Let's put this to bed, once and for all. Say a guy pays $2400 rent for a nice SFR that has "current" market value of $625,000 (which would cost roughly $4272 per month using a 5/1 Option ARM, including taxes). It is costing him $22,464 less per year to live in this home by renting it than buying it. Even if his rent went up by a ridiculous 25% to $3000 per month, he would pay $15,264 LESS per year to rent the home than he would to buy it. Finally, if the value of the house were to come down (as it will…duh) to 2001 prices or cheaper in the "overshoot" of this correction, it would come down by well over $200,000. I submit to you that losing $200,000 of value in your house (or perhaps MUCH more) hurts a LOT worse than having to pony up an extra $200 bucks a month in rent as you suggest may happen. Not buying any of the argument for higher rents…I will stay out of the ownership game until both rents and home prices are suffering dramatically…likely beginning late 2007/early 2008.
