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Centerpiece: Renting vs. Owning – Potential Benefits on Both Sides for Working Families

For the average working American family, is it better to rent or own a home? This has been a long-standing question, but in the last several years it seems to have become more prominent. There has been a substantial drop in home prices throughout many parts of the country, potentially allowing low- and moderate-income families better access to homeownership. Yet at the same time, the economic crisis has caused rampant unemployment and financial challenges for millions of households, pushing many homeowners into foreclosure and into the rental market. As pointed out in a recent Center for Housing Policy report, the number of renter households increased by over 2 million between 2004 and 2007, coinciding with a rising number of mortgage delinquencies.

So what is better for the average working family? Many believe that the recent increase in renting households is a positive trend, particularly for low- and moderate-income households. Given the current volatile state of the homeownership market and prevalence of underwater homeowners, they cite that renting may be a safer bet for working families.

One strong opinion in favor of renting came, surprisingly, from wealthy investor and business owner James Altucher in his recent blog post Why I am Never Going to Own a Home Again. Although Altucher states a number of personal reasons for no longer owning, several of his points may hit home for many working families. This includes the generally lower costs of renting (no down payments, maintenance costs or property taxes) and greater mobility (month-to-month or year-to-year leases vs. 30-year mortgages and the burden of finding a buyer).

But homeownership can also provide many benefits to working families when they buy a home at a truly affordable price using a long-term, fixed-rate mortgage with stable, predictable payments. And according to many, those benefits do not include homeownership being an excellent investment. The Wall Street Journal pointed out that U.S. home prices showed an annualized increase of only 2.2% over inflation from historic lows in 1994 to 2009. For working families, there are likely more important benefits than these modest gains in value. These include: the control they have over their living space; the predictability and stability of costs (landlords can always raise rents); and the forced savings and build-up of equity these families can experience by paying down the principle on an affordable, fixed-rate mortgage.

In essence, there is no single answer for working households in the U.S. when it comes to renting versus owning. Each family has to consider its current and expected future living situation, determine how mobile they may have to be in coming years, and balance the respective costs of renting versus owning in different areas of the country where better economic opportunities may be found.

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