During the Housing Bubble I was tempted to buy a few times. Real estate agents, banks, and friends high on the euphoria all told me it was the time, but I baulked at the absurdly high monthly payments. Plus I enjoy not having to pay for major appliances and their repair, and I also enjoy the freedom of being able to move when and where my whim takes me. But I still wondered whether the psychological permanence of renting money from a bank (i.e. paying a mortgage on a house), rather than paying rent to a landlord, would be comforting. But every permutation of possibilities I plugged into this told me I was better off renting. And every once in a while I’d see something like this, or read an article like this.
Now Forbes has compiled a list of the Best And Worst Cities To Rent A Home, and I’m a very happy Portland renter.
They take into acount three metrics: “the annual change in monthly rent, the percent increase of new rental construction in 2008, and the percent difference between the area’s average monthly rental payment and the average monthly mortgage payment”.
Given these criteria Portland comes in at #6 out of 40. Rents average $772 a month, whereas the average monthly mortgage payment is $1,588.
Annual Change in Rent: 4%
New Construction: 143%
Rainy day lovers might appreciate Portland, but so will those who appreciate a bargain. Not only is rent far cheaper than buying–by more than half–there’s a 143% increase in new construction for 2008, which means prices may go even lower.
I don’t believe you could find anything decent to rent for $775/month in Portland. It certainly must be a nasty apartment in Gresham or Oregon City.
We just sold our home in MN, and I would like, for the first time ever, to rent!
dh – Certainly “decent” is relative.
Nancy – I owned a house from 1998-2003, but I didn’t enjoy it at all; the mortgage interest deduction is nice (and unfair to renters) but renting for me is more desirable for a multitude of reasons (no yard work, more flexibility, no responsibility for big ticket items, price, etc.).
How did we end up renting and doing yard work? Oh, yeah, we rent a house. I’m guessing that when making owning/renting assumptions for the articles the authors assumed renting meant an apartment. Of course, I’m guessing that because I haven’t clicked through. Sounds like a lazy renter, but really I’m an exhausted mom that was woken up by the 3yo 3 HOURS BEFORE HE NORMALLY GETS UP. So my attitude isn’t what it normally is.
Btw, I also love the Elko stuff. We used to drive through there to get to MT every year. Not coming from CA any more now.
KYouell – I think the rental average mostly consists of apartments, whereas single family homes probably make up the majority of the mortgages. So the rent/mortgage is not on the equivalent property, but just average costs.
I love the Elko stuff too! My brother Steve updates that blog.
Portland Gentrification says
Forbes’ data is terrible – basing this evaluation on just three measurements without context such as wages, locations of affordable rentals, prevailing tenant laws, number of applicants per vacancy, rental turnover rate are a few off the top of my head that ought to have have been considered as well. Especially that last one – the best cities for renters could arguably be the ones that see tenants’ staying in their units the longest, rather than the ones that have a lot of overpriced housing and fat mortgages to pay for it. Renting is more than just waiting out the mortgage market.
Putting four Florida cities in the top ten tells you this is really a “Best Places to Not-Buy” list.
Portland Gentrification – ‘Best Places to Not-Buy’ might have been a better title for the Forbes article. These sorts of pieces often use the wrong sorts of data or come to arguable conclusions. But the very slow rise in rent prices over the last decade, when compared to real estate prices has both made me a happy renter and kept me skeptical of the house prices during the boom.
You know, I thought I would hate yard word and dealing with replacing appliances. As it turns out. I absolutely love it! In fact, we need to replace a dryer and I am extremely excited!
Unless I win a lottery and can pay for a house outright, I have no interest in owning. I can rent a much nicer place than I could ever own on the money I make. If I owned a house I would constantly be worrying about the roof blowing off or the furnace blowing up and whether or not I had enough money to cover that. I hate doing home repairs, painting, replacing floors, fixtures and all that stuff. I don’t mind yard work, but when I’m out on a beautiful summer weekend having fun and pass by homeowners cutting lawns, sweating in their hedges, yanking weeds, I’m happy I’m a renter.
We bought in 2005, after a big run up in our neighborhood in the preceding 2 years. Just the same, the house increased in value enough between 05 and 08 that things will have to fall a lot further for us to not have come out well ahead.
That said, repairs and high mortgage payments are a big cost/up-front investment.
I’m all for getting rid of the mortgage write-off, but it would have to be done slowly to avoid causing a crash/bubble scenario. It is generally better in the long run to let the market work (nasty socialism and all that…).
With the population of Portland projected to increase by another million in the next 20 years, and property prices way, way below the levels of all the other big West (and most East) Cost cities, property is probably going to be a very good investment here.