Wednesday, May 28, 2008

David Leonardt buys a House

He explains that the rent-to-price ratio is now sufficiently high in Washington is sufficiently high to make owning an acceptable financial choice. He also notes:

Of course, owning also brings benefits that have nothing to do with money. You can settle into your home, confident that no landlord will kick you out. You can repaint the walls and redo the kitchen. All else being equal, owning seems far preferable to renting.


Where I am moving, Los Angeles, still has a high rent-to-price ratio (about 50 percent higher than DC), yet when I find a house I like, I will buy one. Rent-to-house price ratios are always relatively high in LA, because high nominal incomes and the California tax code make tax preferences for owner housing in California higher than in other places. At the same time, housing affordability in SoCal has improved dramatically, meaning that more people can buy a house using standard mortgage products.

I still don't know when the bottom of the market is coming--until inventories begin to taper off (in terms of months of unsold property) it will be difficult to know. Even the inventory figure is difficult to parse; to the extent defaulted homes were stripped by their erstwhile owners, they no longer remain competitive in the market. On the other hand, there may be many potential sellers who refuse to test such a cold market.

But for me, if I can find a house I like in a neighborhood where I wish to live at a price I can afford, the security of tenure (and the knowledge that my rent can't go us) is sufficient reason to buy.

4 comments:

Duke of Moral Hazard said...

Please hurry up and get out to CA. There's some major thinking and fixing to be done, and you'll probably be able to think much more clearly when you get out of the rarified air of the capitol. As for buying a house in L.A. -- that would set a TERRIBLE example.

Here's some cheery news:

http://calculatedrisk.blogspot.com/2008/05/fdic-banks-hit-by-troubled-real-estate.html

Millertime said...

I am debating on renting a property for residential or commercial. The land is zoned commercial in Cincinnati, OH. The house has been used for residential rental and I just purchased it. I am looking to see if anyone has turned one over to a commercial rental and if so, what do I need to be aware of to not get into trouble while renting. My goal is to just update and rent to an insurance agent or similar.
Thank you for all your help!

Anonymous said...

^^Thanks!!

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