Archive for the ‘HOME OWNERSHIP VS RENTING’ Category

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THE GREAT RESET – A NEW WAY OF LIFE

June 30, 2012

Except for some exceptional boom periods, housing has never been a good financial investment.”  Richard Florida; The Great Reset

                                                                                                                                                                                                       

It used to be the business of America was business.  Now the business of America is homeownership.  To recover and grow again, America needs to get over its ‘house passion’. “  Edmund Phelps, Economist

                                                                                                                                                                                                                

Among people of similar financial status, those who chose to rent in 2004 had more wealth in 2009 than those who bought their homes.”  Wendell Cox, Suburbs and Cities:  The Unexpected Truth

                                                                                                                                                          

                                                                                                                                                                      

 

The Strib’s “Big US Cities Boom as Young Adults Shun ‘Burbs’ “ headline caught my attention this morning. The accompanying  AT A GLANCE Box reported:

  • Primary cities in large metro areas over time grew more than surrounding suburbs.
  • City growth in 2011 surpassed or equaled suburbs in 33 of the nation’s top 51 metro areas, compared to only 5 in 2000-2010.
  • 52 of 73 cities over 250,000 showed faster annual growth in 2011 than their average growth in the last decade.

 I assumed, hopefully, that the article was reporting evidence that the Reset that has to come from grass roots had begun and now had been noticed by the press.   I should have known better.  The press are, of course, still back in the 20th century with the politicians.

The story reported that young adults were “spurning homeownership in the suburbs for shorter-term no-strings-attached apartment living, public transit, and proximity to potential jobs in larger cities “– not as a part of the Reset, or the New Normal, but because nothing has been done about the weak job market, high unemployment, delayed careers, a college debt burden and availability of only lower-wage positions.

The authors assured the audience however, that economists believed this city boom was only temporary,  because, after all, the last time people moved to the cities was prior to 1920.  Ah yes, that was the spatial fix caused by the Long Depression of 1873, wasn’t it?  Then we got out of control again; crashed in 1929, headed into the Great Depression of the 30s; experienced a second reset and spatial fix as people moved to the suburbs that lasted well into the 60s.

And here we are again.  Another crash in 2008 and we are now looking for the spatial fix to slowly end the Great Recession. 

I hope I am right and the Strib is wrong.  I hope this spatial fix does not peter out; we need it to become a grassroots happening so we can move forward.    If the stats are correct, I could be right and we could be moving in the right direction.  If we are, do you think the Press and Pols will come along with us, or will they prefer to stay in the safe world of the 20th century?

 

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HOMEOWNERSHOP’S NEW LEASE ON LIFE

May 27, 2012

I was amazed to see the headlines in paper this morning about the shift to home-owning.  Although the argument made has good validity in terms of low interest rates creating a “window of financial opportunity” at the current time, it seems it would be in the public interest to include a few more points of comparison that would help them make a decision. 

The article mentioned, but did not factor in, costs of heating and air conditioning….which are included in rent; did not factor in association fees…which are included in most townhome and condominium developments and often vary from year to year; did not include “Special Assessments”  or updates needed to a standard home; did not include lawn and garden costs and maintenance; and did not include winter snow removal. 

It missed the fact that right now with significant discussion about the state of our education system….if you buy a home near what is today considered an excellent school system based on 20th century guidelines, will it still be an excellent system when your kids are in school?  Hopefully, by then, schools will have started educating for life in the 21st century, but what if your school has not?

And what about buying in vicinity of your place of work?   Yes the article mentioned mobility, but I expect most read that in terms of where you work and will you be transferred out-state-the definition of mobility issues in terms of home-buying opportunities for the last 50 years.  It missed  the fact that the trend is NOT to stay with an organization for your career lifetime; it missed  the fact that for two-income families, that normally does not mean proximity for both working adults.  So with the existing infrastructure crumbling around us, the hesitancy to invest dollars in repairs, or in mass transit, should you add transportation issues to the decision equation?  Not to mention, of course that mobility needs are emerging with a very different definition as we enter the changing world ahead of us.   Close to work; close to airports; close to schools, availability of sidewalks and neighborhood stores and centers to create a sense of place and connect you to your community, and the impossible (negative impact on community as well as prohibitive costs)  task of creating new freeways to provide quick access to wherever one wants to go.

Equally significant is the shrinking availability of time to maintain a home…which only continues to increase cost or limit one to becoming a two-dimensional person:  worker and home-owner.

And as important, it did not include the fact that rents are rising according to “what the market will bear” right now because minimal new apartment building has been done for years and years…so apartments are SCARCE…and can support rising rates.

 In other words, it painted a bright picture without all the facts.  It reminded me of the beginning days of the housing boom and the financial institution’s role in the bust that came just four short years ago. 

Again, I am not against home-ownership.  I owned a home for twelve years and during that time, as I continued to develop as a person and my interests expanded, it became an option that was limiting to me.  I chose to sell that home 16 years ago, and only THIS YEAR, will my rental costs approach equaling the costs of owning a home.  That is food for thought, I think….and worth  sharing with the world that  the decision to buy or rent involves MUCH more that current interest rates vs. current rental rates.  It involves assessing who you are and what place you hope to hold in the world that is before us – not the world of our parents that has passed.