The Dirty ‘30s saw North Americans become migratory, hauling everything they owned to where they thought they could find work.
By the end of the Second World War, there was a new dream — the American Dream: Owning one’s home.
There was no more immediate dream of success than that of having your own house, a yard, a picket fence, and a dog. That measurement of success has remained constant for decades. It was the rite of passage, what a grown-up did.
Today, we’re in the post-foreclosure world. When things went belly-up, the first to fall were those who went to the mat and took precarious mortgages in the name of the “American Dream.” Gone were the homes they’d dreamt of and worked for.
They say the average person is now only a couple paychecks away from the curb. With our cost of living higher than it’s ever been, having a home today isn’t as fiscally prudent as it was in the ‘50s and ‘60s. In fact, for some, it’s the fatal choice that can lead to insolvency.
Now experts tell us to rethink the idea of home ownership.
Owning your home is the largest investment any of us make. If you’ll too tight financially to make your payments comfortably while other things in life are going awry on you, then it’s probably not an investment you should be making. Instead of piece of mind for your future, that mortgage becomes a burden that wears on you day in, day out.
When shouldn’t you buy?
Just like you shouldn’t buy a car you can’t afford to insure or fill with gas, you shouldn’t buy a home you can’t fix.
From hot water heaters to seals on windows to floors, drywalling, plumbing, and roofs, there are so many maintenance issues that cannot be ignored. You absolutely have to be able to fix these things quickly when they go. If your purchase of a home doesn’t leave you with a safety net of funds for home maintenance, then your investment will start devaluing soon after you buy it. If your interest on your mortgage is higher than the principle, it’s a questionable purchase.
But wait. Even if you can afford that interest-versus-principle ratio, it’s possible owning is a bad idea. After all, it’s not just folks living on the margins, the middle-class, who are rethinking home ownership. This columnist at the ultra-rich-folk’s mag Forbes has not just one reason they’re never buying a home again, they rolled out a whopping 11 reasons they’ll forever rent.
Maybe you don’t know it, but the foreclosure crisis may not be over. The specter looms on the outskirts, and if the economy should tank tomorrow, we may see those terrible signs everywhere again. Fact is, as recently as 2013, 31% of homeowners in Greater Seattle reported owing more money on their mortgages than their homes were worth.
Life when the only responsibility is paying rent
Sure, you hear rental horror stories — I’ve lived through two — but there are just as many wonderful landlords with amazing spaces out there as there are unscrupulous, irresponsible ones. Mine responds within 24 hours with on-site visits and experts called in whenever I’ve had something go awry. There’s a lot to like about phoning someone and saying “Fix it,” and they do, and not a penny comes from my pocket when it happens.
With a good landlord — and a working knowledge of your region’s renters’ rights — you can rest comfortably knowing that the roof, the water heater, and everything else falls under their responsibility. Sometimes it’ll even involve everything from your utilities getting paid through to the lawn getting mowed.
What about redecorating?
You might think renting means you can’t paint or redecorate, but a lot of landlords will let you do a lot in homes — from putting up shelves to repainting, it’s all possible if you talk to the landlord first. My landlord gave me the paint to repaint my sunroom, and they’ll provide any paint needed to re-paint over my designer colors before I move out free of charge. Find a landlord who’s open to your re-decorating dreams, and some might even deduct your costs off your rent.
Freedom: the new dream
With the “two-checks-away” reality in the back of many of our minds, there’s a lot of freedom that comes with knowing our housing situation doesn’t need to be permanent. But the freedom doesn’t stop with not having to fix things.
Renting a home also means not being tied to a location. You can make your choice to move with as little as a month’s notice. Want to try living in different areas of the city? Easily done. Or maybe, like me, you dream of moving abroad in a year or two. With 6-month to 1-year leases, or month-to-month rental, you’ll rest comfortably knowing your commitment is minimal.
Reasons to love renting
From finances to responsibilities, there are a lot of good reasons to love renting. You might not be able to afford buying a character home, for instance, but the odds are you could afford renting one. Or perhaps you just want the experience of living downtown (or by the sea, or on a university, or…) for a year. You can do that too.
Whether it’s not having to mow your lawn, not having to have a “maintenance” contingency fund separate from your regular savings, or being able to jam if you decide the new home/neighbors/area isn’t your bag, there’s a lot to love about renting, no matter what your income or class is.
Some folks have even turned the table on their American dream — renting for day-to-day, but buying a vacation spot for a richer, more promising life.
The rental redemption
Don’t fall victim to old ideas that don’t mesh with the new economy. Truly consider the debt-to-income ratio you might be facing with your home purchase, and think about the responsibility that comes from owning and maintaining the largest investment of your life. Be fully aware of just how heavy that load is.
Maybe the best solution for you today is to invest in other areas, like art, furnishings, stocks, and other diversified sources, rather than putting all your coins in one basket. It allows you to save when you can afford it, but spend on contingencies when it’s needed. You’re still investing, but just in a way that makes more sense for today, for your new life.
That rental cash might disappear into the air once it’s been paid, yielding no “investment value” according to old-world economists, but maybe home rental is the price of your freedom and peace of mind in 2014.