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Should You Rent or Buy in this Market?

Families are trying to determine whether or not now is the time to buy a home. Some are advising these families to sit out the current real estate market and instead rent for the next year or two. We do not agree with this advice. Homeownership means a lot to a family. We also realize that the financial aspects of purchasing a home today can be a concern. The challenge is any advice given by someone in the real estate community is immediately dismissed as self-serving.

For this reason, we want to give you the advice of three entities not involved in real estate sales:

Citigroup

“When we examine the relationships between mortgage payments and income and mortgage payments and rent, we see that these relationships have also reverted back to or below equilibrium points. In some cases, particularly when mortgage payments are compared to the cost of renting, home prices actually appear cheap.”

JP Morgan

JPMorgan analysts said ‘the continuation of falling rental vacancies and rising rental demand will make home buying increasingly attractive’, especially as rental prices increase.”

Business School professors Eli Beracha and Ken H. Johnson

“Fundamental drivers now appear to be in place that favor homeownership over renting in the near term future…

The second finding might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting…

Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Bottom Line

Is it better to rent or buy? According to those quoted above, it seems it may be becoming a no-brainer.


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5 replies
  1. David Mott
    David Mott says:

    Maybe not ‘real estate sales’ per se.
    From google:

    SEC Investigating Citigroup Mortgage Deal – ProPublica
    Nov 18, 2010 … The SEC is investigating whether in the run-up to the financial crisis Citi acted improperly as it created and marketed a $1 billion CDO.
    http://www.propublica.org/…/sec-investigating-citigroup-mortgage-deal

    and

    JPMorgan, UBS, Deutsche Bank Probed In Mortgage Investigation By …
    May 23, 2011 … JPMorgan Chase & Co., UBS AG and Deutsche Bank AG are being probed in an expanded investigation by New York Attorney General Eric …
    http://www.huffingtonpost.com/…/jpmorgan-investigated-ubs-deutsche-new-york- ag_n_865928.html –

    In addition to a broken appraisal method, there might just be a trust issue here.

    Reply
  2. Marvin
    Marvin says:

    I would not consider Citi for objective advice on real estate. Citi is a “Bail Out Bank” who took $25 Billion in from tax payers in the financial crisis bailout. Ironically Citi lost the their billions in real estate by writing sub prime loans to anyone who could lift a pen. When I think citi I think reckless.

    Virtually every headline in the past 24 hours is in direct disagreement with every point in this article.

    Reply
  3. realty
    realty says:

    Hi,
    I read your article. It is very informative. Well according to the market scenario , it is the best time to buy property as it is the beginning of rise in rates. The rates will not fall for another estimated 5-7 years at least.

    Reply

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