To put “your rent is not wasted” in perspective, I’ll share the situation my wife and I are in. We pay $1700 in rent up here in Santa Barbara, but would have to cough up $5000 a month for an acceptable house (my wife demands a proper garden). We’re sitting on a nice down payment, but right now we’re saving $50k (including 401k, Roth, etc) a year, and growing our $100k+ down payment. When we pull the trigger, we’ll only be able to save about $15k/year, and the down payment stops growing money. When my wife stops working to make babies and eggplants, I’ll be docking my savings to keep my 401k match… All that roughly adds up to at least $50k/year incentive to keep renting. So, looked at in a certain way, my $21k annual rent pays for a roof and a yard and $50k of cash. Meanwhile, my landlord lost $30k of paper equity on the house this year. Pretty good deal, eh?
Now, if housing prices were going up, I’d be happy to give that up… that’s what the money is for, after all. But as long as prices are nominally flat, we’re doing much better renting. So for me, it isn’t a question of whether prices are falling yet, but whether they’re likely to grow 6%/yr anytime soon. And the answer to that is obviously not.
