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The Renting Shift

Many new home buyers are now shifted towards rented homes.

Author: David Reinholtz

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For years, many people looked to their monthly expenses –and more acutely, their rent- as wasted money. These people had a difficult time justifying spending one thousand dollars a month, and oftentimes more, on rent when they could be spending that money on a mortgage and working toward fully owning their own home. Mortgages for years became much easier to get, with lower standards –and sometimes no standards at all- and people saw the opportunity to pursue the American Dream at last.

Then the economy took a turn for the worse, jobs were lost, and people who had received those mortgages found that they couldn’t keep up with the payments and began losing their homes. Also, during the boom years, home prices continued to climb and many would-be homebuyers who might not have taken the plunge did so before the prices to climb even farther beyond their reach.

Within a few short years, times have changed

Yet, within a few short years, the thought of paying rent every month no longer seems like an unreasonable alternative. The housing market is in flux at the moment and with that, home prices are unstable. Potential homebuyers are in the position of trying to guess whether the home they might consider buying will be going up in value or decreasing in value in the coming years.

Couple that with the fact that it has become much more challenging to qualify for a mortgage, and millions of would-be home-buyers are deciding to sit on the sidelines as they wait for some certain sign of stabilization. It is quite ironic, really, that what was once a dreaded option a few years ago –to pay rent rather than a mortgage- has become the more appealing option for many.

A balance is needed

During the Clinton and Bush Administrations, the mantra that was touted was of home ownership. Many politicians even equated home ownership with a patriotic duty and the federal government took great lengths –through Fanny Mae and Freddy Mac- to help people, even those that couldn’t, or shouldn’t, get a mortgage to actually acquire one.

The climate has certainly changed. During the past year, testimony on Capital Hill has been about the need and necessity of balancing home ownership with renting. One of the great lessons that the industry, and more importantly, the politicians, has learned is that not everyone should own a home. Balance is important in any outlet in life and the housing industry is no different.

Without enough renters, there will be no need for many of the homes, condos, and apartments that exist. When there aren’t people enough to rent, then homes sit unused. Depending on the neighborhood, this can actually prove to be quite catastrophic. In a depressed neighborhood, without renters, empty properties can become vandalized, lawns would be neglected, and the cancer would spread around it, driving prices down for actual homeowners in the neighborhood.

Renting to get through the quagmire

Home ownership should still be the American Dream, but there needs to be some measure of symmetry between the two. For potential home-buyers who are uncertain about the market, who don’t know whether their market with rise or continue to fall, then renting can actually be the best option.

At no point should we, or anybody else for that matter, encourage people, families, or individuals, to purchase a home at this time just because the prices have come down to more reasonable levels. Sometimes renting will be the better solution, especially if there is any chance that the person applying for the mortgage may lose his or her job or that the payments would be too stressful for them at the outset.

David

About Author

David is the Founder and CEO of LoanOfficerSchool.com, an approved education provider for The Conference of State Bank Supervisors and The National Mortgage Licensing Systems' (NMLS) required pre-licensing education and continuing education.

You can contact David at (866) 623-1250 or email at operations@loanofficerschool.com

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