aon providing a better life

Once you're in the weeds of it, real estate decision-making can seem like a tricky minefield of layer upon layer of calculations, mortgage complexities and if-this-then-that dependencies, Plans B-J and lending hurdles.

But this belies the essential truth that the most important real estate decisions are, ultimately, quite simple. The most fundamental, impactful and often difficult of these to make is the decision on whether to rent or buy the place that you live in.

This decision has never been quite so tough as it is in today's post-recession market climate.

For the last eight decades or so, homeownership has been widely considered part of that game of life that is the American dream, the path of aspirations that once included: Go to college; get a great job; get married; have kids; and if you could afford it, buy a home.

Over the last generation or so, every step on that path has been questioned and deemed dubious in desirability by at least some significant number of Americans.

And the inherent value of homeownership has not escaped this social scrutiny -- in fact, the housing market recession sparked a vocal movement of "renters by choice," who deemed real estate ownership more a burden than a blessing, despite being well able to afford it.

On the other hand, the recession has also kept up the demand for (and prices of) rental housing, while slashing the values and prices of homes for sale, creating the strange and unusual dynamic of renting being as or more costly than owning a home, in a surprisingly large number of markets.

To help decision-makers sort through the overwhelming data and opinions on the topic and make the right personal decision, real estate writer Jane Hodges has just released her latest book, "Rent vs. Own: A Real Estate Reality Check for Navigating Booms, Busts and Bad Advice."

To fulfill her stated mission of cutting through the rhetoric and answering all the relevant questions that should factor into the rent-or-buy decision (including those you don't even know you need to ask), Hodges offers dozens of reality checks, success stories and cautionary tales (of renters and owners).

Here are three themes that emerge from Hodges' guidance when it comes to deciding whether to rent or own your home:

1. There's no one-size-fits-all answer to the rent vs. buy conundrum. There are pros and cons on every one of the many factors that must be balanced in making the decision.

For instance, Hodges advises that the exit strategy of moving out of a home you rent is low-risk, but also has low reward; conversely, the potential for reward is vastly greater when you buy a home -- but so is the risk level homeownership poses.

And your personal risk/reward preference is just the tip of the iceberg of considerations you'll need to factor in: things like your family's or lifestyle's space needs and how they map to your town's rental or sale listing inventory; your romantic, family and career plans; and the level of cash you have to (a) buy, (b) pay for the property over time, and (c) improve a home to your satisfaction are a few of the other critical elements that Hodges encourages readers to incorporate into their analysis.

2. Sustainable is the name of the game. Hodges devotes some serious page space to the concept of sustainability, but not the sort of sustainability that probably first comes to your mind! In addressing this new flavor of sustainability, Hodges encourages readers to limit themselves to housing obligations that they will be able to afford long into the future, by asking themselves a series of questions, like:

• Does it make sense for me, personally?
• Can I afford it right now?
• Will I be able to afford it in the future?
• Will I be able to save and invest for the future after I rent or buy?
• Do I have an exit strategy: What do I expect to gain, and how much am I willing to lose on this place?

3. Read the real estate news very, very carefully. There is a fire hose of real estate information out there for the consumer who wants to educate himself, but Hodges cautions that much is biased or susceptible to inaccurate interpretation.

She then translates many of the recurring headlines and messages in the national real estate news, surfacing their underlying realities and deactivating their power to drive irrational guilt or overoptimism in the mind of a consumer.

She goes on to offer a decoder for the now-ubiquitous real estate data stories, helping readers understand how to draw conclusions that matter to them from data points like inventory and vacancy levels and price-to-rent ratios.

Hodges closes "Rent vs. Own" out with a smart, comprehensive compendium of all sorts of real estate resources upon which readers can draw, depending on their angles of personal interest -- from real estate memoirs to calculators to listings. If you're wrestling with the decision whether to rent or own your home, "Rent vs. Own" is a strong recommend.

Unfortunately, no book can make the decision for you, but "Rent vs. Own" applies order and sequence to a decision process that can easily grow chaotic and confusing, and is strong when it comes to surfacing relevant stories of consumers you can relate to, and issues and questions that might not otherwise occur to you until you're knee-deep in a serious situation.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Existing-home sales rose 4.3 percent in January to a seasonally adjusted annual rate of 4.57 million, marking the third gain for home sales in the last four months, the National Association of REALTORS® reports. 

“The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” NAR’s Chief Economist Lawrence Yun says.

While sales ticked up, inventories of for-sale homes also continued to show improvement, NAR reported. At the end of January, total housing inventory fell 0.4 percent to 2.31 million existing homes for sale, which represents a 6.1-month supply at the current sales pace.

“The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers,” Yun says. “Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets. A government proposal to turn bank-owned properties into rentals on a large scale does not appear to be needed at this time.”

Unsold listed inventory has steadily dropped since reaching a peak of 4.04 million in July 2007. It now is 20.6 percent below where it was a year ago, NAR reports.

Housing Affordability Improves

As home prices have fallen and mortgage rates at all-time record lows, housing affordability is at some of its highest levels on record.

“Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” says NAR President Moe Veissi. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”

The national median existing-home price for all housing types in January was $154,700, which is down 2 percent year-over-year.

Distressed sales, which tend to sell at steep discounts, continue to hamper home prices nationwide. Foreclosures and short sales accounted for 35 percent of all January home sales, which is up slightly from 32 percent in December.

Still, “home buyers over the past three years have had some of the lowest default rates in history,” Yun said.  “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”

Breakdown by Housing Type

Here’s a closer look at how home sales fared by housing type in January:

Single-family home sales: increased 3.8 percent to a seasonally adjusted annual rate of 4.05 million in January from 3.90 million in December. They are 2.3 percent above the 3.96 million-unit pace a year ago. Median price: $154,400 in January, down 2.6 percent from January 2011.

Existing condominium and co-op sales: rose 8.3 percent to a seasonally adjusted annual rate of 520,000 in January from 480,000 in December. They are 10.3 percent lower than the 580,000-unit level in January 2011. Median price: $156,600 in January, up 2 percent from a year ago.

Home Sales by Region

The following is a breakdown of existing-home sales in January by region:

Northeast: increased 3.4 percent to an annual pace of 600,000 in January and are 7.1 percent above a year ago. Median price: $225,700, which is 4.2 percent below January 2011.

Midwest: increased 1 percent in December to a level of 980,000 and are 3.2 percent higher than January 2011. Median price: $122,000, down 3.9 percent from a year ago.

South: rose 3.5 percent to an annual level of 1.76 million in January but are unchanged from a year ago. Median price: $134,800, which is 0.3 percent below January 2011.

West: increased 8.8 percent to an annual pace of 1.23 million in January but are 3.1 percent below a spike in January 2011. Median price: $187,100, down 1.8 percent from a year ago.

Contract Delays, Cancellations Remain High

Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through, according to NAR. The number of contract cancellations remains mostly unchanged from December.

The increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.

Source: National Association of REALTORS®