It isn’t your imagination. Rents are soaring. Since 1979, the average rent burden on young workers has risen from 23% to 30% of income, Zillow says. The problem is that construction collapsed during the housing bust and recession, but the population kept growing, which has led to a nationwide housing shortage. No wonder people are considering switching from renting to buying their property, especially if they are finding it difficult to keep up with monthly payments. A big commitment to many people is buying a home. To do this, you need to make sure you are financially stable. For some, renting may seem like a waste of money. There is a lot to think about if you are planning on making this transition, which is why sites like Personal Finance Opinions would be good to look into for more financial advice.
There’s no easy fix. San Francisco has rent control, but also has the nation’s highest rents and worst rent increases. The only cure for a housing shortage is to build more units. Everything else merely chips away at the margins of the problem. And it will take time, at least 2 – 3 years, before growing supply slows rent increases. Meanwhile, renters and would-be renters are forced to live with high rents and rent increases outpacing wage growth. This is such a big problem that some people are trying to move to homes for rent in ellicott city md or other areas with more affordable rents! (Click here for story.)
There are, of course, other facets to the housing story. For example, preference has shifted among young people from owning to renting, which affects what gets built. Youngsters would now prefer to live in apartments offered by companies like 19 Dutch (find here), rather than buying their own home. At the same time, cities like Seattle are adopting policies that aim for higher densities, which also favors apartment development over single-family homes. There’s also profiteering going on by large institutional investors who scooped up distressed homes at bargain prices and turned them into rentals. Hedge funds and asset managers like Blackstone who called housing trends correctly are making handsome profits at the expense of those who, either voluntarily or involuntarily, have thrown themselves on the mercy of landlords. Complaining about it is futile; this is a capitalist society, and the money changers in the temple won’t be denied their profits. Praying for greater economic justice doesn’t seem to help, either.
As for me, I’m sitting pretty because I prepared for housing armageddon years ago. We’ve paid off our house. We didn’t achieve this overnight; it took decades of working and sacrificing. But it was worth it, to get control over our housing expense. We can live in our Seattle-area suburban 4-bedroom home for about $800 a month — the cost of taxes, utilities, and insurance — and only have to worry about relatively modest annual increases in these expenses. We can truck along oblivious to the housing carnage around us.
The sheer cost of housing is only the beginning of the problem. When there’s not enough housing to go around, just being able to afford what there is, isn’t enough. Renter or buyer, you have to play in a game of musical chairs; and if you’re too slow or not adept enough, you’ll be left standing with nowhere to go.
Housing is the largest expense most people have. It’s a challenge from the time you leave the parental nest until your final resting place. I have lived in college dormitories, army barracks, cheap rooming houses, not so cheap apartments, and have owned three houses. Given this variegated experience, I have strong opinions about housing options. You can disagree with my opinions, of course; your experiences may be different.
1. The problem with roommates is the roommates. My first roommate experience was in a college dorm. He had a lot of clothes, so his closet wasn’t big enough; he solved that by taking over my closet too. He spent his evenings dating, and stayed up all night to study; because I couldn’t sleep with the lights on, within a week I was falling asleep in my classes, and my health was being destroyed. And that was my best roommate experience; the subsequent ones went downhill from there.
2. I really don’t need to say much about army barracks. They have all the disadvantages of roommates, except you have more of them, with the added inconvenience of a drill sergeant waking you up for PT at 4:30 a.m. At least you don’t have to pay for this housing, and you may even acquire a certain nostalgic yearning for it after it’s replaced by a foxhole with people shooting at you. I’m too old for military duty now, so I won’t ever have to put up with it again, no matter how many stupid wars our political leaders drag us into.
3. The main differences between a dormitory and a rooming house are (a) the “house rules” are replaced by anarchy, (b) the “house mother” is replaced by a greedy and abusive landlord, and (c) there’s no parking.
4. The big advantage of an apartment over a dormitory or rooming house is you don’t have roommates anymore. You pay a lot for that privilege, but it’s worth it, although it’ll feel like you’re backsliding when a girlfriend moves in and begins running your life for you.
5. The big advantage of owning a house over renting an apartment is you don’t have a greedy landlord anymore. By this time, he’s probably been replaced by a spouse. I won’t go into that; it is what it is. Buying a house is a hassle, so choose well and keep in mind there’s a reason why everyone buys 4-bedroom houses, so you won’t have to move again. Finding the perfect home is difficult, but with the help of companies like Space station and others, this task can be made much easier with a range of homes available. At first, your perfect home might seem far more expensive than if you were to rent, but that’s an illusion; over time, renting is always the more expensive option. Therefore, you might as well start the journey towards owning your dream house or apartment today.
6. There are right and wrong ways to own a house. To do this right, think of it as a place to live, not an investment or piggybank. Don’t borrow against your equity, because that means the house will never be paid off and you’ll be saddled with ever-increasing interest payments. Just make the payments (and extra payments if you can), because the idea is to become master of your fate and beholden to no one. Let others struggle with the housing market, rent or mortgage payments, and deal with lenders or landlords. When you have to contend with neither, you’ll be free.
Photos: Apartment or house? That’s up to you, but I have a clear preference.