Welcome to the Mortgage Market Report

The Mortgage Market Report for June 3rd, 2024

Mortgage-backed securities are up 14 basis points right now. It might even improve from here because the 10-year treasury has dropped more significantly on some weaker data that we got; S&P Global and ISM Manufacturing. 

Goods times, bad times – Bad stuff out of the New York Times, that’s for sure. Talking about how renting, in their opinion, is better than buying in pretty much every place in the United States – pushing their calculator.

Showing why they think people should give up on buying and why renting is the strategy.

Let’s take a look at this article from the New York Times:

They are really pushing the narrative of their title. Saying that renting is a better financial decision

They go on to say that millions of people are renting, saving money on the rent vs buying and investing the difference. We’d like to know who these millions of people are. They point to the S&P – over the last century returning about a 7% per year return.

We’ll go through all those numbers in just a minute but first, let’s take a look at our tool – the buy vs rent calculator that we have to show you the breakdown step by step.

I want you guys to be able to shut down this garbage that’s going on out there once and for all. Take a real scenario here; 

The monthly payment on a purchase is about $703 a month more expensive than renting. Here’s where they say look you can invest this difference and you could get 7% rate of return.

So let’s just go with that – now rents do go up 5% a year but let’s also put the negatives for buying a home.

Let’s say property taxes is going up, the repair costs that you wouldn’t have with a rental, and the cost to sell. We are going to put all those things in there – now we went with a pretty modest return. We went with a real actual area of a 4.13% rate of return per year on appreciation.

Which people say you get 7% percent for your investments so why not take 7% on your investments – it’s better than 4.13% right? We will go over all of these things – turning to our buy vs rent tool and put the numbers in.

You can see the difference, same numbers $703 dollars – initially cheaper but what starts to happen overtime. That 5% increase in your rent starts to take its toll and you can see that rent gets more expensive. In fact, when you take a look at your total cost over time, the amount that you are outlaying is cash flow.

Your cash flow is actually better buying than it is renting but obviously then you get into your most important aspects.  See below.

The 4.13% appreciation, the tax benefit; which the NYT doesn’t take into consideration, and the amortization gain. We’re going to subtract the closing costs, of course, and the cost to sell. Between everything; over the 9 years, you are better off by $248,118.

But as you can see in the initial period of time; you are going to be upside down. The net gain is a big difference! Let’s shut this argument that the NYT is making down once and for all and show you how flawed it is.