Whether You Own or Rent, You Need a Place to Call Home

home-for-rent1By Alanna McCargo

The debate about home ownership is alive and well. Questions like: Are we in another housing bubble? Is this a good time to buy a home? Are home prices really appreciating for the long term? All good questions and experts are trying to provide insight into what the future of housing will look like. Recent research shows that consumer attitudes about the American Dream of home ownership are evolving since the housing crisis hit in 2009. The MacArthur Foundation commissioned Hart Research Associates to conduct the “How Housing Matters” study. The study revealed that despite the data trends showing signs of a very healthy housing recovery, many Americans are still very cautious and weary; not believing the worst of the crisis is behind us. You can read the full study here.

One of the key findings from the research revealed a very interesting shift in attitudes as it relates to the owning vs. renting a home: “With families and communities still reeling from the boom-and-bust cycle of the past decade, the public is recognizing that owning is not the only acceptable option, and the sense that renting is somehow undesirable appears to be facing. In fact, nearly half (45%) of current owners can see themselves renting at some point in the future.”

More people have returned to renting from ownership or have made a decision to defer buying a home for a number of reasons. A growing part of the population have returned to being renters over the past several years as a result of employment changes, geographic moves, retirement, graduation from college and foreclosure. Whatever the reason is, it appears that rental is alive and well and the inventory of rental properties, particularly single family homes for rent continues to grow and be attractive in many markets around the country. With demand up, many areas of the country are also seeing rents rise significantly, spurring concerns and policy debates around rental housing affordability. Rental lifestyles can provide stability for families in a way they did not in the past, especially because a family can now rent a large single family home in a nice neighborhood and reap all the benefits of ‘community’ that the so-called American Dream provides.  Renting is no longer just living an apartment life with no yard. And with this change in rental stock comes an appeal that is shifting consumer attitudes and behavior when it comes to deciding what to call home.

Renting a home or apartment can have many advantages over buying, particularly when your life situation has a lot of changing variables. Renting can offer value for a number of reasons, and should not be looked at as “throwing away money”, as some often describe it. There are individuals who are life-long renters and achieve a balance and freedom in that lifestyle that provides a certain quality of  life.

As students graduate and start careers, and military families’ transition from deployment or base housing, there can be a great deal of uncertainty in what the future holds. Settling down and committing to buying a house and planting seeds in a particular community can be a costly mistake. As part of the financial planning process, individuals should weigh many factors before making the decision to buy vs. rent to ensure that timing and finances are right.

Key considerations in the Rent vs. Buy decision:

Impacts from the economic downturn are vast. A number of people have lost work or have had hours reduced and face a lot more uncertainty on what their income will be. A great example is the sequestration related government furloughs. Workers now face great instability in wages given their agencies may reduce their work hours from the 40 per week they were accustomed to down. This can have a significant impact on overall income and ability to maintain a mortgage and potential maintenance on a home. Be sure your income, savings and credit are in a state of stability before you commit to buying.

There is something to be said for figuring out how to do something before you leap fully in. This apples to your buy vs. rent decision. For example, it may not be wise to jump into buying a place right after you graduate, even if you landed a great job and on paper it looks like you can afford it. Especially if you have never had a place of your own outside of a dorm room or parent supported apartment. Renting your first place, establishing a housing budget, and building good habits by stroking a regular check for rent, food and utilities is good practice and preparation for responsible home ownership. Don’t rush if you have no experience. Renting can be a great way to learn the basics before you commit to buying a home.

Organizations and small businesses are more mobile and virtual now than ever before. Jobs may require travel and as companies consolidate and cut costs, many are relocating staff around the country. This is happening in corporations, Government and in the military. For workers, this could mean you need to have the ability to travel frequently or  may even need to move to where the work is. Renting is a simpler arrangement to unwind if you have to be mobile to maintain a steady income.

Maintenance on a home can be expensive and add on unexpected costs for home owners. One of the great benefits of renting is that your landlord or owner is primarily responsible for major repairs, and those costs are typically not passed to tenants. Renting offers a few more constants in your housing situation than owning does. The variables of repairs, maintenance, and insurance for homeowners can be costly. If you have a good and reliable landlord, as a renter you get to skip the worries about major unexpected costs for repairs and can establish a pretty stable budget for regular living costs.

With all of that said, there are still huge advantages to owning your home. But the shifts that are being seen in rental housing inventory, consumer attitudes, generational differences and overall housing needs are playing out as our country finds the new normal for housing within the economic framework. As the ‘How Housing Matters’ study findings show, “After decades of equating home ownership with the American Dream, in the aftermath of the housing crisis, three in five (61%) of adults believe that renters can be just as successful as owners at achieving the American Dream. This sentiment is felt broadly among both owners (59%) and renters (67%), as well as across all regions of the country.” These findings speak volumes to an evolving American housing system, and the need to keep ownership and rental in mind as new foundation and legislation is laid out for the future.

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Real Barriers to Homeownership

New entrants to homeownership will need more financial education resources, training and financing programs to help navigate the process and become successful homeowners. First time homebuyers, millennials, new immigrants, minorities, women head of households are all projected to be the demographic types that will drive housing demand in the future. New focus, financial literacy programs, housing programs and credit access methods will be key to successfully serving the new housing market.

“If you get, GIVE. If you learn, TEACH.”

-Maya Angelou
4/4/28 – 5/28/14


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