The month of June came with the news of a 53 percent rise in home foreclosures, according to real estate data firm RealtyTrac. With the dismal housing situation, many are confused. We see more and more “For Sale” signs cropping up; who is buying, and who is selling? And, there have been reports that it may be more cost-effective to rent than to buy. Which is the better option?

 

“I know many families who have rented,” says Joe Russo, a NC-based real estate broker. “They are a lot happier and have more stability than the families who bought and are now bankrupt.”

 

“It should now be obvious to all that home ownership is not for everyone—I have advised many clients that they should rent and not buy—I am now their best friend,” he explains. “They will call me to buy when their job and family growth situation stabilizes.”

 

Now an expert on waterfront real estate in North Carolina’s desirable Lake Norman locale, Russo has a broad perspective on the market, having spent over thirty years working in the competitive New York real estate area. He is the author of Selling Your House/Condo in this Housing Emergency of 2008 (http://www.americasbestagent.com/buythebook.asp).

 

Russo tells demo dirt that while it depends on the neighborhood, “There may be a glut of available homes for rent. Some may be less because of the competition, but in some areas, I have seen demand go up and the rents will follow.”

 

While the American dream is to own a home, there is no stigma attached to renting, and may be a smart choice for many, he says. “Some owners are being foreclosed on and they have no choice, but to rent a house to live in is actually not a bad thing,” Russo explains. “The expenses to rent are usually less and it at least gives a family a chance to get back on their feet financially and get their dignity back. Also, if foreclosed on, of course it would be difficult for the same family to get a mortgage on another house until their credit score came back up.”

 

How is the real estate market affecting various generational cohorts? Young people with the money may be able to buy, says Russo, but the banks “are now scrutinizing, doing what they should have been doing all along.”  

 

“Generation X and Gen Y are realizing that what they can buy is limited to what they can afford. For instance, Gen X and Gen Y in California are getting burned right now,” Russo states.

 

“I know it sounds so simple—to buy only what you can afford—but people used to buy way beyond what they could afford,” Russo explains. “The problem in the past was there was too much projection about what people will make or have in the future. People from the old school [Baby Boomers and Matures] know that this doesn’t make any sense. Now, banks are really analyzing prospective buyers’ incomes.”

 

The differences in attitudes about money are apparent every day, Russo maintains. “I see Gen Yers charging McDonald’s and Starbucks on their credit cards,” he adds. “Baby Boomers and senior citizens were raised differently.”  However, Russo concedes, “The government has encouraged credit card spending.”

 

“The problem for Generation X and Generation Y is that they have no cash to put down, and banks want to see a commitment. They want to see 15 to 20 percent down,” Russo contends.  “Gen X and Gen Y are learning that you cannot clean your credit up that easily; credit scores are getting lower and lower, and banks are running out of cash. They may have the salaries, but they need to pay student loans, and have high rents to pay, and have other expenses.”

 

Despite their more careful attitude towards money, Russo maintains that the real estate crisis is hurting Boomers as well. With it becoming harder for people to buy houses, who will Boomers sell to when they want to pack up and retire elsewhere? “For Baby Boomers the problem is that they would like to retire, but they cannot sell their properties, so they cannot buy. If they cannot sell the house, they cannot go anywhere to retire; they cannot sell their house to buy in another area. This [crisis] has put the brakes on everything,” he explains.

 

It won’t get better anytime soon. “We haven’t seen the worst of this. Suburban communities are suffering because of the gasoline prices, which will never go down. People don’t want to spend forty dollars a day commuting to work,” Russo notes.

 

This means more renting, less ownership. “The demand for rent will go up because people cannot buy,” he adds. “There will be lots of houses available, lots of inventory for rent.”

 

However, people will discover that renting their home will not necessarily solve their problems.  “The mortgage payment to pay for the house will not be covered by the rent. This will be a short-lived situation. People cannot sell, so they try to rent, and they eat the money that rent won’t cover. To pay the mortgages, rental prices in urban, desirable areas will go up,” Russo says.

 

To learn more about the services that Joe Russo offers, go to http://www.americasbestagent.com or http://www.lakenormanexpert.com.