It might seem strange that a person that relies on people buying homes would even discuss this subject, let alone advocate an unexpected opinion, but here I go. While in most cases, it is more beneficial for customers to own their own homes, there are many instances where that is not the case. In fact, the overall health of our economy and the housing market in particular depends on a healthy mix of the two options.
As a person who found himself transferred many times early in my career, I can attest to the main reason why people rent. Lifestyle. There are many us that are simply not at a point in our lives or careers that putting down roots is the most beneficial thing for us from an economic viewpoint. The fact is that it may take many years, even in a good market, for you to be able to capitalize on home ownership. Historically, a quick turnaround sale does not yield sufficient profits to cover sales and closing costs. Many customers simply are not in a position where they can buy real estate for the right reason. Another big reason why renters are so important is that they feed the investor market. While the speculator market was a big part of the real estate crash, long term returns for investment properties remain strong. That success requires tenants to occupy those properties.
The other main reason why having rental properties available is that there will always be people who are not financially able or financially responsible enough to own property. While that may be a sad fact, it is true that some people simply lack the maturity to handle the demands that come with ownership. It is important that we maintain available options for low income borrowers but we should never return to a time where customers who are unable to afford property be allowed to do so simply because we want to increase the percentage of home ownership.
Here are some striking figures: between 2006 and 2009, one in every 411 homes received a foreclosure notice. Housing prices fell over 32% during that same time. In can be said that a customer that did not buy a home during that time actually made a better financial decision than those who did.
This is not to say that home ownership is not a wonderful thing- because it is. And it is and will continue to be vital to the recovery of our economy. We need to stop thinking of it as a right and rather as something of a reward for making correct and wise financial decisions. The decision to purchase a home must come with an understanding of the responsibilities and requirements that go along with it. We can’t continue to think of our homes as a way to make endless profit or as an ATM that is never empty. As we continue to move back towards those ideas, the market will improve, prices will increase and foreclosures and delinquency will start to fall off.
As much as I would I like to think that solving our current problems is that easy, I know it is not so. Our economy continues to sputter and many areas simply are not improving like we had hoped. Unemployment continues to be a very big concern as jobs numbers are not where economists would like them to be. This week, we will see the release of July existing and new home sales. The numbers are expected to be down but how bad will reflect on the status of the housing recovery. In some other news, USDA loan funding, while approved by Congress, is still stuck in a sort of limbo. The guarantee portion of the program (which works like FHA or VA) is still in need of funding. It is expected that much of the money approved will go towards the direct loan program which is not as popular with consumers or investors.
Rates remained steady last week. The markets will react sharply this week to jobs and housing numbers. Mortgage rates will probably remain steady but pressure on rates will continue.
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