When Renting Makes More Sense than Buying
It's Not Always Best to Take on Mortgage Loan Burden
Feb 12, 2009
During the housing boom, which ran from about 2001 through part of 2006, the U.S. homeownership rate soared, hitting the 69-percent level as late as the third quarter of 2006, according to the U.S. Census Bureau
Today, though, that rate has fallen as foreclosures increase. The Census Bureau now reports that the homeownership rate for the fourth quarter of last year fell to 67.5 percent. That's a level last seen in the first quarter of 2001.
Some may view this as a negative. Homeowners, the argument goes, are more connected to their community. They have a larger financial investment in where they live, and are more willing to watch out for crime, keep their properties in good shape and do everything they can to ensure that their neighborhoods are healthy and vital. Therefore, say the proponents of a constantly rising homeownership rate, the more homeowners in the country, the better.
That argument, though, no longer seems as strong. According to RealtyTrac, a provider of real estate data, home foreclosure filings hit 2.3 million in 2008. That's an increase of 81 percent from 2007, and the most foreclosures for any year in the country's history.
It's clear, then, that many of those people who bought homes during the housing boom should never have left the world of renting. They weren't financially ready to take on the burden of owning a home.
When Renting Makes Sense
There are certain people for whom renting makes sense.
People who struggle to pay their bills on time, for instance, would do better to rent. A monthly mortgage payment is a huge responsiblity. People who can't pay their car bills on time have no business taking on a mortgage loan of thousands of dollars each month. These people may no longer even have the option to buy a home. Mortgage lenders have become far more cautious when it comes to lending money. Borrowers with shaky credit may no longer qualify for mortgage loans.
People who are worried about the stability of their jobs would do better to rent. It's hard for many borrowers to make a mortgage payment when they're gainfully employed. It's very difficult when they're unemployed.
People whose jobs cause them to move frequently are also good candidates for renting. In today's economy it's hard to sell a home. It takes time. People who move frequently don't want to be saddled with the burden of trying to sell a home every time their job sends them to a new city.
Then there are those people who simply prefer the freedom that comes with renting. People who rent don't have to spend their weekends mowing lawns or repairing broken fences. They don't have to worry about budgeting for plumbing emergencies.
Hopefully, the current housing crisis has taught an important lesson: Renting is a viable option for many people. It is not merely the choice of last resort.
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