Renting is new version of American Dream

Home ownership is supposed to be the American Dream — just apparently not the dream of all Americans

Many of them go by the term, "renters" and currently regard themselves as winners as they watch home prices fall in parts of the country and homeowners struggle to pay their adjustable-rate mortgages.

But have they really won? With the weakening prices and still-low interest rates, economists and housing experts are questioning the wisdom of continuing to sit out of the housing market. Now is the perfect time to buy, they say, because waiting too long might mean a higher interest rate.

"It does not take much in rising interest rates to wipe out the savings in price decline," said Gregory Leisch, chief executive of Delta Associates, a real estate research firm in suburban Alexandria, Va.

So if you're considering joining the ranks of die-hard renters or following the American tradition of owning a home instead, what should you do?

"The simple answer is that it's not simple," said Mike Larson, a real estate analyst for Weiss Research in Jupiter, Fla.

There was a time when it was simpler. That is, when it cost less to own than to rent. Ten years ago, according to Moody's Economy.com, the average annual cost of owning a home — including mortgages, taxes and maintenance costs — was $10,231 nationally, compared with $13,090 for renting.

Then things changed. Owning became more expensive than renting in the first quarter of 2004, and that trend has persisted. In the second quarter of this year, nationwide, the average annual cost of owning a home was $17,707, compared with $15,721 for renting.

"In the last four years, rent became a four-letter word. No one wanted to rent. They looked down upon it ... " said Larson. "I think a lot of people just assumed buying makes sense. They drank the Kool-Aid and unfortunately are finding themselves now in a tough spot."

There are many reasons why housing costs increased, economists say. First, lenders promoted exotic mortgages that did not require large down payments, if any, leaving homeowners with large monthly payments. Second, because interest rates were at record lows, people bought more house than they could afford.

Proponents of homeownership say the benefits offset those high housing costs.