Saw this information from John Mauldin and thought it was worthy of passing along…
Owning a home is supposedly the American Dream, the key to financial success. Paying rent is said to be “throwing your money away.”
Is that really true? Maybe, but not always and everywhere. This calculation by our friends at John Burns Real Estate Consulting illustrates why.A young family deciding whether to buy or rent a starter home has to consider home purchase payments vs. the rent for an equivalent home. Ownership costs are mainly a function of purchase price and mortgage rates. Applying current averages to those, the chart shows sharp swings over the last 20 years. The red bars indicate times when buying was the better choice. Now is the opposite extreme, with renting a home much less expensive.
Home buyers could still come out ahead by selling the property at a higher price, but that’s not guaranteed. And the bigger implication here is for housing-related jobs and inflation. As JBREC notes, “Home prices historically need a reset when the premium of owning explodes this high, this quickly.”