“- Rents for single family homes are increasing not decreasing because there are more renters and that is bringing the rent/buy spread tighter and tighter. The spread increased rapidly (making renting much cheaper) from 2003 – 2005 as interest rates plummeted and loan origination standards weakened thus inflating housing. (who wouldn’t want to buy when you didn’t need any money down or even decent credit?) As more renters clamor for fewer available homes the rental rates are inflating.”
This is simply false. I can tell you emphatically that rents are going down right now. My lease has been up for like 10 months and I have been on month to month. The entire time I have been checking rentals on a weekly basis, over the last 3-4 months, rental properties started sitting for long periods then dropping when they could not rent them. I’d even say just by casual observation there has been a 10% decline in rental prices for my area (92103). Probably the cause is the economy, people are doubling up, kids are moving home etc….
“- Foreclosures are not equally spread throughout the county. They are clustered in areas that are shall we say subprime in terms of both their location and their constituency. The vast majority of “bubble buyers” without stayng power who qualified when they shouldn’t have been able to and the speculators will be washed out of the market through foreclosure or forced sale within 12 months. That’s not to say there won’t be more foreclosures but it is to say they will return to more historical norms.”
This is irrelevant, it will only affect the time frame in which an area will see decreases. It’s all connected. Also, foreclosures are off the charts and the downturn is only going to make it worse. What are you thinking?
“Both the run up in prices and the quick retreat are unprecedented in terms of how quick they both occurred. Those predicting this downward cycle lasting for another 5 years or whatever are wrong in my opinion. I believe many areas will hit bottom this winter and you’ll see a more normal market developing where you’ll see +/- 2-3% per year in 2010 and beyond.”
This should be labeled under: Things I hope are true. Because that’s all it is, wishful thinking. If you have not noticed we are going into a recession and it won’t be over in the winter, not by a long shot. Last time I checked recessions affect housing markets negatively.
Go ahead and buy but do it with eyes wide open. Do not concoct downright stupid arguments around what you want to be true. When you looking at your next prospective house make sure you do some calculations. Take 10% of the purchase price plus the difference in what it is to rent the same home for say three years, add that up and say I am giving this amount of money up to paint my walls purple if I want to. After you do that calculation see how you feel…
