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Saturday, May 14, 2005

Buying Versus Renting A House

I have written on this subject before. It is not an easy answer. It all comes down to where you live in my opinion. Make no mistake about it though. Right now there is a huge real estate bubble just ready to burst. It's really just simple economics if you break it down. You have only 10% of the population able to afford a median priced home here in California and certain other parts of the country. You also have interest rates on the rise. Over 50% of people have an adjustable rate mortgage now. That is a ticking time bomb ready to blow. The bottom line is that this feels like the NASDAQ 2000 stock market. It costs less to rent now than it does to own. Alot of people think that by owning a home they have an asset. A home is liability! An asset is something that throws off income like owning a mortgage or bond. I'll give an example. When I moved into my house back in 1998, the rent on the place was $1325/month and the house was priced at $205k. Right now, the same house is selling for about 550k and leasing for $1800/month. Do the math. It's cheaper to rent now than own. If you put 10% down, that's $55k. You would have a 90% 30 year mortgage @ 6% right now. That's $2,982/month versus $1800/month by renting. Here is another good article about this subject


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