Rent vs. Buy

Free information is useful on a macro level, but do not use it to make the decision to buy a particular property.

A smart Realtor can keep you one step ahead of the crowd. When you find your neighbors are going to conferences get into your market, it is time to set up a booth to sell your inventory because prices will get inflated and there will be better returns elsewhere.

Rent vs Buy Calculators: The New York Times has a fantastic interactive graph (bottom right).

Bankrate.com asks you a series of financial and lifestyle questions and makes a recommedation.

Credit Loan has a spreadsheet format.

Misleading Sources of Information: The Case-Shiller Index, which newspapers frequently site, can be very misleading. All that Index does is track the average value of the homes that sold in a given month which is affected by: 1) The price of homes and 2) The mix of homes sold. Lately, the ratio of foreclosed homes to market rate homes that have sold has had the biggest impact.

The following non-housing example might help in understanding why an average is not a good measuring stick: The average height of people in America is shrinking. If the newspapers interpreted that information the same as it interprets the average price of homes sold from one month to the next, the stories would be about how our diet is affecting our growth. However, the reason is that Latin Americans are comprising a larger percentage of our population. Unfortunately, our diet is causes a width problem not a height problem. You and I are not getting shorter.

Similarly, just because the average price of homes sold in a given month goes up or down, it does not necessarily mean that your home's value has gone up or down by the same percentage. It could be that the mix of low priced foreclosures sold has changed from one month to the next.

Zillow is also tremendously misleading. At best it is within 15% of what your home could sell for which might be a swing of $75,000. Zillow even states that it does not know the condition of your home. It does not know how home values change from city to city or block to block. It does not know if a home is next to a forest or a dump. If they do not know that information, they cannot generate a reliable estimate. It is just a marketing gimmick.

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