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| Volume 15, Issue 8 | For the week of February 28, 2011 | | Rent vs. Homeownership, A Narrowing Gap | | In many metro markets the cost of renting is now approaching the cost of homeownership. There are several factors that are causing a narrowing of this gap. | | Homeownership
The recession has dramatically impacted the prices of houses through these forces: | | - Houses bought prior to the Great Recession (2007) were purchased at the peak of housing prices and many cases at the top of the housing bubble. - The precipitous drop in values resulted in: 1) a negative equity for many homeowners;
1)the inability to refinance their mortgages that were upside down due to low appraised values; 3) the inability to sell without sustaining a sizeable loss, forcing cash in refis or short sales and the inability to relocate for employment or other reasons. - To counter this impact, Federal programs were instituted to provide mortgage restructuring for those who were have financial hardship but wanted to remain in their homes. - These programs have now run their course and the housing market continues to be faced with a glut of REOs and distressed properties. - Lower home prices and basement bottom interest rates have brought homeownership affordability to it’s highest level in years. | | Renting
As a result many former homeowners have turned to renting. This migration has resulted in: | | - A larger demand for rentals. It takes time to plan, permit, construct and bring to market rental property. - This lag in supply pushes the rental prices up to meet demand. - The cost of renting is now compounded with the addition of hidden costs including required renter’s insurance and storage fees for those downsizing. | | A Narrowing Gap
Traditionally, renting has been the more affordable proposition. But when you take these points and factor the missed opportunity for appreciation and higher quality of life that homeownership brings the scale tilts to homeownership as the better of the two. |
Key Economic Reports Released This Week | RELEASE
DATE | ECONOMIC
INDICATORS | RELEASED
BY | CONSENSUS | Wt. | INFLUENCE ON
INTEREST RATES | | Mon 02/28
8:30 am et | Personal Income & Outlays
for January '11 | Bur. of Econ. Analysis
Dept. of Commerce | Income 0.3%
Outlays 0.4% | *** |  If above consensus
 If below consensus
| | Mon 02/28
10:00 am et | Chicago PMI
for February '11 | Chicago Purchasing Managers Index | 68.0% | ** | If above consensus
If below consensus | | Mon 02/28
10:00 am et | Pending Home Sales Index
for December '10 | Chicago Purchasing Managers Index | -2.5% | ** | If above consensus
If below consensus | | Mon 02/28
1:00 pm et | Weekly Bill Auction | Dept. of the Treasury | N/A | ** | If strong demand
 If weak demand | | Tue 03/01 | Motor Vehicle Sales
for January '11 | Automobile Manufacturers | Vehicles 12.7M | ** | Undetermined | | Tue 03/01
10:00 am et | ISM (NAPM) Index
for February '11 | National Association of Purchasing Mgt. | 61.0% | ** | If above consensus
If below consensus | | Tue 03/01
10 | Construction Spending
for January '11 | Bureau of the Census
Dept. of Commerce | -0.9% | ** | If above consensus !
If below consensus | | Wed 03/02
7:00 am et | MBA Mtg Apps Survey
for week ending 02/25 | Mortgage Bankers Association of America | N/A | * | Undetermined | | Wed 03/02
8:15 am et | ADP Employment Report
for February '11 | Chicago Purchasing Managers Index | 185k | ** | If above consensus!
If below consensus | | Wed 03/02
2:00 pm et | Beige Book | Federal Reserve Board | N/A | ** | Undetermined | | Thu 03/03
8:30 am et | Jobless Claims
for week ending 02/26 | Bur. of Labor Statistics
Department of Labor | 395k | * | If above consensus
If below consensus | | Thu 03/03
8:30 am et | Productivity & Costs
Q4 '10 revised | Labor Department | Prod 2.3%
Costs 0.3% | ** | If above consensus!
If below consensus | | Thu 03/03
10:00 am et | ISM Index (Non-Mfg)
for February '11 | National Association of Purchasing Mgt. | 59.0% | ** | If above consensus
If below consensus | | Fri 03/04
8:30 am et | Employment Situation
for February '11 | Bur. of Labor Statistics
Department of Labor | Payrolls 175br>Unemp 9.2 | **** | If above consensus
If below consensus | | Fri 03/04
10:00 am et | Factory Orders
for January ' 11 | Bureau of the Census
Dept. of Commerce | 2.0% | * | If above consensus
If below consensus | | * Low Importance | ** Moderate Importance | *** Important | **** Very Important | | | |
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