| In this environment, homeownership may not be a dream |
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| 已发布 on 2003-04-24 12:48:48 EST |
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Owning a home has always been the American dream.
But the state of the housing market has given some experts reason to issue a wake-up call.
With apartment vacancy rates at a decade low, renting is a bargain right now, they say, especially compared with house prices, which have risen sharply over the last few years. For some potential homeowners, an apartment may be a better short-term solution.
Adjusted for inflation, home prices have risen at nearly triple the rate of rentals since 1995, according to the Center for Economic and Policy Research.
And there are other factors to consider:
� States' and cities' fiscal crises are putting upward pressure on property taxes.
� The black mold scourge has pushed homeowners' insurance rates through the roof.
� If housing prices have hit a peak, as some experts believe, then home equity appreciation will be hard to come by.
Yes, mortgage rates are at historic lows. But inflation is at its lowest level since 1966, so the real savings are not as good as they appear. And smaller interest payments mean fewer homeowners are benefiting from the home mortgage tax deduction.
Some experts suggest approaching a home purchase the same way you would any other investment, such as a stock or bond � especially if you might move in the next few years.
"There's a huge risk now with owning a home," said Doug Nolan, credit analyst at Dallas-based money management firm David W. Tice & Associates Inc. "What happens if you need to sell it for any reason?"
Craig Jarrell, president of Dallas-based Pulaski Mortgage Co., said he has seen house listings begin to lag in the Dallas area, while inventories are on the rise. He attributes the "pause" in activity to concerns over unemployment.
"People are cautiously looking at new houses. They're worried about the houses in their neighborhoods and about their neighbors getting laid off," Mr. Jarrell said.
Pre-owned home sales in Dallas-Fort Worth were down 3 percent in March from a year earlier, while prices showed no change.
In some areas of Dallas, for every "For sale" sign you see driving down the street, you'll see just as many that say "For rent."
"It's shocking the number of signs I am seeing � they're everywhere," Mr. Nolan said.
Moving on up
Meanwhile, national apartment vacancy rates for the nation's top-50 metropolitan areas rose to 6.8 percent for the first quarter, according to Reis Inc., a New York research firm. Vacancies are even higher in Dallas � they hit 9.4 percent in the first quarter. The last time there were so many empty apartments in the area was 1989. Back in 1984, they rose as high as 16.4 percent.
What caused the spike in vacancy rates back then was overbuilding by apartment companies, according to Andrew Wright, a senior consultant with Reis. Today's culprit, he said, wears much different stripes.
"What's happening in Dallas is not so much a slew of new product hitting the market," Mr. Wright said. "The overreaching theme this time around is move-outs."
Many of those moving out of apartments have been first-time home buyers.
Relaxed lending standards, generous home builder incentives and falling mortgage rates created a new generation of homeowners who might not have been able to make a purchase several years ago. This trend, which has pushed the U.S. homeownership rate to around 70 percent, has left apartment landlords out in the cold.
And that's made renting a bargain.
"It's a great time to be a renter, because what's been feeding single-family housing has reduced rents," said Ronald Johnsey, president of Dallas' Axiometrics Inc., an independent apartment-market research firm. "And vacancy rates don't look like they've reached a turning point."
When incentives such as big-screen TVs, DVD players and even Caribbean cruises didn't work, Mr. Johnsey said, landlords began lowering rents and giving away one or two months free.
Home prices soar
Over the last few years, those extras have kept the lid on rents while home prices continued to rise.
Excluding inflation, home prices are up 32.7 percent since 1995. By that same measure, rents have increased only 11.7 percent, according to the research center.
Previously, when the gap between renting and buying has become pronounced, it has been corrected through a decline in housing prices, not a rise in rental prices, according to Dean Baker, co-director of the center.
"This really is without precedent," he said. "We've never seen this kind of a bubble in the housing market, not in the 1970s, not ever."
Yet home builders continue to break new ground. On Wednesday, the Commerce Department revised January housing starts to a record annual rate of 1.83 million.
Some in the industry say continued immigration will maintain the demand for houses. But others worry that this flood of new homes will create a glut for retiring baby boomers when the time comes to put their homes up for sale.
"The baby boomer generation is a far greater phenomenon than the immigration levels that we are seeing or are likely to see in the future," Mr. Baker said.
Add to the mix jobless claims that are at an 11-month high and you've got a conspicuous problem, he said.
"We've built 3.7 million homes over the same period that we've lost over 2 million jobs. That just doesn't add up," he said.
Interest paradox
Low mortgage rates have a downside: Many first-time home buyers can't deduct their mortgage interest. If a home costs less than $100,000, a couple's standard tax deduction probably will nullify the mortgage interest deduction.
"Not everyone needs to own a home," said Mr. Jarrell of Pulaski Mortgage. "All of these single people who are running out and buying $50,000 or $60,000 condos really aren't getting any benefit."
Many experts fear that the push by lending institutions to increase the ranks of first-time home buyers will backfire. Some first-time buyers may decide to go back to renting once they experience the extra costs and responsibilities of owning a home.
"Homeowners may be stuck with some costs they hadn't counted on," Mr. Johnsey said.
Worse, the lowest-income earners are often the first to lose their jobs in a downturn, raising the specter of foreclosures.
First-time home buyers are more likely to make the smallest down payment required to get into a home and to deplete their savings in the process, leaving them even more vulnerable.
"There's this assumption that it's always better to own a home," Mr. Baker said. "But you're not doing a low-income family any favors when you get them into a house that's value is going to drop a lot in the future."
If a lot of first-time homeowners return to renting, unemployment continues to grow, and a housing glut materializes, a fall in home prices would be expected.
Mr. Baker forecasts home prices will drop 11 percent nationwide over the next several years, before they start rising again. But, he says, the decline could be double that if the economy performs worse than expected or there are other unexpected shocks.
In a recent survey, PMI Group Inc. ranked Dallas as the second-highest-risk city in the nation for home price decreases. Unlike markets such as Boston or San Francisco, where land is scarce, Dallas has relatively infinite tracts it can develop. The downside, if home prices are about to fall, is that an overbuilt region will fall harder.
For some experts, it all adds up to an environment that turns conventional wisdom on its head.
"Renting certainly makes more sense than buying a home that in one or two years could be 15 or 20 percent less in value," Mr. Baker said.
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