Homeowners no more: Now we're renters, and glad
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The collapse of the housing market has dramatically changed the way my wife and I think about housing. And though the crisis and ensuing recession have been difficult, we are happy that they have given us the chance to formulate a new philosophy -- one in which we embrace the flexibility of renting and let go of homeownership as an American ideal.
When we bought a home in Brooklyn Park in 2004, we saw it first and foremost as an investment. The message we had gleaned from society was that renting was throwing your money away, while homeownership was the hallmark of both success and prudent money management. Having bought into the view of housing as the best investment anyone could ever make, we set about making improvements to the house to increase the value of our investment. We always had some sort of project underway. We could be found at Home Depot almost every weekend.
Three years later, a job change to the opposite side of the metro and a growing sense that the housing market was headed for the tank inspired us to sell our house. After nine months on the market, we sold for a net loss of several thousand dollars. Eating the loss was hard, but we were glad we could sell without leaving the bank or anyone else holding the bag.
We rented an apartment much closer to work that brought our combined commutes from two-and-a-half hours a day down to just 30 minutes a day.
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Initially we intended for rentership to be a temporary arrangement while we searched for a bargain house in a central location (we found out quickly that short commutes were something we valued tremendously). Time wore on, prices continued to drop, and though we continued to watch the market and visit houses we liked, the motivation to buy never grew strong enough to act on.
At first I thought that our reluctance to buy resulted from the era of declining prices; why buy now when we could wait a year and buy for 15 percent less? But as our search for the right opportunity stretched into years, and the freefall in house prices seemed to abate or at least slow, I began to realize that our reluctance to buy was not just a matter of market timing. Instead, it was the product of a mismatch between our values and the benefits that homeownership had to offer.
A house is not an investment. A house is a place to live. An investment is an asset that generates income. Whether we rent or own, we all have to live somewhere. There is no doubt that homeownership offers benefits that renting does not: the sense of permanence, the opportunity to freely customize, and even a hedge against rent inflation. But these benefits come with costs that are easily underestimated: maintenance and remodeling costs, the risk of falling prices, rising property taxes and assessments, very high transaction costs and, of course, crippling illiquidity.
What makes us more uncomfortable than anything are the countless stories of people like us -- educated and with good jobs -- who have nevertheless found themselves unexpectedly without an income and unable to relocate because their houses either won't sell or aren't worth enough to satisfy their mortgage. We gladly give up the tangibility of a house in favor of the liquidity and portability of our financial investments. Our mutual funds may go up and down, but they don't have an address - and if we have to move across the country to find work, we can take them with us rather than be forced to sell at the bottom of the market.
Homeownership may be fine for some people, but it isn't a fit for us. Oddly, though, the ideal of homeownership has been so thoroughly programmed into us that we still struggle with doubt about whether we are missing an "opportunity" in the current market of low prices and low interest rates. A ride through the neighborhood to see the latest foreclosures is usually enough to cure that doubt - at least for a while longer.
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Paul Hoefer works in construction management and lives in St. Louis Park with his wife. They have just renewed the lease on their townhouse for another year. Hoefer is a source in MPR's Public Insight Network.
