Fundamentals Belie Housing Boom
A writer at Motley Fool has done the calculations readers of this blog know a lot about. He didn't like what he came up with. "In our neck of the woods, things look pretty unhealthy. I recently came across an OK-looking three-bedroom. Needs a new roof and windows and updating throughout. Price: $500,000. The showing agent expected prospective buyers to waive all reasonable protections like inspection clauses. To me, that screams, 'Bubble!'"
"For a reality check, I popped a few numbers into our handy rent vs. buy calculator. It informed me that we would be $60,000 worse off after seven years if we buy rather than continue to rent. It also assumed we'd be comfortable putting more than 50% of our income on the line for a home payment every month and it assumed 5% annual appreciation in housing prices for the entire seven years. In my opinion, those are pretty bad assumptions."