Why Own When You Can Rent?

About two and a half years ago Trina and I sold our house and we've been renting ever since. Renting was not the original plan but it became the obvious one shortly after selling. I worked for a home builder at the time and by early 2007 I had predicted that my employer would be gone by the end of 2007 and I'd be looking for a job. I was right, but they lasted a little longer than I thought. The Bank foreclosed sometime in May or June of 2008, just six months after I had already left.

Today I am always asked why I have not bought a home yet. So many people say this is the best time to buy and that I won't see a better time ever. "Better not be greedy" they say. They think if you look for the bottom of the market you'll loose out because by the time you recognize the bottom it will have already passed us by.

I think not. We have a ways to go in my opinion. I think once we hit "bottom" we will be there for a looooooong time. Plenty of time to recognize it and take advantage, if you can. Why buy right now anyway? I can still rent for less than I can buy and in fact where I live there is downward pressure on rents due the large number of homes people are trying to hold on to and rent. While renting I am able to save more money than I could ever save by owning.

I am keeping my eye on things though. Once the cost of renting is greater than owning, that is when I begin looking to buy. I would likely buy even if market values continued to fall as long as the cost of ownership was less than renting. Of course there are other factors to consider as well. I am in no hurry to buy right now since there is an opportunity cost to buying. Once I buy I've thrown an anchor overboard that will be difficult to heave back on board if I need the flexibility to sail off after another opportunity. Flexibility is important under current economic circumstances.

For now, I'm sticking with the current game plan - wait it out. All signs indicate that this is the best way to go for now. The 60 Minutes video and the commentary below are a couple of the many sources that support this conclusion.






http://www.moneyandmarkets.com/your-2009-real-estate-outlook-2-28990

Here Come the "Chuppies"

Its been a while since I've posted anything on this blog. I believe I became a little exasperated with saying the same thing over and over again, even if it was ten different ways. I don't know that anyone reads this, at least not regularly. If anyone does let me know. Otherwise I'll just keep talking to myself.

For anyone out there that thinks that the world will hurt when the US hurts that may not be so true. Those countries that have high savings rates are sitting pretty. While the US will have to cope with a drastic reduction in our standard of living other parts of the world will increase their standard of living. It's possible that we are witnessing the beginning of a shift of producing economies like China becoming consumers of their own production. No longer will we be able send IOU's abroad in return for goods that we will never fully pay for. Nope, time to start to rebuild America. Let's get some factories here so we can provide for ourselves. Much of the rest of the world has not forfeited their purchasing power as we have so profligately done.

Check out what's happening in China right now. As we spend less there is a new breed of yuppie emerging in China - the "Chuppie":

http://www.moneyandmarkets.com/miracle-on-nanjing-road-2-28925