Renting Vs. Buying: Why Home Ownership Ain’t All It’s Cracked Up to Be
AND STILL, THERE IS ONE THING about the idea of owning a house—well, one thing beyond the YELLOW—that won’t leave me alone. It comes from my 48-year-old friend Mark.
Honest to God, Mark’s story should be all the home-buying deterrent anybody would ever need. It isn’t just depressing; it’s Lifetime-movie tragic, and begins with the 150-year-old house he bought in a charming New Jersey river town in 2005. He put a substantial chunk of cash into various renovations. Then the bubble burst, leaving his home’s value about $140,000 less than what he’d spent on it over the years.
When Mark landed a new job in another state, he rented the place out, hoping that a few more years might see home prices rise again. Then last year the basement flooded (for the third time in five years), and he spent another $13,000 on the damages. He also went on blood pressure medicine and anti-anxiety medication. Underwater in both a literal and figurative sense, Mark went so far as to meet with a bankruptcy lawyer last fall. For now, though, he’s taking one last shot at selling the place, at a considerable financial loss.
“I am broke because of this house,” he laments. “This house is literally killing me.” Even in dry weather, he obsessively checks the flood reports for the Delaware River, and he’s despondent over the fact that not a single similarly priced home in his adorable town has sold in the past year.
Mark’s one saving grace in all of this is the Shore house he owns with his brother, which he sees as “a sort of insurance against landing in a nursing home when I’m old because the income has stopped coming in and I’ve got nothing else.” If it weren’t for that place, he’d feel like he had to buy again despite his obvious reluctance, if only to secure his long-term future. “Who wants to be paying rent when they’re 80?” he asks.
His words start a domino effect of panic in my brain. If home-buying is, as they say, like a ladder, and each rung propels you to the next rung to help you get to the next stage in life, am I making a mistake by not just climbing on now, when prices are so low? About two in three Americans think that now is a good time to buy a house, Gallup reported last spring. Local real estate honcho Allan Domb gushes over the opportunity buyers have now to lock in “ridiculously low” interest rates, the lowest in 60 years. Am I just postponing my ultimate reality of buying, and if so, should I get on with it while the getting’s good? Are we going to regret our current choices when we’re 80?
Forrest Huffman is director of Temple University business school’s real estate program. He’s also from South Carolina, and both his softened Southern vowels and his words have a calming effect on me. “Hey, falling house prices can help certain groups, such as first-time homebuyers,” he says. “If you buy it, buy it to live in it, not to get rich. If you want to avoid the hassles of ownership—the taxes, worrying about the school district and the neighborhood, the upkeep—rent. You won’t build equity, but you also won’t lose it.”
Huffman’s whole real-estate philosophy seems equally practical. “You just can’t look down the road and say, ‘Hey, if I want to move and sell, then we’ll make money off it,’” he says. “That’s not necessarily an option anymore. People need to start looking at houses as a useable asset. The questions are, ‘Do I want to buy, and is it affordable? Will I stay there for five to 10 to even 15 years?’”
I think about an old book-club buddy, a 33-year-old interior designer who could easily have afforded to buy in Center City but instead remained a devoted renter. “When it’s time to go, I can run so fast,” she said. “I have temporary wallpaper. Best of both worlds.” She has since moved to New York.
Put in this perspective—committing now to a middle school for our unborn progeny vs. committing to temporary wallpaper—pretty much brings things back to the original appeal of the rental. It also sort of validates something my friend Jennifer said recently: “The era of the starter house,” she opined, “is over.”
Jen is 42, owns her own small business, and, with her husband, bought her first-ever house in Riverton, New Jersey, about a year and a half ago. After being turned down for their first mortgage despite having perfect credit (ah, the world of post-crash banking), they were approved for a loan on their second try and have remained blissfully happy since move-in day. Jen loves the control and the permanence, and she pretty much lives for the DIY projects. “There’s not a surface of this house that hasn’t been touched by a paintbrush,” she says brightly. She doesn’t plan to move. Ever.
“We were first-time homeowners in our 40s,” she says. They’d been to New York to grow their careers; they feel they’ve had the chance to do “everything.” They don’t suffer from wanderlust anymore. They are … home.
“Maybe,” Jen suggests, “you’re still too young to buy now.”
In fact, remarks Kevin Gillen, thanks to the housing downturn, we’re almost certainly going to see a later median age for first-home purchases in this country: The bubble burst combined with a spike in energy costs has “pushed us in a direction where the future of housing is different than in the past.” He thinks that down the road, the American housing market will come to look a little more like the European housing market: smaller homes that are more energy-efficient, people staying in their places longer, fewer people owning. (“Is this good or bad?” I ask him. “Yes,” he replies.)
For now, however, the economist thinks that Philly is a good place to buy, and, yes, that now is a good moment—assuming, once again, that “you want to buy a home because you want to live in a home.” You’re not going to get rich, he says. And that game of making money by betting on the next hot Philly ’hood and planning to flip every three years is unlikely to yield happy results.
I think about our apartment. It feels like home to us—at least until we decide we want to feel rooted somewhere else badly enough to shell out a 20 percent down payment. Or until we have kids, which is, I suppose, its own commitment to permanence. Until that day comes, we’re content to just be each others’ roots, to perch mostly happily in our sweet little unpainted nest.
There’s also this: Huffman notes that as renters and owners both reconsider their roles and options going forward in this brave new real estate world, we might see rental choices designed to appeal to more and more people. He talks about the possibility of longer-term leases, or ones with built-in renewal options. Or the ability to change the space to your liking in some ways. “Like wall color,” he says.
In a city where the vacancy rate is so low and so many people are renting—86 percent of the under-34 crowd, the Inquirer reported last July—the idea of landlords suddenly becoming so flexible as to allow us to indulge our design cravings seems like a long shot. But I, for one, will still dare to dream, with my “Sunflower” and “Lemonade” paint chips at the ready.