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So... what's wrong with being a renter?

Posted by dave_donhoff (dwdonhoff@hotmail.com) on
Wed, Mar 4, 09 at 15:02

So... what's wrong with being a renter?

I was sitting eating my oatmeal this morning after my rehab workout... and I thought to myself;

"What EXACTLY are we trying to ACCOMPLISH with all the government interventions in the mortgage market itself?
A) Anyone who could afford to stay in their home "IF ONLY" their mortgage were reduced... COULD afford to simply RENT a home at the going market rates,
B) NONE of these people would be "homeless,"
C) Virtually NONE of these people are "losing home equity"
(and those who over-paid into equity thinking it was "conservative" or "debt elimination," but can't make their payments now for lack of cash, I pitty... but have very little sympathy for,)

WHAT IS WRONG WITH THEM BECOMING RENTERS???

Let the homes be SOLD to the next buyer AT THE REAL MARKET VALUE.

The laws are already on the books for who is liable for absorbing the drop in value or deficiency in lien payoffs...
A) in most cases it is the owner... but not in non-recourse scenarios in select states,
B) in some cases the over-extended lender will end up eating the loss (once though, without extended ripple-through costs of bailout administrations,)
-> b1) when the lender eats it, the burden is then shaved along each stop through the bond holders & insurers... all of whom signed up for that risk at the outset.

EVEN IF WE ARE ACTUALLY SUCCESSFUL;
What do we get by struggling to artificially "prop up" occupants who CAN afford to rent, but CANNOT further afford to own?

What do we get by struggling to "prop up" asset prices ABOVE what the real buying market is willing to pay?

WARNING: This is an economic inquiry... not asking "why" but more of "Really???? Don't we know better???"

Color me cynical, but the ONLY rational answer I could come up with was political (and it is equally incriminating to both sides of the aisle.) That "misdirective fanning the flames of panic" serves the incumbents to grab, shift and concentrate power.

Bush played the public for fools by using the NYC attack, and OBL's scapegoating, to grab power and throw a massive misdirect in order to go after Iraq for completely unrelated reasons.

Now Obama (or his handlers) are playing us for fools with an economic non-issue of occupancy distress... in order to attempt to gain economic political control (for completely unrelated causes?)

Thoughts?
Dave Donhoff
Leverage Planner

PS. why am I bringing this to the "Buying ANd Selling a Home" board?
Because FUNDAMENTAL INVESTORS ARE HOME BUYERS!


Follow-Up Postings:

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RE: So... what's wrong with being a renter?

Personally I think there is nothing wrong with renting. For variouse reasons, maybe they won't live in the area very long, rent until they find a neighborhood they like/prefer, don't want the responsibilities of home ownership, single, couple , etc.
Now everyone should be homeowners, but everyone should take care of the property they rent as if they owned it, and every landlord should try to repair the problems with respect and understanding. Some rules must be changed so the landlord can get rid of non payers in a reasonable manor, expect the tenets to obey the rules etc. Guess that it why I will never be a landlord again.


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RE: So... what's wrong with being a renter?

Renters are more or less vilifed even though many pay on time and keep the rental property clean and well maintained, and alert landlords of repair requirements. I've been both a renter and a homeowner, and have always left every place I've lived neat and clean and in good shape. Have always paid on time, too. Nevertheless, I've noticed that renting automatically puts us in a lower class, and that's wrongheaded thinking on the part of this country.

It is very true that there are good reasons to rent. Mobility is a huge one. Many of us work in fields that require frequent moves. Being trapped to real estate ownership--especially right now--can mean having to pay for two residences, live apart as a married couple, taking a huge loss on real estate, or even having to turn down a desireable job. And, some people know they're not interested in owning a home and are smart to keep renting. IMO, only when a person is ready and able to commit to living in the home for quite some time, and take on all the 'joys' of repairs, maintenance, etc, should they buy. I find it laughable that people think renting is 'throwing money away.' Unfortunately too many people hear "renter" and automatically think the person is a deadbeat. That's too bad, because I think we're going to see a lot of people forced to become renters again in the next few years. And many young people starting out still cannot afford houses at these prices which are still more than 2 or 3 times the median income, the tried and true guideline to how much one can afford. That number could also go down with all the job layoffs.


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RE: So... what's wrong with being a renter?

I don't think there's anything wrong with renting - never has been a bad thing and will always be a viable alternative to ownership. Now a segment of the population is going to find themselves in that position - either back renting again or for the first time - and for any number of reasons from (A) outright foolishness to (Z) job loss or unforeseen financial crisis and anything in between. Probably find there's an acute shortage in desireable rentals.

My response is purely on a gut level and I'm not feeling particularly articulate today. I'm quite removed now from anything to do with real estate and the buying and selling thereof. Lucky, you bet! I inherited a lovely old home with a mortgage long since satisfied. But prior to this I did experience apartment living early on in my adult life. Truth be told, I didn't much care for it. So, I saved and bought my first home having a good job, with finacial docs up the wazoo, and 20% down for a totally white bread 30 year conventional. Same for my second house which I sold as prices were running away skyward.

To my mind, I did everything right; bought what I could afford - refinanced once when the interest rates dropped enough to where it would have been stupid not to, etc.,etc.

I would like to see credit freed up so people with the appropriate documentation, etc. can refinance in good faith. But I do not have a warm and fuzzy feeling toward debt forgiveness. How many free rides will people expect? And if they can't keep up even after a restructuring, what then?

Yes, home ownership is part of the American dream, but if you have no income, no job, no assets, you have no business keeping a starter castle you knew full well you could never afford in the first place.

Call me cynical, too, but I somehow believe fewer people were duped than should be believed. One thing those who don't have any money know is that they don't have any money!


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RE: So... what's wrong with being a renter?

Dave, I think that complaining about a program to try to "save" homeowners that began four months after we indebted future generations to the hilt by bailing out the banks and security firms that created and GAMBLED ON our futures through securitized mortgage obligations is a bit like closing the barn door after the horses escaped.

Why didn't we let AIG fail? Merril Lynch? Washington Mutual? Wachovia? GM and Chrysler?

I did everything right, too. I am still paying on two houses and have a husband jobless with a $1100 a month "retirement" income because car companies cannot sell to those who can't get loans.

Who was telling us for years that we were stupid to put money down when we bought our homes, that we should "invest" instead? Who created subprime interest-only and no-doc loans? Not home buyers!

Who replaced the old retirement plans with 401ks and IRAs, giving the markets huge infusions of the working person's cash to play with? Who gutted regulatory agencies so that schemes like Credit Default Swaps and Bernard Madoff's could even exist?

Whoever it was, he/she is not living in a home whose mortgage is securitized by Fannie or Freddie.


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RE: So... what's wrong with being a renter?

Hi Nancy,

Who was telling us for years that we were stupid to put money down when we bought our homes,

ME, for one... and the people who hired my planning and took my advice are safe & comfy with plenty of safe growth reserves today.


that we should "invest" instead?

I've always advised SAFE growth vehicles for the funds that cannot afford to be at risk.

Who created subprime interest-only and no-doc loans? Not home buyers!

Au contraire Doll.... every single home buyer that APPLIED FOR and REQUESTED such programs were the entire REASON for their existence.

I can tick off list after list of "creative" loans that were launched and died on the vine... know why? No borrowers wanted them.

Want to know which ones the Home Buyers and Refinancers WERE responsible for supporting?
Look around you; All the loan programs actually OUT THERE.

Who replaced the old retirement plans with 401ks and IRAs, giving the markets huge infusions of the working person's cash to play with?

Uhhh... I give up. Everyone?

Who gutted regulatory agencies so that schemes like Credit Default Swaps and Bernard Madoff's could even exist?

Neither the CDS's nor Madoff existed due to any "gutting" of any regulatory agencies. There were OTHER things that could be laid at the feet of the regulators... but those aren't really two of them.

Cheers,
Dave Donhoff
Leverage Planner


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RE: So... what's wrong with being a renter?

Bush didn't need to "gut" the SEC; all he had to do was appoint Chris Cox. The SEC had the ability to regulate CDSs, but filled with with the Republican belief in "less government is good government", they deliberately passed on the opportunity to do so. Cox never appointed the regulators needed, and the jobs sat empty for four years.

There's nothing wrong with renting. However, one reason the US has a strong middle class is the drive for home ownership. It's partially tax policy, a lot sociological as part of what we perceive as the American tradition (rightly or wrongly). The Founding Fathers came very close to sticking with the traditional model for democracy - the only people who could vote would be landowners. This was narrowly defeated in the end, and turned out to be good in ways no one at the time could have imagined.

However, back to the OT: for those of us who have tried and disliked being landlords, it remains a situation where a few bad apples spoil the barrel for many. I've seen apartments and homes trashed by departing tenants - one had a hole burned in the DR floor, it was amazing they hadn't burnt the entire house down. To say that the poor landlord was appalled when she saw it, would be putting it mildly.

Fact is, most people will simply take better care of what is theirs, than something belonging to someone else. If they have no 'skin in the game', some of them could care less about the detritus and pain they leave behind them. In fact, there are many damaged people who enjoy such behavior, feeling it gives them a sense of power over a class of people they resent.

It would be nice if we lived in a world where all people behaved logically and with care towards all others. But we don't. Most people are good, I firmly believe that. But the definitions of 'good' vary a lot, and there will always be some who honestly don't want your approval and will spurn thoughtfulness.


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RE: So... what's wrong with being a renter?

On the other side...I am currently a renter after having been a homeowner for 20+ years. I happen to know my landlady's financial situation and I live in fear each day of the knock on the door from the sheriff telling me the house is in foreclosure and we have to move. Which wouldn't be too bad (I don't really like the house), but I have 3 horses and it's hard to find a home on acreage overnight.

Otherwise, renting is da bomb! I call the landlady when something doesn't work. I have free rein to do anything to the yard I want to. Last house we owned, I thought I had take the well repair guy to raise, he was there so often!


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RE: So... what's wrong with being a renter?

Between 1960 and 1990, somewhere between 62 and 65% of Americans owned their homes. In 2006, approximately 75% of Americans reported that they owned their homes.

So, when one asks the question about why not rent, I'd suggest that somewhere between 10 and 13% of the 2006 owners might be better off renting to get back to the long term average. At the end of 2008, approx 12% of homeowners were behind on their mortgage or in foreclosure. That doesn't reflect all those who were foreclosed on prior to then (2.2 million in 2007 and 1.35 million were in foreclosure 3rd qtr 2007).

If I look at long term historical numbers, I'd suggest that too many people are having trouble or have had trouble relative to averages. And for that reason, no matter what the cause, I think some people should get help. Averages don't lie.



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RE: So... what's wrong with being a renter?

It's an interesting idea -- well worth exploring.

I would think the holders of bad loans might want to get creative and negotiate some type of program that would allow the upside-down homeowners to stay in 'their' homes (rather than have them sit empty and/or be 'raided'), pay market rent for now, and negotiate some type of 'buy-back' scenario at another date...


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RE: So... what's wrong with being a renter?

I remember in the 1960's, I had read about the fallacy of home ownership being the better investment. During the economic situation of the time (interest rates and home valuation) the writer made the argument that it would be a better investment to invest the money that home-owners pay for insurance, taxes, upkeep,fixing, etc.)

I suppose that it really depends on location. I know that here in Iowa, renting would make sense economically -- there isn't much home appreciation in my region. However, I'm so happy that my parents bought a house in LA in the 1950's.

I'm also at the point that I'm tired of the responsibility of every detail of my home and yard. Renting is looking more and more desirable. I'd love to just lock the door and go on vacation.
Susan


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RE: So... what's wrong with being a renter?

Nothing. In my opinion, "the public" was sold a bill of goods that home ownership was an investment that everyone should want.

I've come to more or less agree with the point susana made. Home ownership isn't an investment; you have to live somewhere. The folks I know who are in financial trouble saw mortgages lower than rent and figured home ownership was cheaper than rent. Insurance never goes down, taxes don't either. The house has to be heated, cooled, and needs electricity. The troubled ones didn't figure for repairs, renovation, or upkeep.

It is sad and troubling to see people struggle. One couple I know is very nice, polite, and good-hearted. They got a loan for first-time homeowners that didn't require a down payment. But they are always on the edge, financially. At one point, a couple other households got together, purchased and reconditioned a rather nice lawn mower for them, as their old cheap one had died.

They left it outside in the middle of the yard, all through the long, snowy winter. Maybe some people aren't candidates for home ownership because they don't want the responsibility for doing all the things that need to be done. (I have one renter friend who says this outright).

People who were provided with new housing after Katrina are complaining that the materials and construction were substandard. Some of their neighbors are saying, no, a house needs upkeep. I suspect there are cases when each of these are true.

I shook my head when I saw, fifteen or so year ago the proliferation of loans to consolidate debt for homeowners, that ended with the spokesmodel announcing, "We had money left over to buy ....."(fill in blank with luxury item) A writer to Dear Abby was shocked! to find out that the loans were a lien on the homeowner's property.

About the same time, one of my colleagues added an apartment onto the home he couldn't afford, so the rent would defray the cost. (It didn't)

There was enough greed to go around.

I think the bailout (for companies and individuals)is like pulling the band-aid off slowly. The end result is not changed, it just hurts longer.


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RE: So... what's wrong with being a renter?

"I'm also at the point that I'm tired of the responsibility of every detail of my home and yard. Renting is looking more and more desirable. I'd love to just lock the door and go on vacation.
Susan"

We moved into a town house last year and love it. Our monthly expense is much better than renting and no landlord can jack it up. It's the best alternative for us to lock and leave (to Europe end of this month).


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RE: So... what's wrong with being a renter?

I can't imagine choosing to rent rather than buy unless there was a specific reason why buying didn't make sense - such as moving in < three years, or something like that.

My home is the place that I can make my own through modifications (all DIY in our case)- adding a porch, crown molding, a couple of windows where there were none, a new french door that leads out to a new patio that we built, etc. Plus the landscaping - planting trees, shrubs, perinneals, and building a water garden.

As long as we can make our mortgage payments - which, since we took out an 80%, 30yr, fixed rate loan 15 years ago, and our incomes are fairly secure, we should be able to keep doing - no one can make us move. We don't have to worry about packing up our stuff and moving it to another place because the landlord decides to sell. If our stove breaks we can replace it with another one that we like - not have to settle for a cheap model the landlord picks, etc.

I realize that my attachment to my home is stronger than some people's and that some people are just as happy, or happier, living in a place they don't own, but for me living in a home I own is important.


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RE: So... what's wrong with being a renter?

It wasn't people not paying their rent that drug the economy down.

It isn't renters that the gov't is trying to bail out.

When someone tells me they just bought their 1st house I say congratulations (if they signed the contract there is nothing they can do about it now anyway) but in reality I feel bad for them.


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RE: So... what's wrong with being a renter?

I agree that not everyone should own a home. However I don't see how it is cheaper in the long run to rent. Someone is still having to buy the house, pay the taxes on it, insure it ect. Just because you are renting doesn't mean that those cost aren't there it is just someone else is paying them and taking a cut for their troubles. I know there are some out there that likely loose money trying to be a landlord but if they are loosing that much money they likely wont be a landlord for very long.

Problems I see with renting. If I have a leaky faucet in the middle of the night I have to call my landlord and he will fix it when he gets around to it.

There are benifits to renting especially if you move around alot or can't do home repairs yourself or are just starting out and your income hasn't stabalized. I don't like the idea of buying a starter home then a year or two later after you get a promotion and your income stabalizes selling that house and buying a larger house. The cost associated with buying and selling a house and the fluctuations in home prices make that sound like a bad idea to me. Also if the real-estate market in the area is in a bubble it would be a good idea to rent and then buy after the bubble burts.

So unless there is a reason not to buy a house I don't see why I would want to rent for the rest of my life.


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RE: So... what's wrong with being a renter?

Actually renting can work out very well today. Due to the recent run up in housing prices, I can rent off someone who purchased their house 10 yrs ago for cheaper than I can purchace one today. He can cover his mortgage and I can get a cheaper place than I could otherwise.

My toilet was running. The part cost $8. I fixed it in 15 minutes. I guess I don't see that as unreasonable.

To me the main benefit of renting is that I don't have to purchase a huge depreciating asset. I spent 2 yrs looking for a house to buy and couldn't find anything that made sense for the money they wanted. So I decided to rent and I found a great place.


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RE: So... what's wrong with being a renter?

We found a great place too. We just moved to a new state, did not know exactly what city let alone what neighborhood we wanted to live in so decided to rent for a year so we had plenty of time to find what we really wanted. We had a relocation company helping us and I emailed them everything I wanted in a rental and because they knew someone who knew someone, we found a condo that had been for sale for a year with no bites. They thought the owner would consider renting to us if they met us so we went, loved the place and agreed on a price. We've been here about six months and we were getting a little worried that we were not even close to finding a house to buy and were thinking we would like to rent another year but didn't think our landlord would agree as he had stressed that he really wanted to sell. But with the market what it is, I guess he decided he would be better off have good renters than having an empty house on the market because he recently called and offered to extend our lease. We were so relieved! I love it here and I really don't feel bad about not owning a house, not right now. We pay our rent early, take great care of his place, keep it spotless (which he comments on everytime he's been here) and I don't feel pressure to hurry up and buy something I may regret down the road. I never thought we would be in our 40's and renting again, but at this point it makes sense.


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