It’s the Worst Time to Buy a House Instead of Rent

Let’s take a break from our Oak Creek Heroes series to consider this proximate reality:

According to the Wall Street Journal from 10/24/2023, the disparity between renting and owning has never been larger, advantage renting.  You can see the entire original article here.

This shouldn’t come as a surprise.  New home construction has been far below typical activity.  Then throw in sky high interest rates and affordability goes out the window.

How will this disparity get resolved?  More than likely, in the form of higher rent.

Home prices have always been sticky, even before so many homeowners were in 3% existing mortgages when new mortgages are 8%.  Ordinarily, if a homeowner can keep making monthly mortgage payments, why sell a home at a loss?  Particularly if selling at a loss means having to bring cash to closing to clear title.  Therefore, home prices tend to resist decline.

We would already expect to see rents increasing rapidly except for two reasons.  First, during the pandemic, rents already exploded.  Second, rents increased so quickly, construction responded to the opportunity, resulting in overbuilding, at least in some locations.  Then the tech sector imploded.  The result has been declining rents on the West coast and other tech hubs like Austin Texas.

Closer to home, rent growth (meaning increases), have remained steady.  According to ALN Data, Milwaukee rent grown was 5.6% in the last year.


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