Our brave new world

The National Association of Realtors reports that 40% of new home buyers put $0 down. In some ways, I suppose, this is good in that it allows people to own their own houses. However, some of these mortgages carry very high interest rates (e.g., 8 ½%) and I wonder how these people can carry the mortgage and still live a reasonable life. They are gambling that the housing market will continue to rise and they will eventually come out ahead.

In an era of a housing boom, might some people be better off renting? A recent newspaper article reported on the comparative decline in the costs of renting versus owning. Relying on my aging memory, in 2000 rental costs in Boston, for example, were about 80% of the costs of buying; now they’re around 55%. Investing the difference would make sense and be less risky for many of these young kids.