Sunday, April 25, 2010
John Romanin Joins the ATA
The American Tenants Association is pleased to announce that John Romanin of Mount Vernon, Virginia has joined the ATA as Director of Legislative Initiatives. John will head up our new Washington, DC office and will be responsible for working with Congress and the White House in developing and guiding legislation favorable to America's 100 million residential renters. You can check out John's complete biography on our "About Us" page.
Monday, April 19, 2010
The Renters Manifesto
Our thanks to M.J. Harris at the Liberty Guardian for this excellent article:
"Stop throwing your money away on rent.” You see the phrase in Realtor junk mail and hear it from new homebuyers who are immersed in the nightmare of paperwork, points, and plastering.
The logic is simple: renting is just flushing money down the toilet; buying a house gives you a piece of something to call your own. You earn home equity and end up with something tangible to pass down to your heirs–or to sell or refinance when you retire.
There is a kernel of truth to all of this. But it’s mostly crap. I’ve been a renter all my adult life, and I have plenty of home equity. My home equity is called “cash,” and it’s the accumulated difference between what I pay in rent and what a comparable homeowner pays for their mortgage, maintenance, property taxes, and utilities. (Sure, I pay for all of those things indirectly, but that’s the point: they’re rolled into my rent, and they’re not rolled into your mortgage.)
Unlike a homeowner, I can choose to invest my equity in something other than real estate. I can spend my equity without taking out a line of credit. I might squander my equity, but I’ll never be “underwater” due to the vagaries of the market. And I accumulate home equity more quickly than the average homeowner.
Yes, thirty years from now, when your mortgage is paid off, you will own a home, free and clear. You know what I’ll own? Enough money to pay cash for your home.
Sure, I’m making a big assumption: I’m assuming the value of your house won’t rise much faster than inflation (or, at least, not much faster than the performance of my investments). Harvard professor Ed Glaeser, writing on the New York Times’s Economix blog, thinks this is an excellent assumption:
Houses are assets, too, but it’s a mistake to expect them to offer a regular rise in price. Houses pay hefty dividends to their owners in the form of living space–that’s the real return on housing investment–and the basic economics of housing doesn’t point to perpetual price growth.
Indeed, the Case-Shiller index, the most respected measure of housing prices, shows that they’ve barely outpaced inflation since 1890.
I’m also assuming that I have the discipline to keep saving the money. So far so good. Homebuying is often lauded as a “compulsory saving scheme.” I guess that’s true: it’s a scheme that compels you to invest a large proportion of your money in real estate. How is this better than simply increasing your 401(k) contribution?
Two kinds of renters
We’re not so different, Joe Homeowner and me. I rent property from a landlord. He rents money from a bank.
Every month, I write my landlord a check. The money gets spent on orthodontia for the landlord’s kids, and I will never see it again.
Every month, Joe writes his banker a check. The interest portion of the payment–for Joe, that’s well over half the payment, more than I spend on rent for a similar home–gets spent on polishing the banker’s yacht, and Joe will never see it again.
For this analogy, I’m indebted to David Crook of the Wall Street Journal, who wrote a landmark 2007 column on the topic:
Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house…most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.
Oh, but what about the mortgage interest deduction? It’s not for Joe. It’s for my landlord and Joe’s banker. Only half of homeowners take it–the rest are better off with the standard deduction–and the average tax savings for those who do is $2000, according to Roger Lowenstein of the New York Times. (The big winners in the mortgage interest deduction game are homeowners who make over $250,000 a year but not so much that they can afford to buy a home with cash.)
Trapped in the closet
Home ownership, it has long been said, leads to financial and community stability. The last three years should have taught everyone that “owning” (that is, financing) a home is no protection against financial upheaval.
As for community stability, be careful what you wish for. If you lose your job, the worst place to find yourself is trapped in an underwater house. I could move with two weeks notice and get my security deposit back.
This isn’t just anecdote. As Tim Harford reported in Slate:
English economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment…. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do.
As for high levels of homeownership creating community, I’m not sure how you would measure that. All I know is that my family lives in one of the safest and most desirable census tracts in Seattle; as of the 2000 census, it consisted of 85% renters.
Why buy?
Am I saying nobody should buy a house? Of course not. There are plenty of situations where you would want to do so:
•You live in a place where the total monthly cost of renting is similar to borrowing. This is true in a lot of non-housing-bubbly places, outside of big cities and off the coasts. In that case, sure, why not?
•You really want to be able to renovate. Yes, this requires ownership. But be careful: renovation costs are almost never recouped when a house is sold. Also, people talk about the ability to customize as if this should be important to everyone. I just don’t care to get my hands dirty.
•The kind of house you want in the neighborhood you want isn’t available for rent. (This is unlikely to be the case in the present market, however).
•There’s a specific house you want, and you can afford to buy it with a big down payment and a boring 15- or 30-year fixed-rate mortgage.
Just because a house isn’t a good investment, in most cases, doesn’t mean you shouldn’t buy one. A steak isn’t a good investment, either. The problem is, houses cost more than steaks, and a lot of people are convinced that everyone should own one, whether they can afford it or not. If you can’t afford to buy real estate, or just don’t want to, don’t. It’s okay. You’re still a grownup.
Me? There isn’t anything I want out of my financial, social, or family life that requires me to own real estate. So I rent.
"Stop throwing your money away on rent.” You see the phrase in Realtor junk mail and hear it from new homebuyers who are immersed in the nightmare of paperwork, points, and plastering.
The logic is simple: renting is just flushing money down the toilet; buying a house gives you a piece of something to call your own. You earn home equity and end up with something tangible to pass down to your heirs–or to sell or refinance when you retire.
There is a kernel of truth to all of this. But it’s mostly crap. I’ve been a renter all my adult life, and I have plenty of home equity. My home equity is called “cash,” and it’s the accumulated difference between what I pay in rent and what a comparable homeowner pays for their mortgage, maintenance, property taxes, and utilities. (Sure, I pay for all of those things indirectly, but that’s the point: they’re rolled into my rent, and they’re not rolled into your mortgage.)
Unlike a homeowner, I can choose to invest my equity in something other than real estate. I can spend my equity without taking out a line of credit. I might squander my equity, but I’ll never be “underwater” due to the vagaries of the market. And I accumulate home equity more quickly than the average homeowner.
Yes, thirty years from now, when your mortgage is paid off, you will own a home, free and clear. You know what I’ll own? Enough money to pay cash for your home.
Sure, I’m making a big assumption: I’m assuming the value of your house won’t rise much faster than inflation (or, at least, not much faster than the performance of my investments). Harvard professor Ed Glaeser, writing on the New York Times’s Economix blog, thinks this is an excellent assumption:
Houses are assets, too, but it’s a mistake to expect them to offer a regular rise in price. Houses pay hefty dividends to their owners in the form of living space–that’s the real return on housing investment–and the basic economics of housing doesn’t point to perpetual price growth.
Indeed, the Case-Shiller index, the most respected measure of housing prices, shows that they’ve barely outpaced inflation since 1890.
I’m also assuming that I have the discipline to keep saving the money. So far so good. Homebuying is often lauded as a “compulsory saving scheme.” I guess that’s true: it’s a scheme that compels you to invest a large proportion of your money in real estate. How is this better than simply increasing your 401(k) contribution?
Two kinds of renters
We’re not so different, Joe Homeowner and me. I rent property from a landlord. He rents money from a bank.
Every month, I write my landlord a check. The money gets spent on orthodontia for the landlord’s kids, and I will never see it again.
Every month, Joe writes his banker a check. The interest portion of the payment–for Joe, that’s well over half the payment, more than I spend on rent for a similar home–gets spent on polishing the banker’s yacht, and Joe will never see it again.
For this analogy, I’m indebted to David Crook of the Wall Street Journal, who wrote a landmark 2007 column on the topic:
Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house…most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.
Oh, but what about the mortgage interest deduction? It’s not for Joe. It’s for my landlord and Joe’s banker. Only half of homeowners take it–the rest are better off with the standard deduction–and the average tax savings for those who do is $2000, according to Roger Lowenstein of the New York Times. (The big winners in the mortgage interest deduction game are homeowners who make over $250,000 a year but not so much that they can afford to buy a home with cash.)
Trapped in the closet
Home ownership, it has long been said, leads to financial and community stability. The last three years should have taught everyone that “owning” (that is, financing) a home is no protection against financial upheaval.
As for community stability, be careful what you wish for. If you lose your job, the worst place to find yourself is trapped in an underwater house. I could move with two weeks notice and get my security deposit back.
This isn’t just anecdote. As Tim Harford reported in Slate:
English economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment…. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do.
As for high levels of homeownership creating community, I’m not sure how you would measure that. All I know is that my family lives in one of the safest and most desirable census tracts in Seattle; as of the 2000 census, it consisted of 85% renters.
Why buy?
Am I saying nobody should buy a house? Of course not. There are plenty of situations where you would want to do so:
•You live in a place where the total monthly cost of renting is similar to borrowing. This is true in a lot of non-housing-bubbly places, outside of big cities and off the coasts. In that case, sure, why not?
•You really want to be able to renovate. Yes, this requires ownership. But be careful: renovation costs are almost never recouped when a house is sold. Also, people talk about the ability to customize as if this should be important to everyone. I just don’t care to get my hands dirty.
•The kind of house you want in the neighborhood you want isn’t available for rent. (This is unlikely to be the case in the present market, however).
•There’s a specific house you want, and you can afford to buy it with a big down payment and a boring 15- or 30-year fixed-rate mortgage.
Just because a house isn’t a good investment, in most cases, doesn’t mean you shouldn’t buy one. A steak isn’t a good investment, either. The problem is, houses cost more than steaks, and a lot of people are convinced that everyone should own one, whether they can afford it or not. If you can’t afford to buy real estate, or just don’t want to, don’t. It’s okay. You’re still a grownup.
Me? There isn’t anything I want out of my financial, social, or family life that requires me to own real estate. So I rent.
Wednesday, April 7, 2010
Apartment Rents Decline as Vacancies Hit Record
April 6 (Bloomberg) -- U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand.
Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc. said in a report today. Asking rents fell 1.6 percent, according to the New York-based property research firm. Vacancies were unchanged at 8 percent, the highest level since 1980, when Reis began tracking the number, said Victor Calanog, director of research.
U.S. rental demand has slumped as employers cut 8.4 million jobs since the start of the recession in December 2007. The bigger drop in asking rents than effective rents in the first quarter signals that landlords are pricing their properties lower at the outset and minimizing concessions, Calanog said.
“Landlords are saying: ‘Even before we talk about the free month off, and even before we talk about the free gym, we want to lower the asking rents to get you through the door,’” he said in a telephone interview.
The U.S. unemployment rate was 9.7 percent for the third straight month in March, the Labor Department said April 2. The economy added 162,000 jobs in the month, a sign the labor market may be recovering.
Actual rents fell year over year to an average of $967 in the first quarter, Reis said. Asking rents dropped to $1,027.
Rent rates rose less than half a percent from the previous quarter, the first sequential growth since the three-month period when Lehman Brothers Holdings Inc. filed for bankruptcy.
The net change in occupied space, a measure of leasing known as absorption, grew by 20,424 units, the most for the first quarter since 2000, according to Calanog.
“The perception that labor markets are stabilizing is probably enough to tip the demand for apartments,” he said.
Effective rents fell the most, year over year, in Las Vegas; San Jose, California; Phoenix; Seattle; and San Francisco, according to Reis.
Rents paid by tenants climbed the most in Colorado Springs, Colorado; Washington, D.C.; San Antonio; and Dayton, Ohio.
This article appeared at http://www.bloomberg.com/.
Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc. said in a report today. Asking rents fell 1.6 percent, according to the New York-based property research firm. Vacancies were unchanged at 8 percent, the highest level since 1980, when Reis began tracking the number, said Victor Calanog, director of research.
U.S. rental demand has slumped as employers cut 8.4 million jobs since the start of the recession in December 2007. The bigger drop in asking rents than effective rents in the first quarter signals that landlords are pricing their properties lower at the outset and minimizing concessions, Calanog said.
“Landlords are saying: ‘Even before we talk about the free month off, and even before we talk about the free gym, we want to lower the asking rents to get you through the door,’” he said in a telephone interview.
The U.S. unemployment rate was 9.7 percent for the third straight month in March, the Labor Department said April 2. The economy added 162,000 jobs in the month, a sign the labor market may be recovering.
Actual rents fell year over year to an average of $967 in the first quarter, Reis said. Asking rents dropped to $1,027.
Rent rates rose less than half a percent from the previous quarter, the first sequential growth since the three-month period when Lehman Brothers Holdings Inc. filed for bankruptcy.
The net change in occupied space, a measure of leasing known as absorption, grew by 20,424 units, the most for the first quarter since 2000, according to Calanog.
“The perception that labor markets are stabilizing is probably enough to tip the demand for apartments,” he said.
Effective rents fell the most, year over year, in Las Vegas; San Jose, California; Phoenix; Seattle; and San Francisco, according to Reis.
Rents paid by tenants climbed the most in Colorado Springs, Colorado; Washington, D.C.; San Antonio; and Dayton, Ohio.
This article appeared at http://www.bloomberg.com/.
Friday, April 2, 2010
Don't Buy The Myths!
The National Multi-Housing Council recently published a study entitled: "Don't Buy The Myths - Renting Can be A Smart Investment." Here's the bullet points. Check out the full study at http://www.nmhc.org/.
Myth #1 I'll reduce my tax bill if I buy a home.
Myth #2 Paying rent is throwing away money. I could be building equity.
Myth #3 My mortgage payment will be less than my rent.
Myth #4 As an owner, my housing costs will remain constant. I won't have to worry about rent increases.
Myth #5 Investing in a house is a safe investment.
Myth #6 I can't afford not to buy with these low interest rates.
Myth #7 I know I'll make money on my house because I plan to stay there for at least five years.
Myth #8 Buying a house will force me to save and help build a nest egg for retirement.
Myth #9 I know buying is better for me because I used an on-line "Buy vs. Rent" calculator.
Now more than ever, renting makes sense!
Myth #1 I'll reduce my tax bill if I buy a home.
Myth #2 Paying rent is throwing away money. I could be building equity.
Myth #3 My mortgage payment will be less than my rent.
Myth #4 As an owner, my housing costs will remain constant. I won't have to worry about rent increases.
Myth #5 Investing in a house is a safe investment.
Myth #6 I can't afford not to buy with these low interest rates.
Myth #7 I know I'll make money on my house because I plan to stay there for at least five years.
Myth #8 Buying a house will force me to save and help build a nest egg for retirement.
Myth #9 I know buying is better for me because I used an on-line "Buy vs. Rent" calculator.
Now more than ever, renting makes sense!
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