There have been a number of reports recently claiming that renting is more expensive than buying a house. This is a great thing as everyone involved in selling, building and financing houses would tell you, especially if it were true. Unfortunately it is not for a variety of reasons, one of them being that owning the home you live in just isn’t that good of an investment, but we’ll get to that in a moment.
The first hurdle is the challenge of amassing the 20% down payment. On the average US home price of $242,300 the downpayment would be $48,460. That is essentially one whole year’s worth of the US median income of $51,413, so the question is how long would it take someone to save that much? This question is nearly always ignored in these comparisons. But say we all have a rich relative who leaves us the downpayment in their will, it’s all good after that right?
Some of these type of reports simply compare the average local rent to the mortgage payment for the area’s average home and therefore can be discounted out of hand. Others include taxes and insurance which is slightly better but they are still missing a very big piece of the cost of owning and operating a home; repairs and maintenance. Continue reading Rent Vs. Buy And The Great Myth of Homeownership as an ‘Investment’
Home prices have crashed. Interest rates are at all-time lows. If you’re in the market to buy, homes are more affordable than they’ve been in years. Or are they?
From a WSJ report posted by Motley Fool:
The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages. … That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
Up 22%! yowza! More from MF:
The average home in America now sells for $272,000, so a 20% down payment totals about $55,000. The median household net worth, meanwhile, was $67,000 in 2010, suggesting the average homeowner needs to tie up a tremendous amount of their net worth in a down payment. Can you really Continue reading The secret about home ‘affordability’ they don’t want you to know- Good for Apartment Building Investment
In yesterday’s MFE article What Does the Fed News Mean to Apartment Owners?: “the median net worth of middle class families plunged by 39 percent in just three years.
The Fed used a hypothetical family with $126,400 in 2007 to prove that point. In 2010, that same family’s net worth dropped to $77,300. Median family income also fell—from $49,600 in 2007 to $45,800 in 2010. The number comes from the Fed’s Survey of Consumer Finances, due out this coming Monday.”
Then in a WSJ article Why Housing Affordability Is a Mirage: “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago… the total cost of homeownership, as a share of a borrower’s income Continue reading Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily