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Why the rich are renting

By Judy Martel · Bankrate.com
Tuesday, July 3, 2012
Posted: 7 pm ET

Sales of luxury homes are rebounding, but a growing number of the ultra-rich are still renting, even if they can afford to buy. Real estate brokers say it's another indication that the housing market has changed in ways they're still trying to grasp.

Some of the reasons for renting among the rich are typical to the broader market: Potential buyers who purchased a home during the boom have been rendered gun-shy by the housing bust. And with mortgage rates predicted to remain near historic lows for the next year, there's no sense of urgency to buy immediately, giving buyers time to be choosy while home prices settle.

But there are additional reasons for renting that are specific to the luxury market. High-end rental properties have become more plentiful, as investors in luxury properties choose to rent them out while waiting for prices to rebound. In New York City, agents are reporting that the rich who own property elsewhere are opting for the low-maintenance lifestyle of renting in the city.

CNBC reports that mansions in tony areas like Miami, Beverly Hills and Manhattan are renting for more than $100,000 a month. Of course, for that price, you get square-footage, primo views of the city skyline or the yacht docks and plenty of amenities like tennis courts and even private discos.

Since the housing bust, have you become more committed to renting or do you still hope to buy a home?

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33 Comments
CC
July 17, 2012 at 10:43 pm

The "freedom" of renting is appealing in the short term. In some situations it makes sense.
However, one major benefit of owning is having a fixed cost. Yes, there are repairs, unexpected problems with owning. But as rent prices are driven up as demand for rental property grows, food and utility costs continue to rise, etc., I would rather have a fixed-rate mortgage. I would prefer to know what my housing will cost next month, next year, -the next two or three decades.
Lenders were completely unethical to sell some products they sold, but many buyers should never have signed notes for balloon loans, interest-only loans, etc.

clarence
July 17, 2012 at 2:18 pm

Rent v own. Used to be that you bought all of the real estate you could afford. This and the CRA bill created a phoney run up in housing prices. When the housing market became saturated with owners that bought more than they could afford,no new buyers appeared . One of the reasons was that record numbers of homeowners were living in housing that they could not reasonably afford. Bring enough of this and loss of jobs are interrelated. We had a big boom in housing. then the domino effect. WE couldn t make the payment . I used to tell my loan customers who where overextending themselves that I wanted them to have enough LEFT OVER for beer and pizza. When you calculate the benefit of deducting taxes and interest, even without appreciation owning is better. NOW FOR THE ADVICE BUY BUY BUY WITHIN YOURSELVEs SO YOU AND YOUR FAMILY CAN STILL HAVE BEER AND PIZZA.

Jo Hunts
July 14, 2012 at 4:06 pm

I followed the American dream that my parents taught me back in the '50's. My ex and I bought a home when we learned we were expecting out first child. He left four years later and then I had two children. I never remarried because raising children and keeping a home, along with my full time job was filling up my time. The kids graduated college, I went back to school to become a nurse and remortgaged my house to do that. Now, almost 60 years old, laid off for over a year from a Union Hospital, I just sold my home and only walked away with $5,200.00. Over those 36 years all the County regulations changed and I had to dump $39,000.00 into the house for a new well and "designer" Septic System, as well as giving the Township a $10,000 check for escrow because the system is so high tech. My house was 60 years old but I put money into it every year. At least what Uncle Sam gave back to me every spring. I am renting, but still doing my own little repairs because it's easier than waiting for my handyman to come by. I love it. No gas and oil filter for the John Deere tracker just to keep the grass cut for six months and no more oil bills of $700.00 for oil to heat the house, even with the new windows. Yea the rates are low but the long term price is very high!!

Beth
July 13, 2012 at 11:02 pm

I posted early on that buying a home was - for me - (a single woman in my late 20's) the right decision, and I still believe this.
It seems that people are hesitant to take responsibility for the decisions that they have made, and how these decisions will impact the future. Now, I agree that bad things happen - unemployement, medical issues, etc... However, when buying my home, these were all things that I took into consideration. When I went to the bank to get approved for my mortgage they approved me for $250,000 based on my debt, credit, job history, etc... In reality, there is NO WAY that I could have EVER afforded a home that cost $250,000.
It would have taken my entire monthly paycheck and then some to cover the mortgage and related expenses. When I mentioned this - she suggested I get a roommate (this is what I was trying to get away from. LOL) So, I made the broker write the mortgage pre-approval letter for $125,000, and she was genuinely surprised that I was not interested in buying the most expensive house I could afford.
Maybe this is where so many homeowners went wrong - they bought homes that were WAY out of their price range, with a "the lender says its OK, so it must be" type of attitude. This makes it easy to blame the banks for giving people home loans they could never afford, but where is the COMMON SENSE?
Why would I ever put myself in a position to be or become "house-poor" and becoming a homeowner has not made me such.

Lastly - to Bea who had her Homeowner's Association (HOA) twice deny the sale of her home... Do you owe your HOA any money? This can legally prevent your house from selling, or delay it.

Red
July 13, 2012 at 8:44 pm

I can't help but laugh when I read some of the comments here. Comments like, "I'm not paying for anything but rent" and that the landlord is responsible for repairs, taxes, etc...

For those writing these comments and those who think this way, HELLOOOO just who do you think is paying for repairs, taxes, and anything else associated with your renting a property? Your landlord? The government? The rent fairy? Guess what - YOU are paying every dime and then some (called profit). Hey, if you don't want to buy again that's your affair, I'm a landlord and I love your money.

Let me help you get a clue. Unless you had some tragic event happen in your life, or lost a job and were unable to find employment, or something else along these lines, the reason you didn't succeed in home ownership is not because of mortgage companies, taxes, the government, your neighbors, your association, home repairs, bills associated with home ownership like gas, electric, etc... and so on... the real reason you did not succeed in home ownership is because of your inability to manage your money correctly and possibly (depending on circumstances) some degree of laziness.

Now you just make one lump payment (called rent) to cover all those same expenses and the landlord makes a profit for keeping an eye on it all for you. You're still paying for all of it, you just don't own anything in the end. It's a beautiful thing - for the landlord.

You go from being a queen bee (or maybe you're a "king bee") in your own house to being a worker bee in someone else's. Not everyone is cut out to be the queen or king. We need more worker bees than kings and queens anyway.

I say, by all means, go on renting, but remember, when you can't make the rent you'll be out a lot faster than a forclosure on a house and there'll be someone in right behind you that can make the rent.

A good landlord will never lose - a good landlord meaning one in a place you'd actually want to live. Good landlords have nice properties in nice areas. Good landlords take care of their properties and plan for inevitable repairs. Good landlords know how to manage their money, tenants, properties and employees.

In the end, the landlord will sell or just live off the profits and retire comfortably, probably help his or her grandchildren with college expenses, have money to travel in style, while the renter will move to a smaller and cheaper rental that he or she can afford and live on a fixed income. Even then, you'll still be helping someone else turn a profit with that rental. It's a beautiful thing - for the landlord. Thank you for your money, I mean, business.

steve – o
July 13, 2012 at 8:43 pm

You want a job with guaranteed wage increases and guaranteed benefits get a union job! Most union members volunteer to join. For the poor souls who were "forced" to join their union, I have a question. Did you know you were going to be forced to join the union before you took the job? Probably! A majority of people who cry about being in a union never understood the true meaning of a union and probably didn't have something go there way.

ross
July 13, 2012 at 7:01 pm

I just purchased a home and do not regret it. Great home, Great price.

Jimi John
July 13, 2012 at 6:22 pm

Employee rights are not under attack - unless you're talking about the initiatives of the unions to force people into unions.

Everyone who has a job is worker. Not just people in unions.

Collective bargaining for PUBLIC unions may be, in some states and in small ways being restricted. Not private unions. There shouldn't be ANY PUBLIC labor unions however since their collective bargaining forces the taxpayer to forcibly pay more for public wages whether or not the public wants to. These decisions are made politically and therefore are filled with corruption and violate the inherent rights of the public not to participate in the corruption. The taxpayers should be paying AS LITTLE AS POSSIBLE - not as much as possible for services.

Should a private school teacher making $40K / year who does an empirically better job teaching than a public teacher pay taxes toward a public teacher's salary who makes $85K / year because the public teacher is in a union that gets salary kickbacks from a Democrat governor in return for votes?

It is unjust. It is immoral.

If someone will do the work for $40K or whatever - then that is what the job is worth and the public should pay no more for it.

Jeff Wilson
July 13, 2012 at 5:02 pm

Unions aren't the problem. capitalism will set the wage prices. Employee rights is whats under attack. Our congress passes all bills thru collective bargaining. our officials are selected Thur collective bargaining. ( the vote ) and any employee should have the same right!!! otherwise we are not free to stand together and therefore not a free people.

EL J
July 13, 2012 at 4:43 pm

I'm with Jeanna! I don't want to own anything but my truck (SUV) and I do, it is PAID FOR!!! All I need is to be able to LEAVE whenever I want! And I can. I will rent rather than own another home. Builders and buyers can KEEP 'em. Been there, done that...tryin' ta quit! Oh wait, I did! Don't need those headaches anymore. I can sleep, live in, whatever in my truck. It's all I need.