Most versions of the American Dream include home ownership, but with Hoboken real estate prices sky high and seemingly still rising, many residents may need to keep dreaming for at least little while longer. As a result, while many of our pals in the suburbs are cutting their lawns, many of us in Hoboken are still cutting monthly rent checks.

Low interest rates, a rebounding economy and lackluster stock market returns had many young professionals looking towards real estate as an investment vehicle during the past few years. High demand, limited supply and most importantly, easy access to cheap funds combined to create real estate’s version of the Perfect Storm.

While all over the country real estate prices have soared, few areas have seen greater price appreciation than the Mile Square, where most estimates have property values more than doubling in the past five years. Peruse the websites of the 40+ realtors that serve Hoboken (a remarkable number given the size of the market) and you’ll find that the asking prices are staggering.

The landscape has changed drastically in the past few years for potential homebuyers. Not that long ago, a 20% down payment was the necessary cover charge to enter Club Homeowner. Ask a 20-something in 1995 why they didn’t own an apartment and they would likely tell you that although they could afford the monthly payment, they weren’t able to hack the required down payment (a major barrier unless, of course, Daddy was feeling generous).

However, with the array of exotic mortgages offered by lenders these days, it seems today’s buyers need nothing more than a dollar and a dream. Lending standards are at all time low, so as long as you have a steady paycheck and a pulse, someone will be willing to lend you a large multiple of your annual salary. And all around town, happy sellers wait with open arms for overly-funded buyers, ready to book a mid-six figure gain on a property they bought only a few years ago.

Despite these soaring prices that threaten to financially strap potential buyers, many Hoboken residents are still determined to take part this decade’s gold rush. A simple walk down Washington St., which is invariably inundated with FSBO flyers, signs for Open Houses, and potential buyers window-shopping at realtor offices, demonstrates that perhaps home shopping has overtaken barhopping as this town’s #1 pastime.

Yet with mortgage rates steadily rising and home prices staying at lofty levels, some smart Hobokenites are beginning to make a startling revelation – perhaps renting isn’t so bad after all!

A quick examination of the numbers supports this case. Interest rates on 30-year fixed loans hover around 6% at the time of this writing, meaning that each $100,000 borrowed translates into roughly $600 per month of mortgage payment. With local asking prices typically between $500K-700K for two bedroom apartments, and assuming a 0% down payment (I mean, how many people do you know with tens to hundreds of thousands of bucks just sitting around?), monthly mortgage payments will be between $3,000 and $4,200.

And that’s before considering a slew of fixed monthly expenses including maintenance, taxes and private mortgage insurance, which combined, can add hundreds more to your home ownership costs. All in, the tab can easily approach $4K-5K per month. Compare that to the cost of renting a similar unit, and you may be surprised – equivalent apartments can be usually rented for literally hundreds and sometime thousands less per month than the cost to buy them. And some residents have taken note.

"I have been considering buying for awhile," says Bud, a longtime renter, who shares his two bedroom, two parking spot apartment with his significant other, "but getting something similar to what I have would cost about double per month." He notes that although he is not building equity, the relative bargain gives him increased financial flexibility to do the things he enjoys such as traveling, and will still allow him to build his savings in advance of buying his first home in a few years.

High prices and low rents also affect the viability of Hoboken real estate as an "investment" – a word we use quite loosely, given the high probability of this being a less than lucrative proposition.

A quick lesson: The name of the game in Real Estate investing is OPM – Other People’s Money. Landlords charge tenants enough to cover their monthly expenses and, ideally, make a bit of profit on top of that. Combine the monthly positive cash flow (namely the collection of rental income in excess of the landlord’s expenses) with the paydown of a mortgage (a.k.a. equity building), property appreciation, and tax advantages, and it becomes obvious why every other person you meet is an aspiring Donald Trump.

Many Hobokenites who were astute (or lucky) enough to buy in before the boom are now considering rolling their winnings over into second properties. But a quick check of the numbers shows the value proposition just isn’t there. The reality is this: it is unlikely that a landlord purchasing an apartment in Hoboken today will be able to rent it out at enough of a price to cover his monthly costs.

As a result, the investor is cash flow negative each month and essentially relying on strong price appreciation trends to continue in order to make any money– quite speculative, and not my idea of a good investment.

Undoubtedly, many will poke holes in this analysis. Some fear that rents will increase at a faster rate than home prices in the near term, ultimately catching up with the cost of ownership. While this is possible, a recent study by Torto Wheaton Research, which was published in the Wall Street Journal earlier this year, indicates that actually the exact opposite has happened in most metropolitan areas since 2001. The gap between buying and renting has grown, making renting an even bigger bargain.

Others may tout the tax benefits of ownership, noting that mortgage interest and taxes can be deducted for taxpayers who itemize. Indeed you are correct, and all things being equal, this may justify a decision to buy. However, given the large disparities we are witnessing these days, the savings from renting is great enough to more than offset these savings.

In addition, some potential buyers remain optimistic that current rates of appreciation will continue over the next few years, especially in Hoboken, where increased development along the water and the west side are making locations further from Washington St. and the PATH increasingly attractive. For those who believe outsized gains can continue indefinitely, I have a .com stock I’d like to sell you.

The final, and perhaps most indisputable reason proponents cite, are the emotional ones. Says local realtor Giancarlo Lanzano of Realty Express LaBarbera, who acknowledges that each individual’s decision depends on his or her financial situation, "I have never met anybody to date who thought buying was a mistake. They have only been happy with their new home."

Still, while investing in a primary residence is never a bad idea, it is difficult to make an economic case for buying rather than renting in today’s Hoboken. Call me a dreamer, but I am waiting for a better deal.

Mike Tagliaferro will be regularly contributing personal finance columns for realhoboken.com.  For any issues you may want addressed in future column or commentary on this story, you can post your thoughts in the message forum or e-mail him at miketags@yahoo.com.