Important headlines for June 7th – The story of your life doesn't fit an index
Bottom Line: These are stories you shouldn't miss and my takes on them...
Renters in better position to create wealth than homebuyers, South Florida professors say - Sun Sentinel
Excerpt: As U.S. housing markets including South Florida's approach the peaks of their price cycles, it’s better to rent than buy a home, according to the latest “Buy vs. Rent” index produced by two South Florida professors. The quarterly Beracha, Hardin & Johnson Buy vs. Rent Index is designed to signal whether market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period, relative to historical market conditions and alternative investment opportunities. The index focuses on 23 major metropolitan housing markets. The Miami area market encompasses Palm Beach, Broward and Miami-Dade counties.
Hot Take: In a separate story today, I tackle this topic in a comprehensive way. Here's the bottom line. While the index suggests that there is a shifting value proposition towards renting, and that may be the case relative to where we've been, I strongly disagree with the premise. Historically there's never been a sustained window of time in which that's been true and there's no reason to believe that's about to change now. The reason is pretty straight forward. We all have to pay to have a roof over our heads. Housing isn't an either-or investment choice (stocks, vs. Bonds vs. Real-estate) in that regard – it's a non-negotiable. The question is whether you want the ability to own the roof over your head by paying it off over time and reaping the benefits of appreciation over time as well.
If we're having a conversation about how best to utilize investment dollars – then yes the conversation swings in favor of stocks rapidly as the average annual rate of return is 10.1% for stocks compared to 4% for real-estate. But that's not the conversation here. The bottom line, and it's my first rule of retirement (a mortgage, or rent payment, isn't a retirement plan) is that over the long run you should own your home and invest in stocks.
As the Russia Farce Winds Down, Spygate Begins to Unfold Conrad Black, NY Sun
Until tomorrow...