Top U.S. Cities Where Buying Beats Renting

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By EconMatters

Bloomberg reported that Morgan Stanley (MS) published a research analysis in July 2011 predicting  America is well on its way to becoming a renter society amid high rate of mortgage delinquency, foreclosures and liquidations slashing home ownership, while driving up rental demand.

Morgan Stanley noted that during the housing bubble, home ownership rates increased from 66% to 69%, an all-time high. Today, that number is just below 65% and that ratio is expected to decline further to 59.7%, driving multifamily vacancies down and rents up: 

".....the U.S. will become a Rentership Society, in which the home ownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come." 

Indeed, the mortgage rate might be at multi-decade low, but amid high unemployment rate and the growing number of the long-term jobless, not everyone can qualify or afford a home loan. Falling home prices, of course, has not been a positive influence on owning a home.

While declining home ownership could be an incoming trend thanks to the Great Recession, I think people who lost their homes for whatever reasons would first crash at their parents' or relative's place first.  

Home ownership could be well on a declining curve based on current economic outlook, but that does not necessarily translate into a corresponding increase in rentals either Moreover, renting does not make that much economic sense, as this infogragphic by Mortgagesum.com shows buying still beats renting and the top U.S. cities to do just that.  So it is hard to see how after losing a home due to financial stress, renting could be a viable option.  

On a side note, in light of the world's faith in the U.S. dollar whenever there's a crisis situation, we should also see increasing foreign ownership of the domestic real estate, particularly in the commercial office and multi-family unit sectors.  That would be the subject of another research or infographic endeavor.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Real Estate , Economy , Investing Ideas

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