Jay's notes: In almost half of the cities that the Wall Street Journal reviewed, it is less costly now to OWN than to rent. They go on to highlight one of our keys markets, Atlanta, where a a renter can save himself $300/mo if he is able to buy a home. Put another way, an investor can be that homeowner and rent to a tenant and pocket $300/mo in cash because of the rent premium in that market. That is why the fundamentals behind real estate are so strong right now for investors and why investors are driving the buying activity while possible homeowners-to-be, who can not able to meet today's strict lending guidelines, remain stuck on the sidelines.
The monthly cost of owning a home is more affordable now than in the past 15 years, and is less expensive than renting in numerous cities, according to The Wall Street Journal’s third-quarter survey.
Low home prices mixed with low mortgage rates—hovering at 4 percent or even lower—are creating an appealing buyer’s market, analysts say. For example, buyers today have a 77 percent increase in their borrowing power compared to 1991, Dan Green, a loan officer with Waterstone Mortgage in Cincinnati, told The Wall Street Journal. To illustrate: He says that in 1991 a $1,700 mortgage payment allowed a borrower to take out a $200,000 mortgage, whereas today the home owner taking advantage of current low rates can get a $350,000 loan for that mortgage payment amount.
In the 28 cities that The Wall Street Journal tracked, it found monthly mortgage payments on the median-priced home—including taxes and insurance—to be lower than the average rent levels in 12 of the metro areas.
Atlanta was found to be the city where owning was more favorable to renting by the most. For example, the monthly rent on the median-priced home there was $539 during the third quarter (with a 20 percent down payment) compared to the average asking rent which averaged $840, according to data provided by Marcus & Millichap.
Nationwide, apartment rents are expected to rise by about 4 percent this year, which may make the owning vs. renting picture tilt even higher, according to some analysts.
Despite the appealing housing picture for home buyers, some buyers continue to stay on the sidelines, unable to sell their current home, qualify for mortgages due to the tightening of credit, or keep a steady job, housing expert say.
Source: “Stronger Lure for Prospective Home Buyers,” The Wall Street Journal (Nov. 26, 2011)