Tuesday, September 18, 2007

The smart money is on renting

Seth Sandronsky sez:
Are you a renter now? If so, are thoughts of buying a home dancing in your mind now that U.S. housing prices and sales are dropping like a rock? If so, consider this. Home buyers need solid data to make an informed purchase. Fortunately, Washington, D.C.’s Center for Economic and Policy Research has updated its snappy Housing Cost Calculator (www.cepr.net/calculators/calc_housing.html) for people just like you, based on Uncle Sam’s data.

Enter the home price, down payment, mortgage rate, tax bracket and future sell-date, and you will get the "net cost of owning." The calculator compares that to the cost of renting for the same period of time. CEPR's housing calculator features about 400 metro areas across the nation.

Your family and friends who are still employed in the mortgage and real estate sectors might not like you for it. Play around with the numbers for a bit and you might just decide you're better off renting. Why? The simple reason is the calculator relies on one important assumption: that the historic rise in U.S. home prices the past 10 years will return to the "more normal historic trend." Funny how most mainstream economists and pundits failed to see that the home bubble diverged from trend prices. Call it the blind spot of conventional wisdom.

Meanwhile, the U.S. housing bubble has disappeared like a fist when you open your palm. Hello recession?

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