Released: August 10, 2006

For some, renting makes more sense

Source: By Noelle Knox, USA Today

There’s been a debate ever since Micki Seibel and Jan Leger told their friends they were going to sell their home in the heart of San Francisco and rent an apartment. “Half think it’s great. The other half have been trying to talk us out of it,” says Seibel, 34, who works for MyNewPlace, a new online apartment search firm.

Though Seibel and Leger love their home, which they bought in 2002 for about $1 million, it’s been draining them of $5,600 a month for their mortgage and taxes, when they could be renting a place just as nice in the same neighborhood for about $3,400. “We can put that savings in the bank and make it work for us and take away the risk of the unknown future of the real estate market,” Seibel notes.

It’s hard to imagine the American dream as a two-bedroom apartment with a pool, instead of a single-family home with a white picket fence. But in some of the nation’s priciest real estate markets, that’s what’s happening. The financial reasons for renting instead of buying are the strongest they’ve been in 25 years.

“The last time home affordability fell to such an extreme was in 1981, but that was because interest rates jumped from 13% to 16%,” says Hessam Nadji, a managing director for Marcus & Millichap, an investment brokerage firm.

“What’s alarming this time is that interest rates are still historically low. That means rents need to go up, and home prices to come down in some areas, for the balance to be regained. And that may be a painful process that takes between a year to 18 months.”

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