Financial 411: Is it Better to Rent, or Buy?
Tuesday, June 28, 2011
IMF Appoints New Chief
French Finance Minister Christine Lagarde has been chosen to lead the International Monetary Fund after receiving the support of the Obama administration. She will become the first female leader of the organization and steps in after the former chief, Dominique Strauss-Kahn, stepped down after being charged with sexually assaulting a hotel housekeeper in New York City.
Lagarde will face immediate challenges in her new job such as helping prevent Greece from defaulting on its debt. Worries it could do just that have plagued Europe for months now, and have led some to worries about the future of the Euro.
But on Tuesday, there was optimism that the solution to the crisis is near. That sent stocks up, for the second day in a row. The Dow Jones gained 134 points, to close at 12,177. The S&P 500 added 15 points, to end at 1,295. The Nasdaq ended the day at 2,725, gaining 37 points.
Confidence on Wall Street, however, is not shared with people on Main Street. The Conference Board says that consumer confidence fell to a seven month low in June, due to continued high unemployment and flat wages.
Is it Better to Rent, or Buy?
Another reason Americans are worried is because of the dismal state of the housing market.
On Tuesday, there were some mixed messages about real estate. The Standard and Poor's latest Case-Shiller home price report found that prices in major U.S. cities rose for the first time in eight months last April.
In New York City, prices increased just under a percent from March to April.
But there's bad news too: Home prices are at levels last seen in 2003, and sales are still down from a year ago. In New York, that means a lot of people are choosing to rent versus buy, a conclusion supported by data from the brokerage firm CitiHabitats.
So is it better to rent nowadays? Reporter Janet Babin said it appears more people are renting. According to CitiHabitats, she said, "the city's vacancy rate is actually the lowest it's been in five years. Many upscale buyers are finding that it's cheaper to rent a place than to buy, their money can go further, it can stretch farther, if they decide to rent instead of buy."
Babin said the trend is seasonal, to some extent, as the summer months are the busiest of the year for people looking to move into the city. She also explains other factors, like economic uncertainty, that influence housing sales.
Interest rates are also low — below five percent for a 30-year fixed loan — but Babin said banks are still being cautious about who they lend their money to, and only those with the best credit are going to get mortgages.