An interesting article on CNBC today. I had written several weeks back about how people completely capable of affording their mortgages were choosing to walk away from their homes with no intent on paying. They could afford it but saw no point to do it when they couldn’t make the money back that they invested when they purchased it.
This article is similar. It talks about how wealthy Americans are choosing to rent homes instead of buying them because of the state of the housing market. While many wealthy Americans could flat out buy a home in cash without ever having a mortgage, some are worried that a need to move will have them losing money.
And it’s not just a fear of selling down the road. One of the pitfalls of home ownership can be routine maintenance and the need to fix items or replace those beyond repair. It’s also keeping up with the exterior maintenance, etc. With renting, they can avoid all this.
According to the article: “More affluent Americans are opting to rent as oppose to buy,” says Jack McCabe, an independent real estate analyst and CEO of McCabe Research and Consulting in Deerfield Beach, Fla. “Within the last year, so many people have seen their family and friends get burned in real estate. They don’t see it as being a risk free investment as they used to.”
But what about the flip side of the coin? Isn’t that throwing money down the drain by paying a landlord each month instead of investing? And isn’t this turn in the housing market great to get a house for a lot less than what it used to be worth? Maybe that works if you’re planning to stay in your house for a long period of time, at least 5 years. But for those looking to feel out a new neighborhood or relocating for a short time, renting could be a better option. A lot of these renters also believe that it’s not the same investment as it once was.
One reader left a comment about the mortgage crisis contributing to this problem. He suggests that if you want to buy a home you need to take out a personal loan that will automatically be deducted from your paycheck each month so that you can’t default. If you’re not working or retired, he suggests cash only, or you can’t get a loan. I think that really takes away from the American dream of home ownership. While it’s a tough market right now, it can only get better. And for goodness sake – if you don’t need to sell your home, don’t move!
I’m curious to hear what you think of this reader’s comment and if you think it would work. And I’m also happy to help you look for a home to buy or to rent. Please visit me online.