Why we rent - The Changing Nature of the American Dream

Reblogger Wallace S. Gibson, CPM
Property Manager with Gibson Management Group, Ltd.

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.... - 

Original content by 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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Rainmaker
905,750
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Great re-blog, 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 #1
Rainmaker
713,834
Cheryl Johnson
Highland Park, CA

It's true.  There has been a fundamental shift in how most people view owning/renting real estate.   Folks are more mobile, less rooted, life is faster paced.  Lifestyle is somehow more of a "packaged" commodity.

As I've mentioned to other broker friends,  this is also reflected in how often today's home buyer will choose a renovated/staged home over a lower priced home they could improve gradually on their own..

Which opens up opportunity for the people willing to invest in the lower priced home, renovate it, rent it out and hold it for long term....

We do live in interesting times.

Oct 16, 2013 11:34 PM #2
Rainer
205,279
Candy Miles-Crocker
Online Real Estate Agent Training - Chevy Chase, DC
Realtor - Real-Life Real Estate Training

Thanks for the post Wallace.  This is a very interesting perspective on renting versus buying.

Oct 16, 2013 11:37 PM #3
Rainmaker
1,431,914
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

There are a lot of people that have good incomes and jobs to rent an upscale home, but do to foreclosure or short sale need to rent.  They want to rent nice homes.  

Oct 17, 2013 03:07 AM #4
Rainmaker
1,304,888
Charles Stallions Property Manager
Charles Stallions Real Estate Services - Pace, FL
Pensacola, Pace & Gulf Breeze Property Management

I think with most people getting their working hours cut down to part time will make renters out of a lot of people

Oct 17, 2013 01:44 PM #5
Rainer
1,756,848
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

Hi Wallace.  Interesting how real estate is so different in the different parts of the country.

Oct 17, 2013 08:49 PM #6
Rainmaker
5,554,580
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Good morning, Wallace....not everyone should buy....some need to rent and should....

Mar 31, 2014 11:03 PM #7
Rainmaker
187,364
Kathy Smiley
Rodeo Realty ~ Fine Estates Westlake Village - Westlake Village, CA
Westlake Village, CA - "Making YOU Smile!"

Of course, the MOST IMPORTANT item (and the one of only real value) in this scenario you presented is the fact that "Of course, the downside to this is that you aren’t building equity in a home when you rent."  The rest of your essay is not of value, in my opinion. Am I slanted toward home-ownership? Shouldn't I be??

Apr 01, 2014 04:33 PM #8
Rainmaker
187,364
Kathy Smiley
Rodeo Realty ~ Fine Estates Westlake Village - Westlake Village, CA
Westlake Village, CA - "Making YOU Smile!"

Sorry to be a downer - I think I reacted too much as a hard-working REALTOR, and not as much as a hard-working renter? Anyway, great "thought-provoking" post!

Apr 01, 2014 04:40 PM #9
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Rainmaker
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Wallace S. Gibson, CPM

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