Today's American Dream Is Renting, Not Buying. This Expert Agrees

Today's American Dream Is Renting, Not Buying. This Expert Agrees

While home ownership has long been the standard for achieving the American Dream, a growing number of people are opting for a more flexible living situation. A third of tenants are choosing not to. Buy a housethough they can afford one as of January 2024. Interrata survey.

Bernadette Joy is one of those tenants. “I can afford to pay the house in cash and I'm still not buying,” she said.

Bernadette Joy, founder of Crush Your Money Goals

Viva Tung/CNET

Oh money coach And CNET Money Expert Review Board Member, Joy bought (and sold) three houses over the years. After trying to own a home and invest in real estate, she and her husband recently decided to unload all their properties. Looking back, he realizes that he made the mistake of buying a home in 2013 out of obligation, not because he actually wanted one.

“I got a job. I got married. So the next step was to buy a house. That's what you have to do,” Joy said.

Now, without the stress of home ownership, the couple is happily renting as they please.

As many households are worth out of one. Unaffordable housing market Marked by high Mortgage rates And with steep house prices, renting for life is becoming more common by default. But Joy's story reflects another side of the equation — the growing percentage of renters who enjoy the freedom of not owning property.

Renting is not a bad thing. If it suits your lifestyle better than owning a home. I spoke with Joey and asked about his back story, his decision to rent and advice for others considering home ownership.

Don't let today's housing market rush you.

“If you're going to be here for the next five to seven years, take your time and find the right place.”

If you're set on home ownership, base yours on a realistic timeline Household budget And personal needs are key. With so much competition for homes in the seller's market, buyers often make decisions based on outside considerations, not because it's actually the right time for them.

Joy said many people rush to buy because the market is hot and homes are going fast.

Since when A global pandemic, home prices are skyrocketing and inventory is low. Homes haven't been listed for long and sellers are still recovering well above asking price in some areas. Also with Current mortgage rates Averaging between 6.5% and 7.5%, it's a pressure not to miss.

Because people think they're making a good investment, they buy a home that's overpriced and worth more, Joy said. Instead, it's best to ride out market fluctuations and rent until you find a home that suits your situation.

“If you're going to be here for the next five to seven years, take your time and find the right place,” he said.

Read more: Should you rent or buy a home?

Don't give in to social pressure.

While buying a home is a solid long-term investment, the pressure of becoming a property owner can lead people to make risky decisions, Joy said. The narrative is that if you are a tenant, your social status is low.

“I see a lot of people going beyond their means and buying a home to impress other people, not because it actually meets their family's needs or needs,” Joy said. fulfills.”

During the pandemic, Joy and her husband bought a house in the suburbs. But after a while, they realized they didn't need a 2,400-square-foot house and could build half the space. And they wanted to live in another city, where they later realized their housing needs had changed.

Although Joy once felt a social burden to own a home, she now likes to tell people that she is a renter who is financially secure. He said it was contradictory.

“I am financially independent. I have a net worth of $1.6 million dollars and I rent.

Don't underestimate the costs of home ownership.

Although Joy can afford the expensive housing market right now, she is not actively looking to own a home. The median home price where she and her husband live — and where they like to live — is about $700,000, and she hasn't found the right place to buy. So she's renting for $2,600 a month, which is cheaper than the estimated cost of a mortgage and buying a home in the area.

Like many other financial experts, Joy recommends committing to a 20% down payment in your homebuying budget, even though that's a lot of cash to come up with. If you're willing to buy a home with a low or zero down payment option, it probably means you're living paycheck to paycheck and have a lot of wiggle room if something goes wrong. There is no room.

The “all costs” of home ownership are often overlooked. Oh Leverage, Closing costs And a Monthly mortgage payments There are hardly only home ownership costs — there's also home insurance and ongoing maintenance. Joy notes that insurance prices have gone up for many of her clients, and that cost adjustments from state to state can be staggering.

In Joy's case, housekeeping was an additional time and money responsibility that she and her husband were not interested in handling.

And she is not alone. According to an Entrata survey, nearly a quarter of renters don't want the responsibility of owning and maintaining a home.

“You have to be reasonably honest with yourself about what you can sustain,” said Joy, who prefers travel, business, dance classes and other activities. “Housekeeping is very low on my list.”

After considering the expenses that come with home ownership, there are other financial obligations in your overall budget, e.g Student loanscredit card bills, Car payment and basic needs. Just because a bank says you can afford a home loan doesn't mean you can actually afford it on a day-to-day basis, Joy said.

It is also important to account for any unforeseen events or contingencies that may affect your ability to meet your monthly housing costs. “If you lose your job or something happens, you're really in a bind,” she said.

Don't rush into buying a home.

Joy and her husband don't have a new timeline for buying a house. For now, they enjoy living at a distance they like.

“If we find a place and it makes sense both mathematically and emotionally, where we are in our lives, we'll buy it.”

In the meantime, she is happy to advise clients and others on their home buying journey. Her first tip is to find a real estate agent who won't pressure you to make a decision. Joy was shocked to find an agent on YouTube who told viewers not to waste their money because it was not a good time to buy. “I immediately like, I trust this guy because he's not trying to sell me,” she said.

Next, Joey tells his clients to pretend they're paying off a mortgage and paying off all their expenses at least half a year before they actually buy. If you're on a fixed budget for months before you move, you'll have more. A realistic understanding of what you can afford.

And even then, you need at least three months of emergency fund. “If you're using every last penny to buy that house, you're not there yet. You still have to have a cushion,” Joy said.

Although many economically disadvantaged households do not have enough income or savings to purchase a home, the social value placed on home ownership is also changing. As more renters actively choose financial independence over homeownership, they are also making conscientious decisions about retirement savings. Pay off debt and participating in new experiences.

If a money expert is perfectly fine with renting because it fits his lifestyle, you might be too.

“There's no shame in being a renter for as long as you need to,” Joy said.

Read more: Don't rush home ownership: save and enjoy life.

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