No matter what deranged real estate agents or their ads say, most agree that now is not a good time to buy a home. I have covered this in other posts, and have discussed the irresponsibility with which Realtors give "advice" to potential home buyers about the benefits of buying in the current housing market.
To this end there is an excellent article in the New York Times that looked at the costs of renting vs. owning in the major metropolitan markets including Los Angeles and the Bay Area here in California.
…itÃ¢??s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. ItÃ¢??s almost as if they have thrown money away, an insult once reserved for renters. …
Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter.
My favorite part of the article is the reporters attempt to call attention to the facts that homeownership is excessively expensive compared to renting by placing a call to Pat Combs, the National Association of Realtors President and asking for her thoughts on the results of the study.
I called Ms. Combs and asked her whether she thought there was any chance that she and her fellow Realtors had gone a bit too far in promoting the boom. Ã¢??I absolutely disagree,Ã¢?? she said, still cheerful. Ã¢??We help people look at the marketplace.Ã¢?? …
ThatÃ¢??s a nuance that didnÃ¢??t make it into [the NAR’s ‘interview’ ad spot]. In Grand Rapids, where the median home costs $130,000, it is probably good advice. In a lot of other places, it may still be too optimistic.
Personally I think that Realtors should be restricted from giving financial advice on the benefits of home ownership. They should stick to showing homes and helping close transactions. Becoming a Realtor doesn’t make you a financial expert in the same way joining the Chamber of Commerce makes your business more or less important to the local economy. Both are just professional associations. Realtors happen to have a strangle hold on the information that controls the industry, but other than that there isn’t much of a requirement to become a Realtor (about $600 in So. Cal, in fact). There certainly aren’t any heavy financial planning or cost-benefit analysis education requirements; nor are there any housing market forecasting classes either.
This lack of education and understanding from people who have marketed themselves as "experts" in the housing market, and are giving financial advice to home buyers about it being a "good time to buy" should make sure their liability policies are current. I can foresee someone, somewhere saying they were giving errant financial advice by a Realtor that was negligent or intentionally misrepresented. It will be interesting to see that in court. Just give it time.Click to See the Latest Mortgage Rates»