There's been enough discussion in the "Roster" thread that I think it's time that this topic warrants its own thread.
The Situation: Dwight Howard's contract ends at the end of this season. He can opt-in for next year for $23,282,457, or he can opt-out and hit the free agent market.
The Free Agent Market: As we saw this year, the free agent market was insane (John Wall's comments about Reggie Jackson come to mind), and next year will be much the same with the cap jumping again. However, it will jump again the next season before settling out.
There was a lot of speculation this year that players would take one or two year deals so they could hit the market again when the cap went up again. Almost no one actually did that.
What should Dwight do:
In my opinion, he should opt-out and resign a max contract at the new rate.
It's risky for him to take a one or two year deal. He's played a lot of NBA games at this point - what if his knees or back don't hold up? Then he's missed out on the last three or four years of a max deal to get more short term salary, a net loss of likely something like 60-80 million dollars.
The same risks apply if he opts-in, but he could opt-in and bank on himself to stay healthy for one more year and then get a max contract. Opting in and taking a one year deal is even riskier, and we saw almost no players do anything like that this year (even younger players).
What should the Rockets do:
Based on his playoff performance last year, I think we should resign him at the max if he opts out, even for 4 years. At the back end of the contract, that will hurt us, but at the front end, we get two more years of championship contender status. We probably fall back into the solid playoff team, but not championship contender, group without him.
If he opts in, that gives us another year to evaluate him, both on level of performance and health.
Clint Capela could make a lot of this discussion moot. If Howard were to opt-in, and Capela proves himself to be a low level star, then maybe signing Howard will be unnecessary after next year. I doubt Capela gets the chance to prove himself this year.
Donatas Motiejunas could also help out this situation. If he truly blossoms into a star, then maybe we would feel comfortable moving him to center and sharing minutes with Capela there. I think he's more effective with a true center next to him, but let's not forget how good the Rockets still were with Motiejunas playing C instead of Howard when Howard was hurt.