I’m not sure that the assumption that when rents rise to a level where it makes more sense to buy, that most people will buy. Here in the outskirts, we crossed that threshold over two years ago. It didn’t change the rental market hardly at all. Vacancy rates seemed the same if not tighter, rents didn’t go down, I just checked my 2006-2008 rental, up about 10% total. Yet it’s cheaper to buy that place than rent it, right now and has been that way 2+ years. In 2008, when I moved out, I could have bought for 140k, rent was $1500, rent now is closer to 1600-1650, buying at about 160k, so it’s the same numbers, it’s still a few hundred cheaper to buy plus the tax deduction. I figured the taxes, hoa, insurance and pmi for an fha loan at about 600 mo, mort at about 600, so it was 300 less than renting. They do sell them quickly when they list, but they also rent out quick, within days.
So why is this? I think it’s a bunch of stuff, there are losts of people with crappy credit, probably more than ever before. It’s hard to gt a loan with crappy credit. People are afraid values will go down, I suppose that will be in the front of people’s minds for about a decade. People have minimal faith in their employment, even those with jobs are scared.
For all of these reason, and a few more, I think there will be a lot of people who will rent even if they can buy and it’s cheaper to buy. Just because it makes sense doesn’t mean people will do it. That same complex I’m referring to sold the units at about 400k for years, even though rent was $1500. It didn’t make sense to buy, but they did. Most people are just not that bright, it’s not just a few, it’s most, so rents could go up, purchase prices could stay the same or even go down and nothing will change, people are idiots, plain and simple.
Now in SD, it’s still cheaper to rent, but when that changes, I think there will still be lots of renters, the patient piggies finally buying aren’t enough to skew the stats.
