Rent or Buy Your New Home - How About Neither?!

Go on Google and enter "rent vs buy" and you pull up an endless list of articles that will spew the benefits of one or the other. Depending on how your area is being affected by the current mortgage crisis the correct answer could be neither. An example is the area I live in. There are pockets that are being severely hit by foreclosures but many areas (read nicer areas) are holding or even increasing in value. These homes are severely overpriced and they need to drop in price but they aren't. So if you can't afford to buy a nice place in an area that is retaining it's value then the right option should be to rent right?

Well not exactly. Because many people are being booted out of their overpriced houses that they couldn't afford to buy in the first place, apartment prices are rising like crazy. Just the other day I took a look at an apartment complex that I knew cost $750 to rent four years ago. Now it costs over $1000 to rent. They didn't add anything extra nor is that just inflation. These skyrocketing rent prices can be seen across the board. Even cheap places that charged less than $500 are now charging around $700. So whats the solution if you don't want to pay for an overpriced house that you know is going to depreciate faster than left over McDonald's sitting in your fridge?

Well take a look at all of these condos and townhomes that people are trying to get out of. They paid $200K+ or more for something that was barely worth $130K and now they are trying to get out before they get in too far over their head. These condos and townhomes can be very reasonably priced for rent or buy. However you do have to dig. Many people think they can set the rent high enough to still cover their overpriced mortgage while they move into a house. Try to avoid these at all costs. Look at the place and decide if it is being rented at a fair value for it's current market value. Its not your fault the home owner decided to buy a condo at the peak of the bubble right? So don't pay for their mistakes.

Another option is to move out of the area you live in. For example the area I live in is either depressed neighborhoods setting new records in foreclosures every week, or overpriced neighborhoods that don't look like they are going to ever go down in price. The area I am looking at moving to has very reasonably priced houses and the prices are still going down due to market forces. There are far more choices in houses to rent and to buy and all are much more reasonably priced. Its a smaller area but that works for me because I hate congestion.

Each area's market trends are unique and it's hard to decide what to do. However I think its time we started paying realistic prices for the places we live in. Those that bought in when the prices were peaking...well so sad so sorry!