Homeownership at most affordable level in 15 years
Low mortgage rates and falling prices bring the cost below rent in some areas, but other factors discourage buyers.
Owning a home is more affordable than at any time in the past 15 years, according to a new analysis from The Wall Street Journal.
Low interest rates and falling home prices have combined to make renting cheaper than owning in 12 of 27 metro areas that were part of the study.
Despite that, the rate of home sales remains low.
"It's one of the most striking developments of the housing downturn," Paul Dales, an economist at Capital Economics, told The WSJ. "The initial building blocks for a recovery are in place, but the legacy of the recession is really preventing households from taking advantage."
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The city where owning made the biggest financial sense was Atlanta, where the monthly payment on an average home (including taxes and insurance) would be $539, assuming the owner paid 20% down. In contrast, the average rent is $840.
The city where it makes the most financial sense to rent is San Francisco, where owning would cost $1,452 a month more, not including the costs of home maintenance. (New York was not included in the analysis.)
Other cities where buying was cheaper than renting were Chicago; Detroit; Jacksonville, Fla.; Las Vegas; Miami; Minneapolis; Orlando, Fla.; Phoenix; Sacramento, Calif.; St. Louis; and the Tampa-St. Petersburg, Fla., area.
Places where renting held the edge were Charlotte, N.C.; Dallas-Fort Worth; Denver; Houston; Los Angeles; Nashville, Tenn.; Orange County, Calif.; Philadelphia; Portland, Ore.; Raleigh-Durham, N.C.; San Diego; Seattle-Tacoma and Washington, D.C. The WSJ has an interactive chart that shows the average rent and average house payment.
Homes may be affordable on paper, but many Americans can't afford them because they have lost jobs or suffered declines in earnings. Some current homeowners who would like to move up to larger homes can't sell, and some would-be first-time buyers can't buy, because they can't get mortgages.
Plus, the housing crisis has ripped off Americans' rose-colored glasses when it comes to homeownership. Commenters at The WSJ pointed out other reasons for not buying a home. One key factor is the need for mobility in an uncertain job market.
As William Prichard wrote:
"Renting has always been the better of rent vs. buy. Even if renting was not cheaper than buying, people would have a much less hassle, e.g. no taxes, HOAs, home insurance, maintenance, worry of the value of their house, unbearable neighbors, mobility to chase the new job. 10, 15 or 20 years down the road you have an old house that is requiring more money for maintenance. It was the government telling you that it is the "American dream" to own a house, but history shows that Americans are very mobile. I never could understand owning sticks and bricks when you can buy concrete and steel."
As someone who has been in the housing and mortgage default servicing industries for over three decades I can categorically say that I have never seen a more incredibly awful housing market in "most" ways. While real estate, just like our general economy, has gone in cycles that seem to happen every ten years or so, this one has been by far the worst since the Great Depression and during World War II. It has been exacerbated by the intervention of the federal government. It is arguable if this intervention will prove to have been wise or not. My own professional view is that had the government allowed the private sector to deal with the housing crisis rather than demand that banks try to modify nearly every loan that was in default, we would have experienced a deeper, yet shorter recession. And, we would already be in a real recovery rather than an artificially propped up one that has protracted the housing slump.
All that said, there is no question that if you are in a position to buy real estate today there are great buys out there in every price range. Why shouldn't there be, prices are on average down more than 35 percent from their highs in 2006. In some markets, they are 50 percent of their high ( artificially inflated) "values". The federal government, including Fannie and Freddie, are most responsible for the housing bubble that burst. BUT, because of the artificial demand created by so many irresponsible loan products available in the early 2000s, there became enough greed to fuel a more rapid burst. Space doesn't allow me to go on further, but the bottom line is that NOW is a GREAT time to buy real estate if you have cask or access to a loan.
Pamela, me and my husband bought a house in Florida around Dec 2008, when the market crashed. We bought in Hernando County, FL - Sinkhole f-ing capital of the world. We have sinkhole coverage and in total, insurance costs us $1,000/year with Citizens. That is $83/per month ontop of our mortgage. Don't tell me sinkhole coverage isn't affordable.
Buy within your means. If you buy a huge **** house, your insurance costs are obviously going to be MORE since your insuring SO MUCH MORE HOUSE.
Also our roof is original and they still insured us. House was built in1993, Scott Nicoletti home. 1500sqft. Cathedral ceilings and all. It looks like a brand new home. We bought it for $77k and fixed it up since it was a foreclosure. It had holes in walls, stained carpeting, no appliances, etc. Our mortgage every month with taxes/insurance is $652.00. We moved out of a $800 apartment into this. Best decision we ever made.
Right now is a great time to buy. Interest rates are half the rate they were when we bought. And the houses on the market now are much newer and bigger...If you have a stable job and are renting, look into owning!!
A good rule of thumb is, if you can afford to buy a home, then do so. Renting is a dead-end. Rental payments are always climbing with the "cost of living," and the cost of living always goes up. If the landlord makes any improvements to your dwelling, and that includes fixing a leaky faucet, then the rent goes up. And, ultimately, all of your rent money goes away from you, never to return, while buying a home will lead to equity.
Don't expect to use your home as an ATM machine, or flip it. It is where you live. Once it is paid off, you own it. You have control over any and all matters concerning your property. You might even rent it out--sure, become the landlord.
Buy property. They're not making it any more. Population continues to rise = a no-lose situation.
World war 3 won't come a day to soon.
Good luck owning a home in Florida. The home owner's insurance will be almost if not more than your mortgage and that's if they choose to insure you. Stupid Citizen's is a joke, they won't pay claims and will not insure a home unless the roof is newer.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.