BTW is to get rid of the goddamned car. $10k a year for absolutely nothing, expensive time wasting.
Not having a car gives me free rent, basically.
To live in a nice place you usually have to buy and you have to spend real money. Try renting an apartment in Seattle or San Francisco or Boston. A nice apartment in DC will cost you $4k a month. $48k will pay a mortgage on a nice (small) house in town.
If you want to live on your terms instead of living by others' rules you have to buy. If you have wife/husband/children you have to buy. Peeps buy into school systems. The best schools are generally in areas without apartments. Your choices would be limited, perhaps an 'unofficial' apartment, a basement without windows. Not too many families w/ kids want to live in a dungeon.
A lot of rentals won't accept children (or pets , either). Pets are usually okay if you buy (except for condos or coops).
Everything in life is a gamble. At the end of the day, you're dead! Buying a house might be the best thing you ever did in your life (provided you are prudent with your 'due diligence' and don't get yourself underwater with a loan). There is more to living than cheap housing. There are friends and activities, clean air and water, community and culture. Most of suburbia is investment done up in vinyl siding. This is a big reason why suburbia sucks so badly.
There are a lot of cheap houses in the US: in Florida, Georgia, most rural areas (learn how to garden/farm), in many Northeast cities. You can buy cheap houses in nice nabes in Spokane, Washington. It's a nice city, not the gnarly railroad town it used to be with block after block of dive bars, six or seven of them lined up one after the other.
I looked in coastal Maine last summer and attractive houses (not suburban garbage) can be had (need work) for under $100k. At that level, price depreciation is irrelevant. Many of these houses are 100 years old and are very strong and well made. Paint and minor repairs are enough to keep them going year after year. Ditto, New Orleans. A solid house can be had for very reasonable amount.
Mind the floods ...
Keep in mind, renters pay all the real estate taxes and the utilities. Most places rental property tax rates are much higher than rates for single family occupants.
If you live in a small town, you can go to town meetings and get involved. You can say (yell) how your taxes are spent. Try doing that in NYC or other big cities where the bosses run the show in back rooms.
Please tell, why does a car cost you $10k per year?
Strategic Default
At the risk of offending people who live there, what I find amusing about this article is that the 10 places listed literally reads like a list of places I wouldn't want to live even if you gave me the house for free.
Sorry if anyone who lives there is offended. It's nothing personal. Those places just aren't my cup of tea.
Didn't these morons at MS lose $4 billion on one real estate deal?
Good places to buy: Hmmm, tell that to the people who recently purchased a home, remodeled and then found out they aren't the rightful owner. Most home titles are a mess.
Rent...in Detroit? Are you nucking futs? How much do you care about your personal safety? Belongings?
Even in reviewing our house's mortgage and assignment history - followed the securitization, etc., I found the records are royally screwed up. It is a great house - tennis courts, acerage...no buyers to date, but even if someone purchased it - who's to say some bank won't come forward sometime therafter and say we still owe their institution a mortgage (wrong co paid). The company last listed isn't even the legal owner based upon audit conducted. That company doesn't know our home's mortgage from a hole in the ground.
It is a tangled web.
Take the money you would pay as a down payment and instead buy and hold physical gold. As the price of gold rises (in dollars) and the price of homes continues to fall (in dollars and even more-so in gold), you end up way ahead.
Besides, if you rent, you can move when jerks move in next door or nearby, or when the neighborhood drops faster in value as it ages.
And besides, when you see a better job or environment elsewhere, you are GONE as immediately as you wish --- no hassles, no 7% loss to real-estate agent rip-off artists, no wondering whether your property will ever sell. Just get up and go where life treats you best.
Which keeps open the most important freedom of all --- to get the hell out of the USSA and away from the most egregious predators in the history of mankind.
Seriously. Does this Tyler work for Freddie or Fannie?
possibly just the real estate agents' lobbying arm. imo the decision to buy or rent, even just as defined by the money costs of each, has got to address the future value of the purchased home and the future cost to rent at the end of the lease period. whatever the above analysis uses for the future value of the home and the cost to rent, i'll take the under as they say around here.
Puh-leez!
Renting = Freedom.
So long as you take advantage of the money you can save while renting and can move to a better location when the time is right, it makes no sense whatsoever to chain yourself to a property and taxing municipality with all of the liabilities inherent in ownership.
The post is nothing more than an real estate propaganda piece.
Stay free!
had fortune to buy a house when there was a controversy in development and people were afraid to buy-I got a bargain-saw price rise to unbeliveable levels but even after decline I am still more than fine
and I have a house where I feel comfortable, etc. I have a feeling of permanence and the neighboorhood is older and very little turnover. People take care of THEIR places with pride.
think about intangibles and you have to be a little savvy too.
Hope you bought brand new...otherwise someday the rightful owner may show up with a registered letter...
The "article" only talks about the cost of the mortgage when compared to rent. There are also these pesky things called Real Estate Taxes! They are not fixed and can go up at the whim of your local politicians. There are parts of the country where a $250k house has $7k in annual taxes. Tack on that extra $600 a month and suddenly owning doesn't look so good, especially when the value of your home goes down and your taxes still go up!
Another forgotten point are HOA fees. Living in a big city high-rise and you are easily looking at a minimum of $800 per month for these fees (gotta pay the door man, pool boy, maintenance budget, manager, etc). I realize these don't apply to everyone, but those that want the high paying, big city jobs and lifestyle gotta pay up.
So keep in mind that you are renting your "owned" home from your government landlord (by paying taxes), and in some instances from your HOA (who can sue you if you don't pay).
UN'S AGENDA 21: SUSTAINABLE DEVELOPMENT, AKA SMART CITIES, URBAN-BOUND, LAND GRABS FOR WILDLIFE PRESERVES See Kyoto agreement.
Part of the plan for the NWO is NO PROPERTY OWNERSHIP FOR THE PERSONS/SLAVES. They are in the process... slow, but this is their intention for globe .
Rented all my life (apartment BLDG.). Pay about half of what property taxes are for home owners here. Saved enough cash to retire early. Yes, in a rent stabalized apartment. Could buy a house for cash, maybe two but why? If I have a problem, I call the super. Living good.
Is this article a joke? RE is tumbling 30-50% due to massive foreclosures, defaults, stagnant wages and sky-high unemployment.
Add to that tons of improper title closings and fraudulent mortgages and the "buyers" may not actually even own the house.
To make matters even worse, Zero down loans are still being handed out which portends a contunued RE depression for years to come.
Renting allows you to minimize your investment losses as well as remian foot-loose and fancy free to take a job anywhere, anytime. Good luck trying to sell a house now.
Put down the Boing and get real. Try reading some real statistics like Dr Housing Bubble publishes.
http://www.doctorhousingbubble.com/
GL!
Foot-loose and fancy free? Free to live where someone else tells you that you must live if you want a job? Can’t own your own home once you get there because they may tell you to move again, so you end up paying for SOMEONE ELSE’S house instead?
It doesn’t sound very “fancy free” to me. Sounds like a wage-slave buying at the company store, but to each his own. I paid cash for the place I wanted in the place I wanted to live. I work for me so I don’t have to worry about someone else telling me that to maximize HIS profits, I have to live in a place that HE chooses.
Yawn... We won't hit bottom in real estate until everyone despises the mere mention of the word. Real estate (and most bubbles)correct 90-95% peak to trough. Until then happy being a renter (and have been since I sold my property in 2004). :-)
Everyone needs a place to live. Either pay a mortgage or pay rent (which pays the mortgage, taxes, insurance, maintenance, repairs AND the landlord who owns it).
Love renters, they have kept me in Mercedes Benzs since 1973 and paid off my mortgages for me.
Rent and pay the premium that absolutely insures you will have nothing in 30 years to show for it.
Owning isn't for everyone. Know which one you are and plan accordingly.
But hey...you put money into a corp pension plan but not a mortgage? Ha! What are the odds you will get your pension money?
Buying is always great, which is why there are record numbers of foreclosures, right dumbass. Plus if you get a job in another city, you get to pay a realtor 6% to move if you can even sell the house. My manager is flat broke despite she and her husband making combined over $170K/yr. She said it was because they have moved 3 times in the past 8 years and bought a house each time. All their money went to the realtors and mortgage brokers. They love buyers.
Everyone needs a place to live but not everyone needs a house to live in. A couple with no children can rent a nice apartment or townhouse in my area for $1000 instead of buying a small house for $1500. No maintenance, not worries. They have an extra $500/mo to invest for 30 years that mortgage slaves don't. What are the chances your property will last 30 years and the area won't become a slum with section creeping everywhere?
What you knuckle-dragging pumpers always forget to bleat is that the buyer has to buy low in order to have the advantage. Prices haven't been low since 1993.
I like that statement:
Home ownership is stated to be "units occupied by the owner." What everyone fails to mention is that most of these units are mortgaged to the hilt and thus owned by the bank. The real question is ... what is the home ownership rate with mortgages factored in?
Advantages to owning:
1. Your monthly payment nominally stays the same over the 15 or 30 year mortage, while inflation continues. After 15 years in my house, my house payment is around $600, renting it currently would be $1200. Rents go up, your payment doesn't. Inflation isn't going away anytime soon, and even in the best of times, there is inflation as long as their is fiat currencty.
2. Your landlord can't kick you out of your home. You can rent out all or part your home if need be.
3. You can remodel, customize, alter your home the way you like.
4. Owners take better much care of their houses and property, I'd much rather live in a neighborhood of homeowners than a neighborhood of renters.
It's simplistic to say that renting is better than ownership. If the home mortgage deduction is destroyed, and owning becomes less of an option for people, I'm sure we can look forward to a future of a nation living under corporate landlords.
Serfin' USA.
1. How many people stay in the same home for 15 or 30 years? Most end up having to move due to employment or family
2. A renter doesn't have to pay 6% to move and doesn't have to wait months or years to find a buyer. Who the hell wants strangers boarding in their house and sharing the bathrooms and kitchen?
3. You can also pay thousands to repair your home and spend weekend doing maintenance, landscaping and repairs
4. It always depends on the neighborhood. My brother lives in San Francisco where many people rent and the neighborhoods there are nice. The same with many parts of Manhattan.
I've rented and owned, so I know there are advantages and disadvantages to both. Many people are single or have no children and the mobility and free time is a much bigger advantage than being anchored to a house.
Please... if you are renting in a nice area of Manhattan or San Francisco then you have few financial difficulties.
You left off that when hyperinflation takes hold, you can pay off your mortgage with a few oz of gold.
We are due for a second wave of forclosures hitting the market which should put to rest any thoughts of RE appreciation. In addition, there is still already a huge back-log of forclosures. $271,000 as an average is misleading. The median house price is probably a lot lower. Prices should continue to drop more; for how long, who knows?
$60+k median income in Upstate NY? In Oklahoma? None of those areas are exactly Silicon Valley or a Financial Hub. Does that "median income" factor in all those unemployed adults who live there, or only the college personnel since many of those listed are college towns?
The national median is < $50k, I have a real hard time believing a place like Tulsa is 20% above the national average.
This isn't analysis, this is realtor propaganda.
This is the absolute worst time to tie up capital in real estate. Sure there are some neighborhoods in Detroit where prices have gone about as low as it's possible to go, but that's because exactly nobody wants to live there. I know someone who bought a house in Detroit for next to nothing, as part of some idealistic artist movement to revive some burned out neighborhood. He lasted less than a year before he just walked away and wrote off all the money, time and effort he'd put into it. The original residents saw the artists as nothing more than soft targets for burglaries and muggings.
Here in NYC prices still have a long way to fall.
Pay cash, the equation changes. Also, steer clear of usurious municipalities and live where taxes are less than 1% of assessed value.
… and settle down for crying out loud. Stop moving every 5 years and become part of your community.
When your job moves, you have to move. Look at Michigan and Ohio. You expect people to settle down where they can't find work?
i bought a house so i could live in it for 3 years and not make one payment. if i rented i'd be out in 1 month if i didnt pay
I love how people point to pittsburgh as one of the best markets to buy in. Consider this, our entire industry in this city is based around healthcare and Higher Education. i believe both of those markets are bubbles, mini bubbles if you will that are only still alive because the government has decided to take both over. At some point soon, like all bubbles they will pop, and then pittsburgh will be right back where it was in the 80's. Then all the landlords who have been buying up in the city will strugle to find renters for their high leveraged properties. Wonder which way the price of rent will go then? So even markets that people consider safe, are very very risky.
Hell just wait until endless unemployment checks end, then we'll see which way all economic indicators go!
Yes go buy a house in detroit where government can't even give away a house for $1.
Home prices are down because lack of potential wage increases. No job, no house. No certainty of keeping your job, renting is better. Especially these days when you can get laid off tomorrow, just rent a 1bdroom and save the cash so that you have the option of leaving America when shit hits the fan.
buying a home in these cities is investing longterm in clusterfucked cities.
This pump ad is hilarious. I live just south of OKC in Norman. I wouldn't buy a house here with someone else's money. OKC, Midwest City, and Moore are dependent on Tinker, AFB. Norman is dependent on the University of Oklahoma. If either of those two government money pits fold, this area is fucked. It will be back to cattle rustling and depleting oil reserves. Show me a local economy which is supposedly growing and I'll show you the government institution making it happen. Get a clue.
Prices are still declining in every market I am familiar with; anything to the contrary is based on phoney realtor data. Hence, your conclusions are dead wrong.
sources: realtor.org - that say all we need to know
According to my calculations the key is inflation to "capital gain" ratio.
If inflation is flat, and there is no possibility to make any capital gains, so rent could be even twice a mortgage payment to make equal deal.
for the rest just read http://patrick.net
This is a gem!
Renting gives you flexibility and greater certainty. Maintenance on a house can be a killer both paying for it or providing it personally. Given Boomer demographics and interest rises that are coming at some point, that house is going down in value. For a generation. So factor in losing another 30% off the value of the house plus decreases in rent if there is rent deflation.
If you must buy, get a 2 or 3 family in a city with a future. To a great degree all real estate markets are local.
Everybody loves renting when real estate prices are falling. And when prices are climbing everybody wishes he had bought 2 or 3 years before.
Does no one remember 2006, when people tuned you out if you didn't tell a story about housing prices. How houses weren't even on the market for a day and sold for $80,000 over the offering price.
And some real estate sold as investment and the first thing the buyer did was raise the rent.
It's the middle of a depression, and somebody is still telling people, "it's the best time to buy a house."
When all the housing parasites are killed-off, and prices return [or go lower] than historical norms, and you have enough money left over to actually do something else, then it will be time to buy...probably 10-20 years [give or take a day or two].
and in 20 years who takes the home off your hands
the coming generation has student loan debt llike a chain around neck.. they will be the next buyers
That's why the purchase price is always more important than the selling price.
Are not rental properties owned?
I'm pretty sure they're talking about the occupant of the home
It is extremely foolish to buy any property which has a Home Owners Association.
There are 350,000 HOAs in the US. Half are in extreme financial distress and will soon be in bankruptcy. Most of the rest of the HOAs will soon be in financial difficulty.
When an HOA files a lien against any of the members or enters bankruptcy no bank will lend on any property in the HOA and all the properties in the HOA will become unsellable.
In addition, banks are requiring all HOAs to drastically increase their reserves for repairs and maintenence and for unpaid fees and special assessments. This is painful to the owners.
Banks are also refusing to lend on any properties where the HOA has any Time Share units. If your HOA has just one Time Share unit included in it you will never be able to sell your unit.
Who the hell buys a primary home in a building with timeshares?
Great comments.
Any purchase of real estate at this point in time is a gamble. It's always a gamble, but it is especially risky now. Rather than put everything I own on the line, I would wait if I was interested in purchasing. The oversupply is NOT going away anytime soon and the situation will clear up over time.
One area where the comparison in the original post falls down is the assumption that renters desire to rent an entire home. I would never consider such when a 1 or 2 bedroom apartment is plenty of space for my needs. That automatically drops my monthly rent well below what I would be paying on the mortgage, taxes, and upkeep required for a complete house.
Then again what the hell do I know? I have very little debt, lots of cash in the bank and some PMs in my personal stash. The "luxury" items I buy these days are worthwhile books. To each his own I guess.