Why we rent - The Changing Nature of the American Dream

Managing Real Estate Broker with HomeUnion CalBRE Lic# 01526904

Rent or Buy DilemmaThe American worker of today relocates often and craves flexibility. The idea of working one job for one company for the rest of their careers is anathema to them; they will change careers several times and likely live in several different geographical locations as they mature. That desire for flexibility doesn’t line up very well with a 30-year mortgage on a non-liquid asset that you’re required to live in. In fact, the rate of home ownership has slipped to just 65% in the first quarter of 2013, the lowest ratio since 1995. 

Mortgage payments are also generally higher than rents are, due to the long-term nature of buying property. When a person pays a mortgage, they’re actually paying two different sets of fees- the interest on the mortgage, and the principal. It’s true that mortgage interest is tax deductible, but only if you forgo the standard deduction on your taxes, so the tax break is not that great, you are only getting back a small fraction of the interest payment.

Rental insurance, even for full-cost replacement value of your items, is substantially cheaper than homeowner’s insurance. 

If an appliance breaks, if the trees need trimming, if you have a slab leak- as a homeowner, you’re responsible for those costs. As a renter, in several areas, you just call the landlord or property manager! It’s important not to downplay how important this is- if the HOA says the trees need topping, or the dishwasher breaks, or a pinhole leak in the slab is detected those expense can easily run into several hundred or in the case of a more severe problem, several thousand dollars. As a renter, you also do not have to pay any HOA fees.

Of course, the downside to this is that you aren’t building equity in a home when you rent. However, what if the home loses value, or you become “under water” or “upside down” on your home- all of that equity can go up in smoke at the whim of the market, leaving that plan you had for retirement in the dust. In addition, recently many homeowners have seen the equity they built in their homes disappear as the market fluctuates.

Renting allows people to live in a nice neighborhood with good amenities and services where they have good access to employment and education, without having to share walls with neighbors or give up their privacy to stay liquid and flexible. That flexibility to choose is the new American dream- and it’s also a great investment option for single-family real estate.

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Comments (3)

Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

I believe that many rental families who are upwardly mobile for jobs and education will not buy unless they will be in the area for a minimum 5 years.  I have residents who are former homeowners who say they will not buy until their youngest child is in high school....

Oct 16, 2013 11:15 PM
David Popoff
DMK Real Estate - Darien, CT
RealtorĀ®,SRS, Green ~ Fairfield County, Ct

I concur with Wallace above..... I see more and more renters, in Stamford, Ct they built over 600 new apartments in the past 2 years with 90% occupancy and more in the pipeline.

Oct 16, 2013 11:32 PM
HomeUnion - Irvine, CA
Managed Cashflow Investment Property Marketplace

Speaking as a pre-milennial, I still want to own my home someday- but as I see amongst my peers, the stigma of renting is gone.

Nov 07, 2013 06:21 AM