Generation renter

Ginger Dean | Improvement Center Columnist | April 9, 2014

"Generation Renter" is here, and the housing market is suffering because of it. Though much of this transition from home buyer to home renter can be explained by the market crash and the toll it took on personal finances, particularly for young adults who may otherwise be looking for their first homes, money may not tell the whole story here. For those without the cash on hand, renting is, of course, the only option. But even people with money to spend are either consciously choosing not to put it toward a home or have been driven out of the market by the very renting boom they're trying to escape.

The cold, hard numbers

CNBC reported that in 90 percent of counties looked at in a study by RealtyTrac, it was cheaper to buy than to rent - so what gives? Though it may look like buying is the affordable option nearly nation-wide, RealtyTrac's numbers were based on the assumption that the buyer could come up with a 20 percent down payment. For many people, that's still not financially feasible. So even if a mortgage looks better to them than monthly rent, they can't buy their way in.

Homeowners capitalize on renting

For those who have the money to buy, the story looks a little more interesting. Let's say a 20-something wants to own a home and has a down payment ready. All that's left to do is find a house. And that's where the process breaks down.

The huge number of people in the rental market have convinced seasoned home buyers that when they move, they should rent their place out instead of sell it. Bloomberg reported that a full thirty-nine percent of home owners wanted to upgrade their current home plan so they could rent it out when they decide to leave. With all those homes taken off the buyer's market, even those who no longer want to rent may be stuck with it for a long while as they wait for a place to become available.

Not interested in buying a home

Then there are the people who are simply uninterested in buying. Some have been scared off by what once seemed like a safe investment, and others have grown to love the amenities that come with renting. Nicole, an attorney from Washington DC, says that she prefers rentals for their flexibility. "It gives me the freedom ... to move as I please," she says.

When asked about any financial benefits of owning a home, she said, "It depends on how you look at the numbers. You've got to spend money to 'save' money by way of a tax deduction." She notes the sizable down payment and closing fees as substantial barriers to those savings. On top of that is an economy that still feels risky: "Contracts are lost, businesses go under and people lose jobs. Renting is a safe bet, and at this stage of my life, buying a home seems like a financial headache."

For Nicole and others who think like her, there are significant benefits to renting:

Leaving the American Dream behind. Renting allows people to forge their own path to the American Dream without the need to get tied up in the politics and uncertainty around being burdened with a mortgage for 30 years. Tax policies are set to change given the ailing economy, and with that level of uncertainty, the American Dream that once was may now be no more than just that - a dream.

Lose the albatross mortgage. Renting can be a short term or long term agreement. If you are relocating to a new city, you'll not only be able to give up your old place without the hassle of selling, but can then rent short term to see if you actually like the city and hunt around for the perfect neighborhood. Buying a home is a much longer commitment.

Your budget your way. Many rentals include utilities and other amenities in check you pay each month. It's a lot easier to budget when you only have to pay the one bill instead of making multiple monthly payments such as a mortgage payment, utilities, mortgage insurance, and property taxes.

The crash of 2008 has forced many to re-evaluate their perception of the "need" to own a home in an economy that perhaps no longer supports such a goal. Instead, all finances aside, many are embracing the positive aspects of renting a place. Though a home was once a sign of being settled - and for many young adults, perhaps the ultimate marker of being a grown-up - people are finding new ways to enjoy that same old "home sweet home" feeling without ever signing a mortgage loan.

About the Author

Ginger is the founder of Girls Just Wanna Have Funds, the #1 destination for women who want to take control and dominate their finances.