Five years after the housing crisis began, a large portion of Americans have decided to remain in the rental market. Despite mortgage rates hovering around record-low levels, renters see several advantages to signing a lease rather than owning a home.
No hidden homeownership costs
With homeownership comes many extra costs that buyers don't always consider. There are many hidden expenses that can crop up unexpectedly when you're a homeowner. Without preparing for these, your finances could be strained. For example, when you buy a home, there isn't a landlord to fix issues like there is with rentals, meaning you will have to pay for repairs and maintenance. All renters need is renters insurance to cover the cost of their belongings if they are stolen or damaged.
Even if you buy a home in tip-top shape, there is a risk that something could go wrong over the years. Of course, most people invest in home insurance to cover the damage and loss from weather, fire or theft, but general wear and tear can add up. With renting, your landlord is required to cover the cost of repairs if something breaks.
A major attraction for a lot of renters is the availability of urban amenities that are often close by. Rentals that are walking distance to shops, bars and restaurants usually have higher monthly prices because more people want to live there. Young and single people are the largest group of renters as the city lifestyle tends to be attractive to them. Living close to necessities like the grocery store or drugstore can also help cut down on other expenses like gas and car payments.
Buying property requires a lot of cash initially, whether it's a down payment or closing costs. Once you are a homeowner, you have the value of your house, but it is not liquid like a renter's money. With more cash available, there is more opportunity to make potential investments, pay off other debts like school loans or credit cards and make bigger purchases. Not to mention, you have to pay a lot in interest with a mortgage over the years.
As the housing crisis in 2008 proved, being a homeowner won't always pay off. When prices dropped, many American homeowners lost equity in their properties and subsequently their investments. As one of the biggest purchases a person will make in their life, being a homeowner is not a decisions to be taken lightly.
Flexibility and mobility
Another point renters cite as a reason not to own is the flexibility they have with a lease. Instead of being stuck in the same home, renters can more easily get up and move to another city if they want to or if there is a new job opportunity. The increased mobility is a big pull for a lot of potential homeowners to remain in the rental market.