I often focus on the nuts and bolts of the real estate market in an effort to best inform our readers of where they stand in the midst of the muck and mire that we find ourselves immersed. In this instance, real estate could be a metaphor for the economy, state of the world, who knows, maybe the universe. Lord knows entropy seems to be alive and well.
Obvious to all, the housing market is a barometer for the overall health of the economy. If houses are being built and people are buying houses, one can safely assume that the economy is doing well, at least on paper. If no homes are being built and sales of new and existing homes are in the toilet, it would be pretty safe to say that is where the economy is too…no paper needed.
It is the latter situation we find ourselves wrestling with and will be for some time. A recent Wall Street Journal piece bemoaned home sales continuing to falter—sales are down 80 percent since their peak in July 2005—which rivals former lows recorded since such statistics starting being kept in 1963. To a degree this drop off is attributed to people seeking to buy foreclosed and pre-existing homes, which are cheaper than a new home. But no matter how you look at it, the housing market is on life support.
This leads to the question of whether newbies should rent or buy. In the past, one was typically advised to buy for a number of reasons, the most specific being a home is an investment and will allow one to build equity. That was, and could still be, the case if one remembers that a home, now more than ever, is a long-term investment.
It will take many years for home values to recover. Plus, concern for ever-increasing taxes has put many who once advocated for buying a home to renting one, which allows for the investment of monies that would have been spent on the home elsewhere, or simply used to cover the cost of living here. Never mind that we are running out of land and inevitably multi-family development stands to become the preferred style of housing. This can already be seen in the scope and style of developments that are being pursued in Ronkonkoma, Brentwood, Patchogue and Yaphank.
For those who own a home (or homes) and are looking to relocate, it might be best to rethink your time frame. I know of homes that have been on the market for years and not because they are overpriced or in dire need of improvement. It may be in one’s best interest to rent out that first home, especially if it’s a vacation home, until the market recovers. Otherwise a significant financial hit is all but inevitable.
As we become a more immediate society and job security is becoming myth, the ability to up and move quickly has become necessary. As that premise evolves, we are seeing a paradigm shift towards renting, and owning will be for the very wealthy and those unwilling to see the forest for the trees.