Why is it better to rent than buy in Minneapolis? I’ll take “negative equity” for $12,113, Alex
Thursday, May 08, 2008 at 2:49 pm
- 8 Comments
If you’re planning to sell your home between now and, say, 2012, it will cost you. In fact, it will cost you about ten grand. A joint report released today by the Center for Economic Policy Research and the National Low Income Housing Coalition reveals that Twin Cities homeowners can expect a decrease in equity between $8,429 and $12,113 in four years for a home purchased today at 75 percent of the median price. The median home price for Minneapolis-St. Paul is $200,000, already 10 percent lower than last year. [Here's the PDF of the full report.]
According to the author appendix, “the calculations for equity after four years assume that the house price adjusts over this period to a trend value that is pegged at 15 times the annual rent of the property. The annual rent is assumed to be 1.333 times the median rent for the city as calculated above.”
Renting in the Twin Cities, according to the study, actually will save an average of $200 a month over buying, and it won’t result in drowning in the adult pool of negative equity. On average, renters in the Twin Cities pay $848 for a two-bedroom pad, while homeowners pay $1,236 a month for a “low-cost” mortgage.
8 Comments
Comment posted May 8, 2008 @ 4:38 pm
A bit backwards The first graph reads:
“If you’re planning to sell your home between now and, say, 2012, it will cost you.”
I think you meant to say,
“If you’re planning to buy a home between now and, say, 2012, it will cost you.”
It naturally makes sense to sell sooner rather than later in a declining market, not the opposite. Thanks.
Comment posted May 8, 2008 @ 4:53 pm
No, I meant that Sellers will continue to be hit with negative equity no matter if they sell now or four years from now.
Comment posted May 8, 2008 @ 5:29 pm
Um, no First of all, you said nothing about negative equity anywhere, only that equity is declining.
Second, you only realize a this decline in equity if you own a home – if you rent, you do not. That’s why it makes sense to sell now, yes? You can buy a home of similar apportionment for less money later.
Last, the headline and first paragraph refer to the expected loss in equity over the next four years. While there has been some loss already, it’s not stated how much in dollar terms that allow a comparison. If that’s what you meant to refer to, you should have said what the loss has been so far. If it’s less than the loss of equity you expect over 4 years (which appears to be 25%), then it still makes sense to sell now no matter how you look at it.
Thanks.
Comment posted May 8, 2008 @ 5:54 pm
No, not true. Home prices have declined ten percent this year, as I stated in the post. And, according to this study and a variety of others, they will continue to decline. Those who own homes now, and those who purchase homes today, can also expect to see a decline. So no matter how real-estate agents try to spin it, the market is seriously suffering and jumping ship now or four years from now will still result in a loss of equity.
Comment posted May 8, 2008 @ 11:38 am
A bit backwards The first graph reads:
“If you're planning to sell your home between now and, say, 2012, it will cost you.”
I think you meant to say,
“If you're planning to buy a home between now and, say, 2012, it will cost you.”
It naturally makes sense to sell sooner rather than later in a declining market, not the opposite. Thanks.
Comment posted May 8, 2008 @ 11:53 am
No, I meant that Sellers will continue to be hit with negative equity no matter if they sell now or four years from now.
Comment posted May 8, 2008 @ 12:29 pm
Um, no First of all, you said nothing about negative equity anywhere, only that equity is declining.
Second, you only realize a this decline in equity if you own a home – if you rent, you do not. That's why it makes sense to sell now, yes? You can buy a home of similar apportionment for less money later.
Last, the headline and first paragraph refer to the expected loss in equity over the next four years. While there has been some loss already, it's not stated how much in dollar terms that allow a comparison. If that's what you meant to refer to, you should have said what the loss has been so far. If it's less than the loss of equity you expect over 4 years (which appears to be 25%), then it still makes sense to sell now no matter how you look at it.
Thanks.
Comment posted May 8, 2008 @ 12:54 pm
No, not true. Home prices have declined ten percent this year, as I stated in the post. And, according to this study and a variety of others, they will continue to decline. Those who own homes now, and those who purchase homes today, can also expect to see a decline. So no matter how real-estate agents try to spin it, the market is seriously suffering and jumping ship now or four years from now will still result in a loss of equity.
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