Tag Archives | predicting the future

Rent or buy? With new boom, here’s a way to figure out what makes sense for you

The strengthening housing market–especially on the East and West Coasts—may be setting some buyers up for another fall.

As The New York Times reports , prices in locations like the San Francisco Bay area and New York City have bounced back so strongly from the lows of 2008-2010 that, for many people, renting now makes more financial sense than buying. “In the country’s most expensive places . . . buying a home again looks like a perilous investment, based on the relationship between prices and rents or incomes,” the Times said.

Of course, buying a home isn’t just a straightforward dollars-and-cents calculation. When I consult with clients on this issue, we run the numbers, but we also spend time talking about the emotional issues of being tied to a piece of property, how long the clients want or expect to live in the same place, their ages, and other factors that may not have dollar amounts directly attached but which are important nonetheless.

For the dollars-and-cents part of the equation, though, the Times’ article also has a link to an excellent calculator that lets you plug in a bunch of variables to figure out your own potential owner-vs.-renter costs.

Why real estate prices keep falling

When clients are considering buying a home and ask me about the tax consequences and what I think is going to happen with real estate prices, I can usually answer the tax question easily. For the question about what’s going to happen with prices, I have to say, “I don’t know.”

The problem is, with so many properties still underwater following the Great Real Estate Crash, we really don’t know how far “down” might be.The Los Angeles Times reports that almost one-third of the mortgages in Los Angeles County are for more money than the property is worth And as the interactive map using information from Zillow shows, negative equity continues to push down property values nationwide, with owners unwilling or unable to sell their homes and more eventual foreclosures in the offing.

I used the map to see that in my own zip code, about 20% of homeowners with mortgages are currently underwater.

If you’re considering buying, ask your real estate agent to find out how many homes with mortgages in the area are currently underwater. Agents almost never want to volunteer that information, but it’s news you can use that they should provide.

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