Shocking! Only a 1.5% increase in 5 years where I live...

But jrldh, be glad an increase is projected!

7% increase for my area, but that is probably because we didn't have the years of crazy appreciation. It takes a looong time to sell a house around here!

ok, it doesn't appear to be very good :)
Now, lets have some fun...Let's use 150k as an approx loss of value in 5 years on east coast(it ranges from 100k -200k+-)...now if you needed to rent during that period of time,the rent on those "averege" priced homes is 3500+-,(some places more, some less)that comes to 42k per year x 5= 210k for rent costs, so did you REALLY lose???
You can't pitch a tent in Central Park and wait for the all clear sign to buy a home..
Now lets say you crammed your family into an "affordable"(east coast!!) apartment for 2k a month, for 5 years, your rent costs are 120k, and tad below the "projected" loss of value in 5 years,.
The doomsayers neglect to factor in "costs" of renting vis-a-vie home ownership and potetial losses...

Is this inflation-adjusted? Also, note that the starting point for these figures was back in June when awareness of the subprime mess was only beginning to register with most people.

Nearest to my two markets shows an 8% drop (Honolulu) and a 4% drop (Chicago). For those of us who don't live IN the cities listed, remember that all RE is local. For instance, RE prices in my Chicagoland town are up 12% although sales are down by at least a third.

The article is discussing "upscale" homes. For homes in the median range...? I'm guessing the decrease wouldn't necessarily be the same?

the market has to adjust. the ones who will lose are the flippers. if you own your home and PLAN on owning it for a while, you will always have appreciation. a home is a longterm investment, not something to to sell quickly for a profit every couple years, that is what caused this mess inthe first place.

Qdognj, maybe not everyone would choose to rent an expensive house~you're looking from *your* vantage point. The *real* people, and there are more of us, would probably look for an apartment. And please, I need to know what a rental at $3500 per mo is gonna 'give' me. ;o)

p-cakes, the article referred to "upscale" homes, and i was using the cost of renting something somewhat decent that a person not buying/owning the type home mentioned in the article, might rent..here is a link to a Northern NJ home for rent,

Here is a link that might be useful: Upscale home? not really

Who is going to save this article for the next 5 years to see how far off target these predictions turn out to be??? As with any market, if we all had perfectly clear crystal balls, all we'd have to do is make 1 right bet and then call it quits.

Okay, since I started this thread, I'll ask the dumb question.

The doomsayers neglect to factor in "costs" of renting vis-a-vie home ownership and potetial losses...

Qdog, if I was looking at the costs of renting vs. the cost of owning, why wouldn't I add 5 years of ownership costs (mortgage, opportunity cost of downpayment, taxes, insurance, upkeep etc) to whatever "loss" I might suffer and compare that number to 5 years of renting?

That article did exactly what it was intended to do...get people interested in reading a Fortune Mag article. That is the first goal of just about every media outlet. People don't read boring uninteresting stuff.

Rarely is linear analysis ever accurate, especially when analyzing a very complex situation with a multitude of variables that are different for each local and market segment. Its used by people that want to quantify something in the roughest sense but is far from something anyone would ever rely on to make any kind of decision.

Stuff like this has good shock value and I suppose to some buyers/sellers it will unfortunately influence their thinking. Kind of like a self fulfilling prophecy.

Patty_cakes,

I don't have pictures but I rent a lovely 3800 sq.ft., 10 year old home, 5 bedrooms, 3.5 baths, 1/2 acre, fenced backyard, huge deck, lovely hardwoods, 3 car garage with a swell kitchen for $3200/month. It's in a nice neighborhood with a good school system about 15 miles outside DC. We chose it because it's 10 minutes from DH's office. We rented it over the summer when there was a great deal of SFH rental inventory so our rent is locked-in for the next three years if we choose to stay that long. Comps in the neighborhood run about $850,000-$870,000. It's a nice upper middle income home. To me, upscale is in the eye of the beholder.

By the way, Congratulations on the sale of your condo and your upcoming move. I guess tenacity is a very good thing. Please promise to tell us all about Austin...I hear such good things about it.

because the article "predicts" the value in 5 years, yes, there are associated costs such as property taxes, but i don't include mortgage payments as i feel that is factored into the equation by the 5 year loss...In any scenario, when you factor in mortgage interest costs , it is very rare the "median" home in the USA hows a profit..People buy a home for 200k, sell it X years later for 235k, and say they "made" 35K, well, no you did't...the realtor takes 5-6% of that, and your interest costs eat up some /if not more of the rest....Trying to time the market is a fool's game,you are delaying your life in the attempt to get the lowest price,which you will never do...

I can't say I see that mortgage payments are figured in the depreciation projected in the article.

Perhaps there are potential buyers out there that are trying to time the market but I think many more are just looking to find a good home at an affordable price. Affordability is the heart of the FORTUNE article. A large disparity between rents and prices indicate an affordability problem...if one can rent a home for 60-70% the cost of owning, why buy?

If a half dozen different studies point towards price depreciation in a given market, the decision to buy should be approached even more carefully. Let's say I buy that $865,000 house. If the price depreciation numbers projected for my area are close (is a 5 year 25% depreciation so unreasonable after 125% 5 year appreciation?), I'm bringing hard money to the table if I need to sell in five years. It would behoove me to make sure I'm in that house for the long haul.

Anyway, I thought the attempt to establish a Price to Rent ratio similar to P/E as a market measurement was an interesting and new way to assess the housing market.

why buy then rent? If you are going to use strictly a $$ value on a home,then perhaps i can see how someone might choose to rent. But as far as having the freedom to make the house a "home", as far as establishing roots for your family, as far as not placing your life on hold until the all clear bell rings to purchase a home, buying makes more sense..People need to stop viewing their home as an investment, look at it as a home, that may or may not be worth more when you go to sell it..
I wonder how many people spend this much time on other expenditures,(i know, much lesser scale $$ wise)such as a car, which loses about 20% within a few months, and nearly 40% in 3+- years..Is that ok?..

It seems out of the list of cities only 4 cities there is appreciation and it not much either. CNN.com has far left wing liberal slant to it and would love to see this happen.

I always advoid from watching CNN because they are so biase on the news. Fox News network at least proves fair and balance news coverage.

I would not put too much into this article since it from CNN.com. They are never very truthfully and love to slant it so it make the U.S. looks like it is in decline compare to the rest of the world. But if you look at all the illegal immrigants coming to this country and you know there is not truth to the liberal agenda.

All the multi-millionaires and billionaries in this country and in the world are not worried about their real estate holdings - still buying big time in the U.S. marketplace; and they have alot more info from more in the know people then the average home owner - so why should your be worried in an opinion from a CNN article when the big boys are just doing it big time? The smart money knows!

I can think of a lot of reasons I would always rather buy than rent, even for an upscale single family home rental. When buying (or building) you have a choice in where you want to live. Not so in renting. In my area rentals of single family homes are uncommon and usually done for a short term basis when a house doesn't sell. You don't have your choice of neighborhoods, in fact in my development I have yet to see anyone rent their home. Also most SFH rentals are not long term. Who wants to keep moving every couple of years? Also you are limited to how much you can decorate since you can't make any real improvements to the home. The bottom line (for me) is where single family home rentals are common are not places where I would want to live. I have no desire to raise a family in a transient neighborhood.

C

C-- are you sure we're not related?? ;)
Or we 're not the same poster with different screen names? lol

"Fox News network at least proves fair and balance news coverage."

roflmao hahahahaha Funny, good joke to start my day, harry wild.

Fox's mantra is a bit like Nixon's oft repeated, "I'm not a crook!" :)

The end of Tricia's political commentary but thanks again for the early morning chuckle.

/tricia

At heart you are a "Joisey" guy / girl like me. Even though it is ridiculously expensive to live here, we know it's really the best place to live.

C

"Fox News network at least proves fair and balance news coverage."

Hey, I've got this swampland in Florida I'd like to sell you...

We rented in Bedford, NH for four years when we moved from CO to NH. That was when the real estate market was tanking in the last cycle (we moved in late fall 1988).

It was a historic home of about 3,500 s.f., built in 1848, had 7 working fireplaces, set on 1-1/2 acres, beautiful home. We painted & decorated at our discretion. We lived in that leased home the entire time my son was in highschool. He doesn't seem to be harmed from the experience.

We leased rather than buy because, like now, it was obvious which direction prices were headed. Our lives were not put on hold, nobody suffered any trauma, we were not transients in the community, and leasing made good economic sense.

Once we could determine that the market had turned the corner we purchased a home nearby at about 50% of what similar homes were selling for when we first arrived in NH. Just like everything else, generalizing makes it easy to point out exceptions to the "rules".

"Just like everything else, generalizing makes it easy to point out exceptions to the "rules"."

Interesting that you took my post as making generalizations since I used "I" and "in my area" throughout the entire post. I guess some people just like to stir the pot.

Also I stand by my statements that renting an upscale SFH is for most people (as it was for you) a short term solution and buying is the ideal over the long term. (You don't live in a rental now, do you?) In a rental, you don't have as much choice in where you can live and you cannot make as many improvements to a rental house as you would a home you own.

C

I don't know how to explain it, whether it's right or wrong, but most people I know who have a significant amount of wealth, is from RE. They didn't start out by wanting to be rich in RE, but now they have a lot of money from being in RE. I highly doubt these people would be in the same boat if they would have rented all their lives and were to "invest the rest". They just simply don't do that. It is very difficult to be that dedicated to investing each and every month, year, for 30 years as opposed to paying a mortgage that you "have to" pay. Leverage is king. Leverage is how a lot of people I know made tons of money. Especially in New Jersey.

C, we leased the same home for four years. While I do consider that short-term it's not for everybody. We get many posters here that are selling after owning less than four years.

And yes, one of our homes now is a rental. We've had the place five years. Why? Because it mades good economic sense. Buying will never be the "ideal" for that home. I decorate as I please. We don't spend much time there & when something goes wrong...I just phone the owner. We don't want the responsibilities that go with ownership. It simplifies our lives to lease.

You're correct. Owning provides more choices but long-term leasing does not limit one to white walls & no holes in the walls either. I've had business associates who lived in homes on 25-year leased land. They made improvements to the property as if they owned. Depends on the terms of your lease. DH has business associates now that have been in leased properties for a decade, or longer. Why? Because they've chosen to purchase homes in areas other than where they are employed.

There are many good reasons to own. Likewise though, there are many good reasons to lease. It depends entirely on each person's circumstances. One is not inherently 'better' than the other.

You did make use of the word "I" and the phrase "In my neighborhood" but I found the overall tone of your post to be a generalization of rentals and areas in which rentals are located. If I misinterpreted, I apologize.

/tricia

Carolineb and Qdog...I absolutely agree that, long term, owning a home can be the right choice. If done properly, home ownership can be both a wonderful lifestyle choice and a smart financial decision. Qdog...housing as an investment choice? I'm in your camp.

However, in a real estate climate of great uncertainty, renting can be an excellent housing choice. Luckily, my area offers lots of housing choices. Many investors bought SFH's during the boom, can't sell them, and are delighted to be able to have a renter help pay their carrying costs. A smart, resourceful renter has some serious bargaining power and can really negotiate a win/win deal here. It takes some work and I looked for two months before I found this deal. I really like this current home and my landlord is encouraging me to indulge my love of gardening. Heck, my hobby adds value to his property.

It works for me. The numbers REALLY work for me...at this particular moment. I do think that people should consider all available options...if you're a short-timer in my market, renting is a possibility worth examining. I have friends who were desperate to leave their condo for a SFH when their daughter turned 3. Mom wants her daughter to have a safe backyard but they can't sell their condo and afford a SFH that isn't a fixer. Based on our experience, they are now renting a SFH and leasing the condo. They are pleased as punch but their goal is to save enough money to buy. Like me, they like owning. They're not waiting for bottom...they're waiting and saving for the fundamentals to look brighter.

As for moving...it's not so bad. Having moved three times in the last three years, I'm certainly motivated to keep clutter to a minimum. Nothing comes into this house that doesn't pass the "will I find it in the back of some closet a year from now" use test. LOL. But, I'm still looking for that great home to buy.

Harry__Wild, it might help to point out that one thing
FORTUNE magazine and CNN have in common is that they are both owned by Time-Warner. FORTUNE's online presence is hosted at CNN's Money site...which is the online host for all TW's business news. I've never really thought of FORTUNE as a liberal business media outlet.

Tricia wrote: And yes, one of our homes now is a rental. We've had the place five years. Why? Because it mades good economic sense. We don't spend much time there & when something goes wrong...I just phone the owner. We don't want the responsibilities that go with ownership. It simplifies our lives to lease. DH has business associates now that have been in leased properties for a decade, or longer. Why? Because they've chosen to purchase homes in areas other than where they are employed.

I agree, sometimes renting can make good economic sense. We have more than one residence. One is a rental on the water in a town with very high taxes. It is actually cheaper to rent than it would be to own. We don't plan to stay in the area forever and are glad we won't be tied down when we are ready to move on. When our landlord saw how nicely we had landscaped the yard, he told us we could make whatever improvements we wanted.

Woo hoo! Did you all see where Cleveland is headed? Sometimes it's good to be at the bottom of the list!

Pompeii
(somewhere a little southeast of cleveland)

Shouldn't they change the name to Fortune Teller magazine if they're seriously going to try to predict 60 months out? I bet there are vast differences between this table and reality within 12 months.

The articles basic premise is flawed.
Rents have only an indirect affect on sale prices.

If the "Greater Washington, D.C." tab is any indication the location groups are too large to be useful.
There are MANY markets around DC that have had increases in certain price segments, despite large declines in volume.

All they are trying to do is sell magazines.

The articles basic premise is flawed.
Rents have only an indirect affect on sale prices

Brickeyee - Interesting point. I think rents are an interesting market measure because they are so sensitive to income but I see your point.

Stock investors look at P/Es for specific companies and often the market as a whole.

For those who do invest in real estate or think a personal residence is a good investment, do you think a Price/Rent ratio is a meaningful measure that should influence a buy/sell decision?

Renting always leaves you open to the landlord raising the rent and when all is said and done all you have done is make MY mortgage payments for me.

The price of housing is not driven by the rental market in most places.
Most people still seem to like the relative stability of owning their home.
There are cases where renting makes sense.
Short stay in the area, moving to a completely new area, areas in long term decline (Though just living in these areas may be a bad idea).

Banks rarely want to rent REO and deal with tenants, so all the foreclosures do is remove houses from the more active market.
There are reasons banks rarely get top dollar for REO.
Vacant, usually in less than perfect condition, and unknown problems (that the bank does not even know about) all drive increase risk to the eventual buyer and drive the price down.
These places are not even used for property value assessments in many places since they are not 'willing seller, willing buyer' transactions.
Try and find a house around $750,000 in McLean (part of the
"Greater Washington, D.C." market).
There may be inventory hanging around, but it is rarely in very desirable places.

Yeah, pompeii, but a little depreciation is worth it to live near where I can watch David n Manny n Kevin swing and Curt and Josh n Jonathan pitch!

Go Sox!