Why some families prefer to rent, not own
After getting burned in the housing market or watching things go wrong for others, many families are deciding that renting offers the life they want at a price they can afford.
After homeownership backfired on Mark and Rickele Wingo (pictured), the St. Paul-area couple and their children found that renting was a welcome path back to financial stability.
The Wingos' is but one of many stories of reinvention being played out across the country as renting takes a turn at stardom in America's saga of boom, bust and recovery.
The population of renters is growing, swollen by foreclosure refugees who can't get credit, by people finally starting new households after bunching up for years with family or friends and by still others who could buy a home but are holding back.
More middle-class renters
A new report from the Census Bureau shows homeownership at 65%, the lowest since 1996. Homeowning briefly reached a peak of 69.1%, in 2001. Here's a demographic breakdown:
- 73.3% of white non-Hispanics own a home;
- 42.9% African Americans;
- 54.5% of people of all other races;
- 45.9% Hispanic (of any race.)
"More members of groups with traditionally high homeownership rates are becoming renters, including married couples with children, high-income households, and white households," says the Harvard Joint Center's new report, State of the Nation's Housing 2013.
Many of the new renters are, like the Wingos, fresh from foreclosure. They want homes like the ones they lost -- three-bedroom single-family houses in neighborhoods with good schools, says Mark Fleming, chief economist at CoreLogic, which collects and analyzes data about housing.
"A significant chunk (of renters) are involuntary," Fleming says. "And I think a significant chunk is voluntary." The biggest increase in renters is among the 35-to-44-year-old age group, traditionally first-time homebuyers.
Watching the foreclosure tsunami has made many skeptical of homeownership. "A lot of them saw what happened to their friends and neighbors," Fleming said, in a phone interview. It's not that they don't want to own homes. But many, even among those who can, are taking a wait-and-see approach.
Homeownership, for Wingo and his family, was an utter disaster. In the exuberance of the boom Mark, 32 and Rickele, 30, imagined they were doing everything right when they bought their first home near St. Paul, Minn.
The home looked newly renovated. The workmanship was shoddy, however. Soon, the plumbing exploded and the roof leaked. Drafts pushed through gaps in the walls so large that bats flew right into the house. Unfinished windows wouldn't lock, letting thieves climb right into the house.
The cost of repairing the mess was overwhelming. Worse, the schools were bad. The neighborhood was dangerous and growing scarier. Still, they struggled on, bracing for an impending $400-a-month increase in their adjustable-rate mortgage payment.
When Wingo lost his job with a mortgage lending company and Rickele, on maternity leave, wasn't working either, they threw in the towel. They'd spent so much money trying to fix up the house that they'd fallen behind on the mortgage payments. They tried to refinance but by then, the home's value had dropped.
"We decided just to take our losses and seek renting," he says. The bank took the home, and in 2007, two years after buying their first home, they became renters again.
'The best thing that could have happened'
Now he sees, Wingo says, that "it was the best thing that could ever have happened to my family. Being able to pack up and move has allowed us to relocate to the suburbs with a safer neighborhood and school system. In return, our kids are excelling in the community and in their academics."
Back at work again, Rickele is a full-time medical scheduler and part-time real-estate agent. Mark now runs a tax, insurance and financial services company from their rental townhome. He self-published a book, "Wingonomics," about their travails and recovery "to share my story so others wouldn't make the same financial mistakes."Those odious, expensive home repairs are history, allowing them to repair their credit, pay off debt and build savings.
The transfer of so many private homes into the hands of investors has created what Fleming, the economist, calls "a structural change in our (rental) housing stock." Between 2009 and 2011, 1.4 million privately owned single-family homes became rental properties, the Harvard report says.
Renters now have a larger array of choices, from apartments to repurposed condos to single-family homes, in cities and in suburbs. With options like these, renters may feel less urgency to buy than before, Fleming says.
"There's still a very, very strong desire among Americans to be homeowners," he adds. "It's more of a timing consideration."
Renting has downsides. If the landlord raises the rent too high, or sells the place, it may be hard to find another home in the same school district. "You're throwing away money," Wingo points out. "You're making your landlord rich. You're not building any equity. There are tax deductions for homeownership."
He wants to own a home again. Someday. Not now.
More from MSN Money:
- The surprising architects of the Phoenix 'miracle'
- Rising rates, prices panic would-be homebuyers
- Why cities are hot and suburbs are not
Sounds like the Wingos brought some of the disaster experience on themselves. This article gives the understanding:
1. That they did not hire an independent home inspector to look at the house before they bought it.
2. That they did not ask other parents about the quality of the schools, or looked up the school rankings and evaluations.
3. That they chose an adjustable rate mortgage instead of a fixed rate mortgage.
4. That they picked a neighborhood with crime.
To avoid the claim, "well, we didn't know anything about it": I don't know anything about buying a house either, but the first thing I'd do when I decide to buy a house is get a couple of books for first-time homebuyers, and find out everything I can on what to do and what to watch out for. They just CHOSE not to do due diligence, and now they believe that home ownership is a bad thing in and of itself. A pity.
Mr. Wingo now claims that the disaster was a good experience, because it allowed them to pack up and move to a good neighborhood with good schools. It's nice that people can rationalize things in order to avoid looking in the mirror.
I'm paying $700 a month rent for a small 1 bedrooom condo with just over 600 sq. ft. I am in the process of buying my own townhome. Even with the mortgage, taxes, insurance and HOA fees my payment will be $730 a month for a 2 bedroom 2 bath with a decent size outdoor space and 1260 sq. ft. This without a down payment as I'm going VA. Plus the HOA takes care of all the outside maintenance and repairs. Seems like a good deal to me.
I'm tired of renting - I want to have my own place and fix it up the way I want and not have to worry about the rent increasing every year or the owner deciding to sell the unit. For some people, renting may be the better option but for me, buying is the way to go.
it all comes down to planning.
too many people life life as if happenstance is always going to work out just fine.
go ahead and have 2 or 3 kids while you rent. then expect to dream about having a house the rest of your life. good luck ever making that dream happen
Let me explain to you why, NO, this is NOT a good thing:
More and More property is being purchased by the few,
and the many have to rent from them.
That's a HORRIBLE sign for the state of this country.
And when I see a duel income house-hold that still isn't making enough to put away
enough money for a house down-payment,
I get REALLY scared. Why don't we just call it what it is?
So much for the American dream.
How do you go from a foreclosed ARM, no home inspection and a bad neighborhood to a financial advisor? Wingo should be in marketing. Even the basic tenets of financial common sense should have prevented that situation.
We bought a home 35 years ago for 35,000. Worth about 150,000 now, Good schools in city.
Property tax cheap in Alabama next to Columbus Ga.
I have about 120,000 equity in it. I painted it, hire some unemployed guys to redo driveway, yard waork at $10 an hour.
We have redone bathrooms and floors are tile and wood laminate, no carpets.
A new toilet cost less than $200 and makes a bathroom look good, replace sinks at 100 dollars each and fancy hardware.
Added a covered patio and a side patio fenced with pea gravel stained concrete.
I love these projects at retirement, gives me a purpose and sense of pride and accomplishment renting cannot do.
Better to own a home than a fancy car. One keeps some value, the other is not worth squat in a few years.
Young people buying a Mercedes is a big mistake. Drive an older Chevy and put that money on a house. Or is stocks.
Home ownership is not for everyone, it is expensive and time consuming. I own my house outright no principal and interest payment. The monthly cost with property tax, insurance, minor maintenance and upkeep are still around $1500.
one big problem is occurring that no=one is saying anything about. The cost of renting has almost doubled! I prefer to rent as I cannot do repairs on a house as I used to, but I have recently been looking for a new home to rent and have discovered that a house you would pay $1100 to $1200, in rent 5 yrs ago, is now asking between $2000 - $3000. This is almost squeezing me out of the market and I know some people could not afford this range at all. Even a nice apartment is $1000 plus!
Folks, visit Home Depot and buy a brush and paint yourself.
Roofs you can get when a storm comes through, folks will do the insurance part for you.
Rent a jackhammer and a jobless person and get that driveway fixed.
Learn to fix and repair yoyurself. There are plenty of folks unemployed who would work for $10 an hour cash. Ask around.
How many renting have a new fancy car at 600 dollars a month ? How about no car payment and double up on house payments.
Remember to not buy the highest priced house or the cheapest and never buy where prices are inflated for jobs as those jobs may disappear along with your home value. This happened in Houston years ago when the oil boom busted.
It happened with the tech bust and will happen with fracking towns.
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