Cautious Renters Put Off Buying a Home

Despite widespread predictions that the market will turn around next year, some first-time home buyers are hesitant to make their first home purchase and are choosing to rent instead.

"During the housing boom, the 'rent vs. buy' decision became a 'buy,'" says Manhattan real estate appraiser Jonathan Miller of Miller Samuels. "Now, nationally, the pendulum is swinging the other way."

One reason is financial. Prices in many areas haven’t fallen — or at least they haven’t fallen very much. In expensive markets like San Francisco, New York, and Orange County, Calif., “where do you come up with $100,000 for a down payment?” asks Sam Chandon, chief economist at Reis, a New York real estate firm.

But the big reason for staying a renter appears to be psychological. "Two years ago someone in New York or San Francisco might have said, 'I'm willing to stretch to buy that studio apartment even though it means I'm going to have to allocate a disproportionate amount of my income to housing costs,'" Chandon says. "What we're finding now is that even in some of these best markets, that sense of urgency has dissipated."

Source: BusinessWeek Online, Maya Roney (07/19/07