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April 15, 2013


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As a landlord myself I do not see the news in the same light. If homes are a better deal then that means rents are drawing and holding higher. Mixed news will be when America's business and tax model improves where upward mobility occurs across the classes.

NYTime posted a comprhensive calculator that calculates whether it is better to buy or rent. It takes into consideration a lot of things like maintenance and appreciation. It give you a point when buying is usually better than renting.

You can check it out here:


It does not necessarily mean that.

Rents could be falling but housing costs fell further. It turns out rents have been rising but it doesn't have to mean that. In fact the latest numbers on a national level show housing costs up 7-10% but rents flat year over year.

If the economy continues to improve and lending restrictions loosen more renters will become buyers. This could put some downward pressure on rents. That is exactly what happened during the housing bubble. When houses are easy to buy some renters buy. Many renters now are former owners so many of them will one day want to return to owners.

However as they do that some investors who entered the market when recently will be encouraged to sell at higher prices which will remove some rental inventory. There are lags of multiple years but over time inventory tends to balance with demand.

The CNN's (or Trulia's) calculations over 3 or 7 years include buying and closing costs, but I'm wondering if they actually include what is the biggest cost for me in the whole RE business - the RE agency commission that the seller is paying on the sale (all non-investors are using agents).

We can compare initial and maintenance costs of renting vs owning, but if I was the renter I could just go away any time and look for a new place. But when I own, there is a significant cost of selling in agent commission, another set of legal fees, etc. This alone at least doubles the cost of owning option if you consider a full cycle.

It puzzles me how RE agencies reports always promotes owning over renting. Though, maybe it shouldn't, since this is where they make the money. This is like listening to your financial advisor that sells overpriced stocks for the commission (because market is always going up!).

I just bought a house and we will be renting out our old townhouse. I think it depends on how long you stay and how much maintenance needs to be done to keep the value of the house up.

In Silicon Valley home prices are still surging and many, including my own, are now well above pre-recessionary highs. Most sales where I live are going for more than the asking price with multiple offers.

Buying is ALWAYS the smart thing to do if you plan on staying in the same location for many years.

I am a real estate attorney. This question, like most, is much more complicated than it seems. Everyone should look at their personal circumstances and evaluate the consequences of their actions-- before they act.

Every situation is unique-- and ultimately, it boils down to running the numbers.

To answer this question, one needs to evaluate their total current financial picture, make valid and reasonable assumptions as to their future and--sum up all the moving parts to arrive at a solid conclusion.

I know-- it sounds vague and all but to say that renting is better or buying is better as a blanket statement is impossible.

FMF hit it close to the mark in his analysis by stating that all real estate is local. I am adding another layer that all personal finance decisions are unique as well.

What is best for me is not necessarily best for anyone else.

Of course buying is better in most places! When you rent, you pay a premium on top of taxes, repairs, and mortgage rates, and that premium becomes the owner's profit. That doesn't mean that there isn't always going to be a strong market for rentals, either because people are fairly transient, because they hate home ownership because of fear of maintenance, or because they just can't manage to save for a down payment or qualify for a loan. But it only makes sense that renting costs more!

Rent vs. Buy is always an interesting discussion.

For my family, we rent and will continue to rent until my husband is no longer in the military. We actually rent on our military installation and it is cheaper than a comparative rental off base without having to hassle with military clauses. I know of many military families who do/did buy and I know of many who were left trying to rent houses they couldn't sell on the other side of the country when they had to move.

I think buying is better than renting if you plan to stay in that location over many years. It's like forced saving. I know properties don't always appreciate, but I'm sure people who purchased in SF 10 years ago are happy now.

We prefer buying, even if it's not the penny-smart thing to do, because it allows us to make it more of a home.

My wife and I are planning to rent our primary home for the near future. Currently we both own AND rent, since we are in the process of putting our previous home up for sale, while living in a rented apartment where we have relocated to.

The main reason we are looking to be renters is because we are unsure of the length of time we want to be in this particular area. We also want to learn the area and not deal with maintenance for a while, but mobility is the key reason we are renting right now.


I just bought for the first time about a year ago. But my neighborhood has extremely high demand -- a unit sold a few weeks after mine for $50K more than I paid. If I lived outside of a major metro area like Silicon Valley/LA/Boston or NY I doubt I would buy. These markets are more protected from price decreases because of the incredible job opportunities we have here. Also, in NY the market (like in Miami) attracts a lot of international buyers. You don't have that in most areas of the US.

In my area, buying is still a good bet, but it is getting closer to whatever your goals are. There are some places in the US where renting has always been the better idea and I don't see that changing anytimt soon. NYC anyone?

Making a decision with a recent year-over-year comparison is dangerous, especially if it's just the last year. So the fact that home prices rose "7% year-over-year last month while rents went up only 3.2%" doesn't give you anything conclusive. Don't we have enough examples of people taking action and thinking that whatever just happened will continue to happen forever?

In my case I bought a place several years ago because I would spend about as much as I was spending on rent. Even if the property value stays the same or goes down a modest amount, I'll come out ahead financially. And I certainly enjoy being an owner more.

Nothing terribly wrong with renting, but I probably wouldn't do it again unless I thought I was going to move around some.

Eh. Over the genuinely long run, the return on owner-occupied residential real estate is just not that high compared to other investments. Unless you have the psychic ability to allow you to time the market, I think you have to be sentimentally invested in the idea of owning a home for it to be truly worth it.

I just never have been. I can imagine running across a good deal in a building I really liked and taking that up, but I can't picture myself buying a house just to be "buying a house."


You are stating a number of things about my comment that simply are not in the text.

You implied I was advising people to make a decision and take action based on an excerpted set of statistics from my comment. I am curious what decision or action you think it is that I was advising based on those statistics. That last year prices rose and and rents did not so it's a good time to decide to do what? To rent? To buy? To do something else? I am not sure what advice you believe I offered but whatever it was you seem to think it was ill advised.

If you read my comment carefully I think you will see that in no instance did I suggest or even hint at taking any action; buying, renting, or otherwise, based on those statistics nor did I suggest those statistics should be expected to continue.

The reason is because I didn't offer the statistics as a guide to making a decisions. I offered them specifically to respond to the direct comment I was challenging, namely that if buying homes is a better deal that means that rents are going and holding higher. Those statistics were simply one example of rents not rising in that environment. They were not intended to provide guidance for any decision about buying versus renting. Unless, perhaps, I have mastered the art of subliminal messages. Unfortunately, if I have, it's operating rogue because it's subliminal for me as well.

Financially, buying is almost always better than renting, because at the end of the mortgage, you have a physical asset that reduces your expenses (no monthly rent), and if you have to move, it can make you money (rent it out). This applies to a price-range YOU know you can afford, not what the bank says you can afford.

That being said, not everyone is cut out to own a home. The tenants we rent to have absolutely no business owning a home - they are unable to do the maintenance, and can barely afford to pay rent (or just chose not to save properly for their rent expense). They could not be expected to properly maintain a house.

Also, not everyone is cut out to be a landlord. So, even though financial it almost always would be better to buy, its not always the smartest move.

Another factor I never would have thought of until the recent housing flux is whether you can get a non-recourse mortgage or not. I always thought leverage would work horribly against you in a falling price market, but if you can get a non-recourse mortgage and finance completely, when it comes time to move you can keep any gains but can walk away on any losses. This greatly encourages taking the chance in a shorter term situation.

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