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For a long time, we have thought of home ownership as part of the American Dream. You could own your own little patch of ground, and make it your own. However, things may be changing. Home ownership may no longer be considered a huge part of the American Dream. Indeed, some may prefer to rent.
I read recently in a CNN Money article that there are some new “normals” that are likely to remain, thanks to the latest recession. And one of those may be that renting is preferable to buying.
Buying a Home May Not Be an Investment
For years, real estate agents and others have said that your home is an investment. (Personally, I’ve always thought of it as a purchase; after paying interest, maintenance and other expenses on it for years, it is very difficult to truly come out ahead, even with tax advantages.) However, the CNN Money article points out that home price fell more than 32% between 2006 and 2009. If the recession taught us anything, it’s that real estate — especially residential real estate — does not always appreciate.
With home values falling, it is little surprise that some are not so enamored with home buying. It shifts the costs of maintenance and repair to the home owner. Plus, there are property taxes to pay, and other expenses. Many are finding that renting, with its decreased responsibility for upkeep, might not be such a bad thing.
What if You Were Renting?
According to the CNN Money article, renter households increased 10% between 2004 and 2009. Some think that renters might be here to stay. And many renters have their reasons. In some markets, it is easier to get a nicer house through renting than it is through buying. And, with some of the stigma gone from renting, it does not seem as though you have to keep up with your neighbors through buying. Plus, when you are renting, you are not tied down to a home, forced to try and sell it. And you are not under threat of foreclosure when you are renting.
Another reason that some give for renting is that they can then invest their money elsewhere. Over the years, according to many estimates, stocks offer better real returns. So instead of putting that money in a home, many decide to invest the difference between their lower monthly rent payments and a higher mortgage payment in order to see more solid returns. Yes, there is market volatility with stocks, but over time, those bumps tend to smooth out to some degree. Over the course of 30 years, you could be building a solid portfolio, rather than putting your excess into home equity that you can only tap if someone decides that you are “creditworthy” enough for a home equity loan.
Bottom line: In the end, whether you rent or buy a home is a decision you make depending on your personal goals and your situation. Some still like the idea of buying, and being able to do what they want with a home. Others, though, prefer the flexibility of renting. And, it appears that renting is starting to become a larger trend that may soon nudge home ownership out of its prominent place in the American Dream.
I liked your article and think you hit the nail on the head about renting becoming more normal/popular.
may I also mention that rent-to-own is also becoming a consideration for more buyers and sellers.
for sellers it is a win because they get more demand for their property which leads to higher rent and a higher sale price locked in sometime in the future.
the buyer wins because he has the OPTION to buy within 2 years for example. the buyer also has more interest in the maintenance of the property and part of the rent will go towards the purchase price.
thanks again for your post. i have bookmarked it on my social networks.
Lou
Finally, I convinced my “better half” to give up the poorly-constructed house she had been living in since long before meeting me. The place had inefficient air-conditioning in a hot climate, a lousy excuse for a backyard, noisy neighbors whose dogs barked at all hours of the night, and floors with carpet tacks protruding from them because quality was non-existant when the thing was built. Yep – we “walked away” from her hopelessly upside-down mortgage, and had no moral qualms doing so. After all, the guys who once ran Merrill Lynch, BP, and Chrysler got millions for lousy performance – why can’t we save a few hundred thousand because bankers, realtors, and Congress screwed up? Good-bye, Home Ownership, and hello renting (with nice pool, jacuzzi, gym facility, someone else mowing and trimming the grass, and no property taxes). I won’t miss you, Mr. Home Ownership, at all. I swear my blood pressure has dropped since we started renting (again).