I have been a renter for a while. People used to laugh at me for renting my house because I was throwing money away on renting. I had to remind people that I wasn`t throwing money away because I had a great place to live and I did not throw money away on food, on clothing, so I wasn`t throwing money away renting a place to live. I needed to live some place.
But off course the mantality was "you are throwing away money because you are foregoing all the profits associated with home ownership. In my mind it wasn`t profits that I was throwing away but expenses and headaches.
I knew as an educated consumer looking at real estate realistically that economically I was better off renting then buying. But everybody else assumed that they were better off buying because they assumed appreciation.
What they forgot to understand was that assets were already overvalued based on what we could rent a similar house for.
So if an asset is already overvalued based on rental alternatives or cash flow, why should that asset appreciate? That was the flaw in their analysis.
At some point in time when real estate actually becomes cheap enough that renting is no longer economically better then buying , then I might decide to buy a place. For a lot of people renting makes more sense then buying.
Peter Schiff is the President and Chief Global Strategist of Euro Pacific Capital. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned.
He has been quoted in many financial TV channels like CNBC, CNN, Fox News, Fox Business Network, and Bloomberg T.V.. In Peter Schiff`s blog you can track all his investment and trading ideas for 2009 as well as all his public appearances on TV, video or in the press.