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The New American Dream Through Renting

16 May 2012

Posted by Joseph Coupal

In the American mind, renting has long symbolized striving rather than achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they're OK with renting it.

Homeownership is on the decline, and renting is on the rise. But the trend isn't limited to the housing market. Across the board, Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to a Rentership Society.

The unsentimental fact about the American dream is that Americans never really owned it in the first place. For the past three decades, especially, consumers haven't so much bought their quality of life as they've borrowed it from banks and credit card companies.

Now consumers are following the example of corporations, becoming more efficient. And it starts at home.

Housing is the biggest single component of consumption in the U.S. economy and the source of much of our present misery. The typical consumer spends about 32% of his or her budget on shelter. In the last decade, that generally meant borrowing a lot of money to take "ownership" of a home.

During the boom, the home ownership rate grew steadily, peaking at a record 69% in 2006.

Ownership-boosters failed to note that homes purchased in 2005 and 2006 with no-money-down, interest-only mortgages weren't really bought. They were simply rented until the "owner" flipped them or walked away from the mortgage.

In the post-bust climate, renting has emerged as a much more economically efficient way to pay for housing. A one-year lease represents a far less onerous financial obligation than a 30-year mortgage. It's difficult to get into too much financial trouble as a renter. The home ownership rate has fallen from its peak in 2006 to 65.4% today.

For an increasing number of Americans it makes more sense to rent. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.

It's tempting to view the rise of renting as an economic step backward. But many would argue the rise of renting is a sign of a system adapting to new realities.

The U.S. economy needs the dynamism that renting enables as much as, or more than, it needs the stability that ownership engenders.

And the rising popularity of renting is hardly contained to the housing market.

Finally, perhaps, Americans are absorbing a piece of wisdom from Thoreau: "And when the farmer has got his house, he may not be the richer but the poorer for it, and it be the house that has got him."

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Wall Street Journal

The Choice Between Renting and Owning

06 Dec 2011

Posted by Joseph Coupal

The housing market is stagnating right now and real estate brokers would have potential buyers believe that there is no better time than the present to buy a home. It is true, prices are down and mortgage rates are at all-time lows.

Unfortunately for the real estate brokers, many clients are not persuaded by that logic. Instead, in increasing numbers, they are choosing to rent instead of buy — unconvinced that the housing market has yet hit bottom. Would be buyers also understand that unless you plan to stay in your home for more than 10 years, buying a home may not be the right investment for everyone.

With apartments in Virginia, North Carolina, South Carolina, and Maryland that are conveniently located near downtown and offering apartment amenities that can’t be found in homes; renting is a great option for many. There is also a broad mix of tenants in the Virginia, North Carolina, South Carolina, and Maryland community: young single residents and families and empty-nesters that no longer have homeownership on their wish list.

Don’t believe the Hype!

23 Nov 2011

Posted by Joseph Coupal

One of the most popular home ownership myths in this country (Raleigh, Charleston, Charlotte, etc) is that owning a house is a huge tax break. I don’t know how many times that people have personally told me that they want to buy a home because they NEED a tax deduction! I just shake my head in disbelief because I have done the math. If your mortgage interest and other qualifying expenses such as charity contributions aren’t more than the standard deduction, ($11,600 for joint filers in 2011), there is no tax advantage to owning. Assume that you buy a $200,000 house with a 5% downpayment at a 6% interest rate. Your mortgage interest for the year would be $11,336. The Standard Deduction for join filers is $11,600. In this example, there is NO TAX BENEFIT. Even when there is a tax benefit, you most always have paid much more money to maintain the house than you are saving in taxes. If your mortgage interest is more than the standard deduction and you choose to itemize, there is little to no advantage. For example, assume that your mortgage interest in 2011 is $15,000. This would be an additional $3400 you would get to deduct if you itemize BUT you spent $15,000 in mortgage interest to save $850 on your taxes (assuming 25% tax bracket). And, you had all of the other expenses of home ownership that you would not incur when renting an apartment home at an HHHunt community!


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