I've been saying for several months that we are in the "perfect storm" for real estate. The combination of low real estate prices and low interest rates make this the best buying opportunity in many years.
This was verified in a paper to be published in Real Estate Economics. The paper is titled Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? The paper is authored by Eli Beracha of East Carolina University and Ken H. Johnson of Florida International University.
The following are quotes from the paper:
"Two major findings evolve from the analysis. First, individuals, on average, were better off in economic terms to have rented for most of the years in the study period. This first result is strongly dependent upon fiscally disciplined individuals that, without fail, reinvest any residual savings from renting. Second, 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 in the near term future. Sections on a review of the extant literature, proposed hypothesis, data, methodology, results, and concluding remarks follow in order."
"Ownership is virtually universally viewed as being the superior choice when whether to buy or rent residential property is being decided. Evidence suggests that ownership increases preferable societal outcomes and increases individual wealth (Engelhardt, 1994; Haurin, Hendershott, and Wachter, 1996; Rohe, McCarthy, and Van Zandt, 2002; Haurin, Parcel, and Haurin, 2002; and Dietz and Haurin, 2003, among others). In fact, there seems to be an almost nati onal obsession with ownership, resulting in a paradigm that favors ownership."
A recent article on CNN Money reached the same conclusion. "For the first time in years, buying a home may beat renting." "Even in cities where people are, theoretically, better off renting, they may not be in reality. Paying off a mortgage is a forced savings plan, said Baker. The mortgage bill comes in every month, the homeowner pays it and the mortgage balance goes down." "Renters, meanwhile, are just as likely to spend their savings. They'll wind up with less money than homeowners, which is kind of what your dad was saying all along."
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