THE BONEZ
Renting Can Be a Viable Option in Today's Housing Market
- The Bonez

In 2004, Fred Samson bought a modest 2 bedroom home in northern Oregon for $215,000. Three years later when he and his wife were ready to start a family the time came to trade up. After selling their home at a profit of $110,000 the family put that money into savings and rented a bigger home.

Turns pout it was a brilliant decision. Samson's place today is worth almost $100,000 less than what he sold it for. And the rent he's paying for the bigger house is about the same as his total monthly costs were for the smaller house. Samson isn't building equity, but, with home prices falling, neither is anybody else.

Home prices are expected to keep dropping for most of this year and then remain low for several more years. This has many people adopting Samson's strategy of putting off owning a home until the market becomes steadier.

When renting, you avoid the peril of wasting money on ever-fading equity. And the choices are plentiful, as many owners are finding it difficult to sell and turning to rentals to generate much needed income.

Rent is cheaper these days, too. The Census Bureau reports that average rent in the US fell last year, and real estate analyst project they will fall even more in 2009. Certainly, renting is only a short term alternative to be used in a tough market. Home ownership is clearly the better way to go in the long term. The tax breaks, building equity, and pride in having a place of your own make ownership by far the best option.

Renting can also be risky in terms of timing. While very few real estate analysts expect the market to rebound quickly, if it does, prices could skyrocket before you're ready to buy. Renting a home provides an excellent option for those whose living situation is already in a transitional state. Those forced to relocate for work, people who've already sold in order to move up, pr retired folks wishing to trade down all can benefit from renting in today's market.

Comparing the costs of renting versus owning can be tedious for sure. Ownership comes with property taxes and maintenance costs but also the advantage of tax breaks. Long term rental on the other hand, can mean a couple thousand to a broker, the cost of another move when you get ready to buy.

One good determining factor to look at when making this decision is price to rent ratio. Take the price of a home in your area and divide that by a comparable home's annual rent. If the result is higher than the historical average of 15, renting is probably the best way to go.

As long as this price to rent ratio remains above 15, you can benefit from renting rather than owning. To get an idea where the market is headed in your area, examine the patterns in home prices as well as foreclosure rates.

Trulia.com offers a stats & trends tool which you can use to find out what the average list prices and median sales prices for your area. Information on foreclosure rates can be found on RealtyTrac.com. Also, take the local economy into account, if there have been a lot of layoffs in an area, home prices are likely to be going down. Well, that is it for now, I am leaving the Colorado Springs area and off to the Black Canyon of the Gunnison with a good friend, 'til next time.

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