Glad to Be A Renter
It’s a rare day when I’m happy to be a 35-year-old who still black holes a monthly rent check to the landlord. But according to housing woe projections from Fortune on CNN Money, it looks like my lack of buying power might bring smiles for at least the next five years. According to their crystal ball, an $856,000 home in the Washington area may sell for as little as $641,000 in five years. The reason? At current prices and interest rates, it’s more cost-efficient to rent. Check these projected values for upscale homes around the country.
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December 7th, 2007 at 8:00 am
You might be right on that. I uploaded a video blog to my site yesterday stating something similar. While I think your estimates may be a bit over the top, I believe they will fall for at least another year, but only for home prices over $417k.
The reason?
Banks are no longer lending at 100% purchase price over the $417k price. While I cannot blame them for the action taking place, it only hurts the homeowners in the category. For the past 5-8 years buyers have been able to get 100% financing and have not had to pay a down payment. Now, with the subprime mess they will have to pay 10% down and if they are VERY lucky, only 5%. Since it has not been historically required for buyers to pay a down payment, the buying pool has not saved up. Until they do prices will keep falling.
Which takes me to the next point. At a $900k house, how long would it take the average purchaser to save $90k? You tell me!