NYTimes: A Word of Advice During a Housing Slump: Rent
An article in yesterday’s NYTimes talks about buying vs renting.
After the last big run-up in house prices, in the 1980s, a long slump followed. In the New York area, prices peaked in early 1989 and then fell 9 percent over the next three years, according to government data. (Adjusted for inflation, the drop was much bigger.) Not until 1998 did prices pass their earlier peak.
Keep in mind that the 2000-5 boom was even bigger than the ’80s boom and that house prices on the coasts, according to the official numbers at least, have fallen only slightly so far. So it is hard to imagine that prices will rise 5 percent a year, or another 28 percent in all, over the next five years.
They even provide a calculator so you can find the break-even point. It factors in rent, home price, taxes, home price appreciation (which you can set to -10% if you like) and annual rent increase/decrease.
In the long run, it’s almost always better to buy, but that “long run” could easily be ten or more years if rent is cheap and appreciation low. It claims to include both the opportunity cost of what you could have been doing with your deposit money as well as operating costs such as maintenance. The details are a bit sketchy, but it seems thorough.