Baseball, apple pie, and homeownership – these have traditionally been the three pillars of the American way of life or at least the accepted image of America. But times are in fact a-changing. Homeownership rates have seen a decline in recent years, and more of the market has been taken over by rentals. “Single-family rentals,” for example, “of standalone homes or semi-detached townhouses, in particular, have seen a 30% growth rate in recent years.” The factors driving this phenomenon are both personal and economic. So let’s see why people are preferring to rent vs. buying a house in Metro Detroit Michigan.
Mortgage Qualification Challenges
A lot of people today are preferring to rent vs. buying a house in Metro Detroit Michigan owing to the cold, hard fact of the challenges and difficulties they face in qualifying for a mortgage. In today’s economy, fewer people can meet the qualifying criteria, such as good credit, solid employment, and the ability to make a down payment. “Checking every box,” according to financial experts, “before applying for a home loan can be more difficult than it has been in the past.” And here’s why:
- Frequent job changes and other employment instability
- Increasingly burdensome college debt
- Rising rents that keep people in renter mode
That last item is becoming increasingly more important today. “Rising rents may also create an infinite loop in the housing market. Rents have risen rapidly and outpaced income in many areas of the country. This makes it harder for people to save up a down payment to buy a home, which leads to more people renting.”
The fact that renting is significantly cheaper upfront is another reason people are preferring to rent vs. buying a house in Metro Detroit Michigan. If you have reasonably good credit, you can get into a decent rental for just the first month’s rent and a security deposit. But buying a house requires a 20% down payment, and if you don’t have that much, you’ll have to pay for private mortgage insurance. And then you’ll have closing costs, property taxes, and various other fees – all of which is out of many people’s reach. Add to that college debt burdens and rising rents, and it’s easy to see why larger numbers of people are never able to afford the initial expense of buying a house.
Besides costing more upfront, homeownership carries with it ongoing expenses, particularly for insurance, property taxes, and maintenance and upkeep. “A house can be a time and money sink. If you own it, you’re stuck with paying for every expense. . . . Renters can typically rely on the landlord for general maintenance of the property, and most of the big expenses are built into the rental fee. Even if you’re renting a single-family home where you’re responsible for general upkeep of the property, you probably won’t need to worry about major expenses such as when the roof needs replaced.”
Some people are preferring to rent vs. buying a house in Metro Detroit Michigan because of the lifestyle flexibility renting affords. Many people move around more and change jobs more often today. Renting allows them to do that because they aren’t tied to house and a mortgage. Millennials, in particular, prefer to spend their disposable income on things like travel and entertainment rather than using it to build equity in a home.
More Investment Opportunities
Because homeownership is no longer seen in the same light as an investment, renting instead of buying in Metro Detroit Michigan allows people to invest elsewhere. Financial experts advise considering “the opportunity costs of putting your money into a house rather than other investments that may earn more. Building equity in a house has traditionally been considered a safe investment, but the recent housing bubble collapse and recession exploded that notion. People choosing to save and grow their money in different ways may also drive the choice to rent.”
Loss of Tax Advantages
The recent tax code changes have caused other people to choose to rent vs. buying a house in Metro Detroit Michigan. The tax advantages of homeownership just aren’t what they were. The tax deductions for state and local property taxes have been decreased, and that really affects people living in high-tax states. When you consider the higher upfront costs and the ongoing expenses of owning, losing these tax breaks makes renting more economically viable.
So why are more and more people opting to rent vs. buying a house in Metro Detroit Michigan? They are doing so because they are too financially strapped to get into ownership, they don’t want the ongoing expenses, they want the freedom of renting, and/or they would rather invest elsewhere. The reasons are both personal and financial, and they are all good reasons. Are you ready to enjoy the benefits of renting vs, buying a house in Metro Detroit Michigan? If so, find out how our experienced real estate agents can help you get started.