For years my colleague David Leonhardt has been helping people calculate whether it makes more sense to rent or buy a home,based on the relative costs of each decision. This week, the economists at Capital Economics noticed an interesting phenomenon related to this tradeoff. For the first time in three decades, the median monthly mortgage payment is about the same as the median rental payment:
Source: Capital Economics, Thomson ReutersOf course, this chart is a little bit misleading because it excludes many of the upfront expenses of buying a home, like a down payment and closing costs. Perhaps more important, not everyone has the option to buy.
Credit conditions are still significantly tighter than they were a few years ago, despite the Federal Reserve’s efforts to loosen credit markets. Many lenders now require a credit score of 700 as opposed to 650, the previous standard. Capital Economics estimates that that requirement alone has shut 13 million households out of the mortgage market.
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Cool, i just bought a house in denver yesterday…i have been holding out for the last 15 years, but finally pulled the trigger.
If I know my cycle theory, then I’d posit that trends well outside the mean tend not only to eventually revert to the mean, but to subvert it.
I think we’ve still got a ways to go.
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I agree with you Jake. I don’t always agree with what I post in News, but thought it was worth putting up.
The local situation and trends outweigh the overall nationwide numbers, of course, but rents have been rising nationally at a decent clip, so home prices don’t have to fall for median payments to drop below median rents.
IMO, prices are still high, supported by low rates. In the past, rate increases have had a surprisingly (to me) small impact on prices. I’m not confident that the same will hold when this interest-rate cycle moves to the upside.
Agreud. That’s my chief concern too. Rising rates + the “new austerity” w. regard to downpayments could equal more storm clouds ahead.
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I close on a house outside of Boston on Monday. Buying it for well under what the last owner paid. We plan to keep it 10 years, so we will see how good/bad our timing is.
Oh, and congrats, Huggie. Don’t know about you, but we’re not even in there yet and I’m already sick up and fed of writing cheques (sic).
Congrats to both of you.
Closed ours in late June. Loving it. My first, even though I’m old enough to have been kicked down the IBC stairs for many moons.
After you finish writing all those checks (which don’t peak until you move in and make the immediate changes/repairs you want), you get the fun of noticing all the things that are wearing out and will have to be repaired or replaced.
Ott, you’re in or around San Diego, right?
That is correct. I stick to the areas where air conditioning is not needed.
Was in the Boston area before coming out here.
Well, congrats yourself. I met Mrs. Anton in SD and lived there for about 4 years before returning to SF. Was at the Hotel Del a while back for a friend’s BD party. Beautiful as always, tho the traffic between downtown and Carlsbad — or just about anywhere — has become more painful.
As I recall, there were quite a few 100+ days when I was living there. But it is, as they say, “a dry heat” with the ocean right THERE when you need it.
My little bro bought at the near-peak in Carlsbad.
They got hammered, but not as bad as the more inland stuff.
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Your bro the cop? Sorry if he had to sell at a loss before moving north. But if it’s a different brother and he’s still there, well, there are worse places to be “stuck.”
Anton — no, brother the cop is still in San Fran.
This is the (an) other brother, the Marine pilot (now out).
Two other brothers on the East Coast (one of whom was also in SF for many years).
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@ huggie,@anton good move.
Thx, db. Time, as they say, will tell.
My gut tells me that Jake & Chess are right for the foreseeable future across most housing markets.
I think purchasing a house for purposes of living in it is a wholly different proposition than looking at it as an “investment.”
If you are looking to buy a house, for peace of mind, or because you want autonomy, or your family is growing, or whatever, any time can be a good time. I would just caution folks not to think about it as an “investment”… ever… unless, of course, it’s for investment purposes.
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We bought in no small part because the HOA for the townhouse we were renting started enforcing rules prohibiting children from playing in any of the development’s streets, even though we lived on a stub road used only by residents of the dozen or so units on the stub. Median age on the HOA boards and committees was probably 65 or more.
We found an HOA-free place.
Agree completely as to the rationale for buying. And we probably looked at 100 joints before choosing this one, so I think we had a pretty good feel for the market. Renting around here is not really an option.
Jake, we’re on the way to Maine, not too far off Hwy 93 (still learning the roads), so holler next time you’re headed up there with the family. There’s a pool, and you can bet there will be a well-stocked bar, so kids and adults both can have a little break along the way.
Hold on.. you’re MOVING to Maine? Or you just have a summer house up there?
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No, no, outside of Boston, MA, on the way to Maine.
I was traveling a lot over the summer, but I thought I saw you post about taking the family to a beach house up there. Thought it was a regular thing.
We loved our place in SF, but most family is on the East Coast and I can kind of work from anywhere, more or less. Thinking about living in Europe for a couple of years next, if they don’t burn the place down.
“Many lenders now require a credit score of 700 as opposed to 650, the previous standard.”
Do you just pull these numbers out of your bung or what?
The IRS and lenders, the lines blur. No luv or respect for small biz in this regard.
Not yours truly, but others I know have to had to explain a deduction to enrolled agents. I mean, its beyond astonishing and insulting, its almost satiric comedy.
From what I hear people say.
I think it’s early.
Canadian here – any thoughts on property stocks or REITS to get exposure?
To which sector?
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“Many lenders now require a credit score of 700 as opposed to 650, the previous standard.”
Does this apply to subprime as well, or is the subprime mkt completely shut down?
housing must be a short. just based on the the number of posts. busy thread right here.