By Gene Ayres

For those of you pondering the merits of renting vs. buying, the jury is in and it ain’t pretty for those of us who bought high, expecting those juicy appreciations to continue forever, as the National Board of Realtors still actually insists on having us believe.

I am old enough to remember when you could buy a nice three-bedroom house, even in California, for under $100K. And if you go back a little before the 1960s, when the bubble really began to take shape, there was a common trend that went back to my fathers and grandfathers era, to wit: a years salary for the average worker was enough to buy a home. When my grandfather got married in 1929 he was able to buy a two story Victorian home with 4 bedrooms in New Jersey (he commuted to NYC) for $2000. In 1950 my father bought a 4 bedroom Colonial with a full attic, 3 baths, a living room, dining room, sun room, breakfast room, kitchen, laundry room and maid’s room, plus a full finished basement, for $25K. He sold it in 1960 for the same price, and bought a new split level in another bedroom community (the now extremely upscale Morristown, NJ) for $35K.

Then prices took off. Ten years later he retired, and moved to Annapolis, in Maryland. There he had to pay the enormous sum of $65K for a custom-built waterfront home on the South River with two floors, floor to ceiling windows, and a private dock for his sailboat (and beach).

But wait: that same year I was living in Manhattan in a quaint artsy area called Soho, at 154 Spring Street. Several fellow film makers and I had the top two lofts of a classic 4 story former factory building. We had our own freight elevator. Our rents were $125 for the top floor, and $75 for the 3rd floor, and we have a film studio in one and a sound stage in the other, with room for two apartments. The owner of the building, who lived in Switzerland, was desperate to sell us the whole building. If only. The price was $125K and we had to laugh, it was so high.

Today you couldn’t get even one of those floors in that building for less than $10 million.

Cutting closer to the chase, in the late 1970s I moved to California. I lived in Manhattan Beach with a girlfriend who had just bought a house a mile inland for $75K. I thought she was nuts, because for the same price you could buy one right on the beach (she thought it would be too chilly in the winter). To put it in perspective, that same year my sister bought a 4 bedroom 2 story ranch in North Seattle for $16K. It resold just before the bubble burst last year for $750K.

Is it time for a reality check? Getting back to my fathers and grandfathers time, last I checked, the average home buyer in Seattle was not making $750K a year. Yes, the National Board of Realtors still wants you to believe that if you can swing a 3% down payment, no problem, you can still own your dream and make a profit too. Have you seen those TV ads they are still running promising a 10% increase per year?

Are they kidding? And if you believe that, I have a great deal on a bridge for you, in Brooklyn.

Here is a swift kick in the reality keister, folks. According to the Center for Economic Policy Research, and data based on HUD and USDA tables, it is way, way, way more cost effective, today, now, to rent, than to buy.

The only cities where this isn’t true are (guess) Cleveland and Detroit. For Seattle, the CEPR provides comparable monthly rent vs. ownership costs in 20 cities. The cheapest, lowest home ownership monthly costs in Seattle, including taxes, association dues or maintenance costs, insurance, interest and principle rangers are from $1921 to $2581 a month, for a unit that, if rented, would cost you $942.

Remember, these figures are factoring in your down payments, brokerage fees, and interest lost by taking money for home purchase you could otherwise earn interest on, and/or use elsewhere.

And here is the worst news of all: there is no evidence (quite the contrary) that this situation, for home owners, is going to get anything but worse, for a long time to come. So if you are sitting on the fence about this, get off and find a rental, quick. And if you are determined to buy, and holding out for prices to drop even more, they will. But don’t count on flipping it for a profit any time soon. My grandfather wouldn’t dream of it. Nor should you.

There is one compensating thing to consider, however, and in my opinion this is the shape of things to come. Last year I was unlucky enough to have bought a condo at the peak of the bubble. The market at the time in this area was $230K, and we got in for $215K, which was lucky. Or so we thought. Now the last unit to sell in our complex was back in January. Sellers today are trying to get $180K for the same unit as ours, with no takers. But here is the thing. The same thing is happening to houses. A house that might have gotten $475K last year will go for $425K now, and maybe $410K by the end of the year. So even if you lose 20% selling, you can make up the difference buying elsewhere. That would be good for everyone, because a lot more people can afford to pay $180K for a condo than $230K. And likewise, the same is true for houses.

On the other hand, the days when a years wages would buy a house may be gone forever, unless you happen to be a CEO or Tom Cruise.

Good luck and happy house hunting.