Weary and Wary, Homeowners Stay Put and Rents Rise

Date: May 22 2008
Source: The Wall Street Journal
Website: http://online.wsj.com/article/SB121140728202412099.html

Weary of bad news on the housing market, yet wary of missing a deal, readers continue to ask: Should I rent or buy?

There are powerful arguments for both cases. On the one hand, no one wants to buy something that's falling in value. On the other, foreclosures are creating one of the best buying opportunities in years, and rents are ticking up. REIS, a New York-based real estate research firm, expects rents will rise 3.8% this year, compared to a 3.1% gain last year.

Although I think it's much better to buy when prices are low -- assuming you can get the financing and aren't planning to move in the next year or two -- many people apparently have become too pessimistic to make a move. Indeed, many Americans have become fence-sitters, according to a new survey done two weeks ago by Harris Interactive, a group that conducts online research - - though people who already own a home are the most resistant to moving.

The poll asked a pre-selected panel of consumers, consisting of 1,258 homeowners, 563 renters and 228 "others" (folks living with family or friends), questions about why they live where they do, and what their housing plans were for the future. The research was sponsored by the National Apartment Association.

The 2,049 respondents, whose answers were weighted to adjust for region, age, gender and other factors, were generally gloomy about the state of the economy. Eight out of 10 thought it would stay the same, or get worse, over the next six months. Consequently, 72% of homeowners and half of both renters and "others" plan to stay in their current residences over the next year.

The stay-in-place movement is a bit at odds with recent trends towards renting. Rising foreclosures and the credit crunch, along with widespread anxiety about the direction of home prices, have all played a part in swelling the tenant pool.