The abnormally low interest rates are one of the primary factors for this phenomena, nobody is disputing that. While it’s been discussed and proven that rates don’t necessarily have a proportional cause and effect on prices that logic would suggest, it has everything to do with rent vs purchase ratios. The good news is they are backwards beneficial, meaning that people who purchased at higher rates can refi, people purchasing once the rates have risen cannot. Low rates benefit or save existing owners, but there’s no guarantee for the future owners to benefit.
For instance, my chosen zip code was a little ahead of the decline so more than three years ago the rent vs. buy threshold was crossed. Even though I jumped in when rates were about 6.5, I was able to refi to a lower rate, making the advantage even better. If you own, it’s better to guess the rates incorrectly than the prices. If they go down, chase them and get a fixed, if they go up, sit back and open some wine, it’s pretty simple stuff.
The article for me explained sheeple mentality and defines piggington beliefs. The masses rushed to buy when owning cost twice what renting did because it was the cool thing to do, piggs didn’t. Now that buying is on par or cheaper than renting in many areas, piggs are buying in droves and the masses are afraid of real estate because it’s not cool. The masses have the fresh memory of how people got burned in R/E, but we know why they got burned, unfortunately they probably will never figure it out. It’s math homework for grown ups and it gives people a headache, they’d rather listen to co-workers and relatives than do the homework.
When you boil down the real reason for buying a primary residence, it’s not an investment, it’s an inflation hedge, a way to fix your rent. The way our economy works it’s rigged against any sustained deflation, inflation over time is the system. Find a 60 or 70 year old lifetime renter (not a strategic renter like most of us) and ask them if they can think of a time in their life in hindsight they wish they would have bought. 97% of them will cite at least one example and of course 3% of the population is crazy. I firmly believe that I will look back in 20 years and wish I had more access to capital right now and I had purchased more r/e, but then again maybe I’m in that 3% that’s crazy.
