Renting vs. owning in a battle royale
If anyone is delighted by the paradigm shift that came with the housing crash, it's apartment owners. They'd been arguing for years that renting isn't a waste of money, but few people seemed to agree until a lot of folks who bought during the market's height ended up way underwater on their mortgages.
Five years after the housing bubble started deflating, many more people are renting -- some by choice, some not. The homeownership rate in the Baltimore metro area, for instance, peaked at 75 percent at the beginning of 2006 and is now down to 66 percent, according to Census Bureau estimates. Homebuying activity is on the rise again, but from a pretty low bottom.
Loyalists on both sides of the own vs. rent debate are continuing to fight it out for hearts and minds.
The National Multi Housing Council, a trade group for the apartment industry, titled its newest annual report "Renter Nation" and argues that demographics are on its side: a shrinking share of the population in nuclear families, more baby boomers looking to downsize and many of their "echo" boom kids at an age that's prime for renting.
"University of Utah Professor Arthur C. Nelson estimates that between 2008 and 2015, nearly two-thirds of new households formed will be renters," the group says in a March press release about the report.
Lender Wells Fargo offers up its own demographic reason for people in the homebuilding and -selling industries to take heart: Those echo boomers -- also known as "Millennials" -- are getting older every day, and some are already in their mid-20s and early 30s. They're potential homebuyers, and there are millions of them, the lender says.
"We're going to have to figure out how to reach them," a Wells Fargo executive told 26,000 real estate agents in a presentation shown on movie theaters across the country last week, according to a HousingWire report.
What all this means for the homeownership rate here and nationwide will be interesting to watch play out. There's so much to consider: What about the possibility that required downpayment amounts balloon or that the mortgage-interest tax deduction withers? Or that Americans -- Millennial or otherwise -- will be leery of putting down roots in case a job transfer or loss makes moving necessary?
But presumably some attractions of homeownership won't go away. You have a lot more freedom to change the place to suit you. As long as you keep up with your bills, it's very unlikely that your right to live there would ever be taken away. And once the mortgage is paid off, your monthly housing costs are maintenance, insurance and taxes.
Where do you come out on the rent-vs.-own continuum? Do you expect to do both at various points in the future or only one?
And which do you think has the edge in the future?
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Comments
Causal vs Incidental gets confused (again).
When Bush Sr began the push to facilitate ever greater levels of home ownership it was based largely on the observation that being a homeowner did indeed accompany general solvency and financial "success".
But that accompaniment was *incidental* to home ownership not *causal*. The causal was the steady reliable employment, a pattern of savings and sober investment.
That hasn't changed.
---
As to whether in the current *employment* market it is wise to have your life and an overly large portion of what passes for a portfolio anchored to a major illiguid investment... I don't have a crystal ball.
Posted by: MrRational | March 28, 2011 8:30 AM
I own and regret it. There have been jobs far away that I could have taken, but backed off because gas prices shoot up and there are 3 houses on my street that have languished on the market for 8+ months. I know I would not be able to sell quickly. My neighbors suck too - but unfortunately one is way under water with his house and since I cannot move now I have to grin and bear it. There is a lot to be said for homewownership but my first home purchase in 2004 has done nothing but thrown cold, hard, realities in my face. It is a huge commitment and you are really stuck - not something I am sure if I want to get into again after I try to sell in 2012.
One thing though - if you look at apartmentratings.com and read reviews for some of the complexes around here, if you see how poorly some of these properties are maintained, it may make buying a home worth taking the chance. I see few properties there with all glowing reviews...but at least if it is bad it is only bad for 365 days!
Posted by: Gina | March 28, 2011 8:37 AM
I think homeownership was a bill of goods sold to people by our govt and the number one lobbying entity-Realtors. It is definitly not right for everyone. Sadly the above mentioned efforts have hardwired people into some emotional attachement with homeownership. Heck, even mrs. Elweedz couldnt swallow it when i wanted to sell at the top and rent for a couple years. She did not want to be a "renter".
Gina- keep in mind, if you dont like your neighbors then living with 12 of them per building is not ideal for you. I hated apartment living. There is always someone in every building that is creepy or you cant stand for a variety of reasons.
Posted by: elweedz | March 28, 2011 2:21 PM
I think there is a huge difference between the group of people renting homes and those living in apartments. Home rentals are definitely up as renters move into the flood of homes bought by investors hoping to flip them. Great post. Thank you.
Posted by: Rich Cederberg | March 28, 2011 11:50 PM
I think that it depends on the price that a person paid for thier house.And how long that they intend to live at the property.
I bought a house in 2003 for $45,000.And i intended to[and still do intend to] live there a long time. If i had rented, the best that i could have paid would have been $ 1000 a month.So if i had rented ,instead of bought, i would have paid $12,000 a year for 8 years .Thats roughly $96,000.And i would have no equity whatsoever.
So for me , buying was a very good choice. I personally think that it all dpeends on the needs and wants of the individual.
I do think that many people overpaid for thier houses.And many of them did so to live in trendy neighborhoods or because they wanted a rooftop deck that they only used twice a year. I hate to sound mean spirited.But i can only have so much sympathy for those people.
I remember when house at "the Moorings" in Canton [off Boston St] were going for a million bucks. If someone had enough money to buy a house there back then , then thats great.But its hard to feel bad for those that did and lost home value.
The one thing that i have noticed over the past 20 years of working construction, is the fact that "middle class" people tend to want things in thier houses nowdays, that used to only be in the houses of rich people.
Im not saying that people should live in hovels.But if they want to have a $20,000 kitchen, then they shouldnt complain about paying for it.
Posted by: Pete from Highlandtown | April 3, 2011 8:30 PM
Hi, Pete! Thanks for the comment. I'm trying something new on the blog -- guest posts. Somebody's already requested you, if you're willing. I don't have your email address, so I'm hoping you'll email me at jhopkins(at)baltsun(dot)com if you'd be interested in writing something (in the neighborhood of 1,000 words or less) about housing. All your comments are very interesting, so you can pick the topic.
Details here: http://weblogs.baltimoresun.com/business/realestate/blog/2011/03/calling_all_real_estate_experts_and_buyers_sellers.html
Thanks!
Posted by: Jamie Smith Hopkins | April 3, 2011 8:58 PM