Buy versus rent.
In a previous post we discussed the financial issues involved and described a free and powerful buy house or rent calculator that handles the heavy number-crunching for you. The financial analysis is important, but not critical. People do not make their housing decisions based on the numbers alone anymore than they make car-buying decisions, college selections, or vacation plans this way. In the end, regardless of what the numbers say, subjective factors likely will carry more weight and push the decision one way or the other.
Here we consider some of the non-financial considerations involved in the buy versus rent housing decision.
Assess Your Home Ownership Value System
The personal satisfaction and pride of ownership that come from being “king of your own castle”, fixing things yourself and having an attractive, well-kept home are powerful values held by most Americans. Home Depot (“You can do it. We can help.”) and others have built corporate empires catering to these values. Make an assessment early-on of just how important the intangible values of home ownership are to you.
If you decide that owning your own home is the only way you can live blissfully, then the buy versus rent question is quickly decided.
The Buy versus Rent Time Factor
The key non-financial consideration in my situation was the amount of time spent every month on home maintenance. Owning an older home for twenty-plus years, I became increasingly resentful of household chores that took valuable hours away from more enjoyable pursuits. Conservatively, I estimated I spent an average of 30 hours per month (an hour per day) painting, mowing, weeding, fixing and doing various other household maintenance tasks – tasks not needed in a rental situation. An equal or greater number of hours of my spouse’s time were also being spent on similar chores.
Because we owned an older home, it was not an uncommon for us to have to spend the better part of a entire Saturday replacing a faucet or doing some similar job.
By my simple calculation, the number of free hours I had to do the things I enjoyed increased by 15% by no longer being a homeowner:
| Total Hours in a Month (30 x 24) | 720 |
| LESS: Sleep Time (30 x 8) | 240 |
| LESS: Work/Commute Time (22 x 10) | 220 |
| LESS: Daily Meal Times (30 x 2) | 60 |
| EQUALS: Net Available Time | 200 |
| Time Spent on Homeownership Tasks (1 x 30) | 30 |
| Homeownership Time as a Percent of Net Available Time (30 / 200) | 15% |
Of course this type of time analysis will vary widely by individual. The American Use Time Survey put out by the Bureau of Labor Statistics (BLS) provides useful data for average Americans that highlights how little time there is in a day to spend doing the things we enjoy most:
Leisure time is scarce for most Americans. We decided that homeownership was costing too much time.
Once upon a time, as young homeowners, we truly enjoyed doing the work involved with owning our home. But now, in our 50′s with a start-up business to worry about and travel, reading and other hobbies becoming increasingly important in our lives, we decided that home ownership had become a burden not a blessing.
The Availability Factor
Desiring to exit from home ownership and finding a suitable alternative place to live are not always pieces that fit together smoothly. There are many issues and obstacles that need to be carefully considered and overcome. For example:
- Are you willing and/or able to live in an apartment setting?
- Is there a suitable selection of single-family or condo rentals in your area, if that is your preference?
- Are you looking to relocate or will you stay in the same area?
- Do you plan to sell-off belongings or will a storage unit be needed?
- Schools, parks, public safety services – all the location factors considered when buying a home – need to be considered when renting also.
Do not assume that there are plenty of suitably priced rentals to choose from any time of the year. Rental markets are specific to each locale and need to be researched carefully in advance. If you are looking to rent (instead of own) a single-family home, keep in mind that the owner you will rent from has the same mortgage, tax, and upkeep costs that you are trying to get away from. You may be unpleasantly surprised at how high rent levels are for homes that are comparable to the one you are trying to leave.
Apartment complexes are able spread many of their costs over more tenants in a denser setting and thereby offer somewhat lower rents. But the lifestyle change from single-family homeowner to apartment dweller is huge. Privacy, noise from other tenants, and limited ability to customize your dwelling the way you like are some of things to consider.
The Saleability Factor
Selling a home in today’s market is no easy task.
Millions of American homeowners are underwater – owing more on their mortgages than their homes are worth. Not only are these people unable to sell their own homes, their absence from the real estate market lessens the pool of home buyers.
Millions more have been forced out of homeownership by foreclosure and now find themselves in the ranks of renters – competing with you for suitable rental housing.
Even if you are able to find someone willing to buy your home at an acceptable price, there is a good chance that they won’t qualify for financing. In the aftermath of the housing crisis, banks have tightened credit standards and are requiring much large down payments – effectively locking out many willing home buyers.
Depending on your locale housing market, selling your home may not be a feasible alternative.
The buy versus rent housing decision is difficult even in a good economy. In today’s market, it is an especially stressful decision to make. Research your options carefully and have open discussion with your spouse to make sure you are on the same page.
Thank you to Prairie EcoThrifter for including our post Buy Versus Rent: Non-Financial Considerations are Key in the July 4, 2011 Carnival of Personal Finance #316: Family Edition.
Filed under: Personal Finance
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My husband and I thinking about selling our house and moving into an apartment. One thing not mentioned in your article are the worries of owning a home. Both of our jobs have been scaled back requiring us to use some of our savings just to keep even. We worry a lot about having to replace some big expensive item like the roof or furnace and what that will do to our finances. We’ve been thinking for a while about trying to sell our home and moving into an apartment for a few years until.