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Homeownership dream fading?

By Judy Martel · Bankrate.com
Monday, October 10, 2011
Posted: 4 pm ET

Mortgage rates hit a new record low in last week's Bankrate survey, but homeowners still aren't biting, as proven by a drop in applications for new mortgages and refinance loans.

Homebuyers are holding back, for sure, as home prices keep falling and lenders continue their reluctance to extend a mortgage to anyone without stellar credit and a 20-percent down payment. According to CNBC, experts expect home prices to drop further by the end of the year, possibly by 6 percent to 7 percent.

But there's a change in attitude, particularly among younger buyers, that may be stalling the housing market. The Wall Street Journal reported that the latest Census figures show a decline in homeownership not seen since the Great Depression. Battered by a housing crisis that doesn't seem to have an end in sight, more people are viewing the American dream of homeownership with a jaded eye. Far from being the solid investment in the future, reports of foreclosure, inability to refinance to more favorable terms and the financial fallout that brought to light the whole sordid banking mess have all made renting a home seem like the better, safer solution for many Americans.

The latest Census figures show that in the decade from 2000 and 2010, the homeownership rate fell by 1.1 percent to 65 percent. Every region in the country declined, with major cities like New York, (69 percent renters) Chicago (55 percent renters) and Los Angeles (61.8 percent renters), leading the way. The regions with the highest homeownership rates were Keweenaw County, Mich. (89.8 percent) and Sumter County, Fla. (89.7 percent). Among age groups, the 35-44-year-old group saw a drop of nearly 4 percent in homeownership, from 66.2 percent to 62.3 percent.

Homeownership rates are still the second-highest they've been since the Census survey began collecting data in 1890, but experts expect the housing slump to result in further declines.

If you were in a financial position to buy a home, would you consider renting instead?

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5 Comments
Jersey Dude
November 17, 2011 at 4:38 pm

Buying is always better. Renters can not refinance and fold in other debts, such as items purchased on credit cards. Renters can't take r/e tax credits or mortgage interest off of their taxes. Renters forget that a mortgage payment goes to one day owning the property. which will result on only tax payments. Renters can't convert their property into an income producing property. IMHO, renters are making their landlord rich while throwing away their money, especially now when you can get a mortgage payment including taxes, lower than actual rent payments.
If you buy a property greater than 5 acres, at least in NJ - you can get a reduced farm assessment lowering property taxes even more...

Shane
October 11, 2011 at 10:24 am

I'm 30 years old. My wife and I are buying our first house. Reasons? Prices have dropped, interest rates are low, and mainly for long term savings & wealth.

Also, we are ready for our home to truly be ours. To make the subtle changes we would like to make, even to fix it the way we want to fix it if something breaks.

Wolverine
October 11, 2011 at 9:38 am

Why buy, when your mortgage payment and your property taxes are more than your rent? Why buy when any costs to the infrastructure are solely yours?

I hate the argument of buying solely because the mortgage is less than the rent. Sure, it is. But in some places, the property taxes alone make renting a WHOLE lot more attractive. And then utility costs and costs of repairs amongst other things...

And as the economy is going, houses won't be appreciating for quite a while.

Sorry, not "buying" it.

Tom
October 11, 2011 at 9:19 am

Why rent when your interest portion of your mortgage payment is less than your rent? At that point you're financially better off buying. That is, if you plan to stay in the area for a long period of time, otherwise you'd have to make sure your home appreciates enough in the short term.