Banking

Renting lets me invest time, money elsewhere

OK, I'll say it: I'm not a homeowner, and I like it that way.

I know, I know ... that seems so contrary to the American Dream. I'm going to get bombarded by Realtors telling me it's A GREAT TIME TO BUY, and lectured on how renting equals throwing away my money. I bet that half the people reading this think I'm just trying to avoid adulthood (I'm 27).

And you know why? It's because homeownership is pushed too aggressively in this country, usually by the industries that stand to benefit and by lawmakers who don't understand economics.

They tell us that it's what responsible, financially savvy people do. Then they lure us with supposed psychological perks, telling us that owning a home brings increased self-esteem, more stable neighborhoods, eternal happiness. It means you're building equity! Becoming master of your domain! You can hammer holes in the walls just for the heck of it!

But here's the thing: I just don't believe that owning a home (or condo, or townhome, or whatever) is the best use of my money. And come to think of it, I don't buy into all these auxiliary benefits, either. Self-esteem? Mine has nothing to do with my house. Stable neighborhoods? I flatter myself to think that I contribute to my neighborhood's stability anyway. Happiness? Yeah, I love the happiness of not having to stress out if my furnace breaks.

But enough about me. Let's look at the facts.

The money: First things first: Renting is usually cheaper than buying. The median monthly mortgage payment in the U.S. is about $1,501 per month, and the median rental payment is about $807, according to the Department of Housing and Urban Development. Renters also save big over the long run because they don't have to shell out for new kitchen cabinets, replacement roofs and backyard fences.

Full disclosure: The estimates on renting vs. owning can vary. And the gap is at least partly because owned properties are usually bigger and nicer, so naturally they cost more. Those numbers also don't take into account that homeowners get some big tax breaks, which essentially bring down a homeowner's monthly costs.

But don't get too excited about the tax benefits: A recent study by the Joint Center for Housing Studies at Harvard found that in 2009, they accounted for only about $10 a month in savings.

Wise renters can take the money they're saving each month and put it in a 401(k), a bond, or some other investment vehicle. Of course there are no guarantees in the stock market, either, but at least it's a lot more liquid than a three-bedroom bungalow. If you bought a house in Charlotte a year ago, then, according to the average home prices, you'd have lost about 1 percent in your investment. If you'd invested in a mutual fund or stock index that tracked the S&P 500, you'd have gained about 6 percent.

Now, I realize that there are many, many periods in which real estate has appreciated more quickly than the stock market. All I'm saying is, that's not always the case.

And let's not forget a little fact that seems obvious now but wasn't to the people who took out giant mortgages around 2006 or so: Housing prices don't always rise. The average sale price for a house in Charlotte topped out around $231,000 for 2007, then fell to a low of about $182,000 in February 2009. Though they're creeping back up, hitting about $216,000 in June, they're still down from their peak. And that's nothing compared to some other parts of the country, which were hit much harder.

The stuff you can't put a price on: Even if I thought that buying a home was a smarter choice financially, I'd still probably rent. I want the place I'm living to be, well, the place I want to live, not just an investment.

Renting allows me to spend my Saturdays volunteering and camping and catching up with friends, instead of mowing the lawn or figuring out how to fix a garage door.

Renting gives me peace of mind. I love not worrying about a giant mountain of debt hanging over my head. I love the idea that, theoretically anyway, I can pick up and move whenever I want to.

Renting lets me live in a neighborhood close to the center city, where I can walk to lunch and the light-rail line. If I bought a house, there's no way I could afford to live in South End. I'd be relegated to the suburbs, and - call me crazy - I believe that we should live close to the places where we work and play. It puts less strain on the electric grid. It cuts down on automobile pollution. It sounds revolutionary, but it's common sense in pretty much every other country.

The bigger picture: The U.S. pushed homeownership too hard, and it led to a little problem called the economic meltdown.

Until 1995, the U.S. homeownership rate was about 64 percent and had been that way for decades. Many economists believe that this was about as high as it could naturally go.

Then cheap financing, government incentives and the usual rhetoric about the virtues of home ownership spurred more buying. When the tech bubble burst, people started putting even more money into real estate, thinking it was a much safer investment than the stock market. By 2005, the U.S. homeownership rate hit 69 percent.

You know the story from there. A lot of people who couldn't really afford houses got them. A lot of people who could afford only small houses bought McMansions. Then the economy collapsed.

Guy Cecala of Inside Mortgage Finance calls the U.S. "the only wealthy country in the world that bends over backwards to subsidize housing," referring to government incentives for home buying.

"I don't think there's any stigma attached to renting a house in Switzerland or Germany," he added. "Here, you're probably apologizing that it's just a temporary arrangement. And that's just social pressure. It's not based on the best financial planning."

There's a nascent push now for the federal government to get rid of the tax incentives for homeownership. The odds of this happening any time soon are slim, but the fact that people are even talking about sacrificing this sacred cow represents a huge ideological shift from the long-held credo that owning is better.

Demand for apartments is strong throughout the country, and in Charlotte, that demand is at its highest level since the beginning of 1999, said Jay Parsons, an analyst at MPF Research in Texas. And, the apartment occupancy rate is increasing, even though thousands of new apartment units have been added in the past year, he said.

At least part of that is from people who recently sold their homes and are now renting, MPF says. "A lot of them were worried that they'd never be able to unload those homes," said Greg Willett, who is also at MPF, "so making another purchase right away is a pretty scary move."

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