July 16, 2007

For Now, I Think I'll Stick with Renting

AS SOMEONE WHO RENTS his living accommodations in a local real-estate market that can still be described as "a bit warm," I've always found it fascinating how people respond to my decision to continue renting an apartment. Their reactions run the gamut from amazement to befuddlement, and in a few cases, even pity. I haven't yet figured out how to respond to these reactions without being smart, so I generally try to be polite about things and offer my congratulations on the homeowners' own success.

Of course, I have my own rationale for renting. Perhaps the most notable factor is that I'm single and have no children and as such, value the freedom that renting on a month-to-month basis provides. That's not the only reason why I rent, though. Renting, as The Economist pointed out some time ago, is the financial equivalent of "shorting" the housing market, and while I certainly missed the boat earlier this decade as of late this strategy has worked in my favor.

Plus, I have the best landlord ever. Of course, it helps that I'm a quiet tenant who always pays the rent on time and doesn't engage in activity that would endanger my security deposit. Still, the long and short of it is that my landlord has raised my rent a total of 1.3 pc over the past six years, while inflation over that six year period has run roughly 17 pc. Thus, my rent is roughly 16 pc cheaper now than it was when I first signed on for the apartment. This is even better when you consider that Casa Ben is a swell two-bedroom apartment in a great part of town, and I get both heat and hot water thrown in. Oh, and an off-street parking space. This example shows that I rule.

Also, the money that I would have been spending on homeowner's insurance and property tax and what not if I had bought a place has gone straight into savings. In part, this is why the pity response amazes me. Sure, I may not have bought property, but I DID manage to take advantage of the stock-market recession of earlier this decade, and in the past 5 years the S&P 500 has risen 68.5 pc. It's not like I've been sitting on the sidelines or something.

Of course, part of the reason I missed the boat back when I moved here was that I was 25 years old, had just moved cross-country and started a new job. As a result, I was in no position to buy anything. Now that I am 31, I have to admit the homeowner bug is starting to bite, even if it's on the frequency of an occasional mosquito as opposed to an army of fire ants crawling over my legs.

So recently I've found myself checking property Web sites and idly scanning real-estate listings, even though I'm single and don't even use all the space I'm renting right now. I do these searches for two key reasons. First, if I scan them long enough, I get my vicarious home-ownership thrills through doing that, and the home-ownership bug eventually goes away. That goes especially if I think about all the Not Fun Chores I'd have to do as a homeowner, like mowing the lawn and paying for expensive, unexpected repairs. Second, I might come across a reasonably priced residence, particularly if it's in foreclosure and there's a chance I could lowball the bank.

So you can imagine that when I went on-line just now, I was pleased to see that a house was on offer here in Manchester for just $99,000. Wow, I thought -- $99,000! Plus, the listing in question mentioned the seller was motivated (always good) and that the home in question was located "close to downtown." That's generally a good thing here, even if back home the phrase "close to downtown" is parlance for, as Egon Spengler put it, "the neighborhood looks like a demilitarized zone." All in all, according to the listing, the home would be a "great opportunity" for an investor or builder.

Of course, there was one teensy catch to the whole deal:

I've heard of a fire sale, but this is ridiculous.

Now, I have to give credit to whomever the listing agent was for this deal, as the whole "major structure fire" bit WAS listed front and center in the ad AND he put up photos of the major structure fire in question. That takes guts. Plus -- although the temptation must have been great -- there were no lines about the home being a "fixer-upper" "in need of TLC" or what have you.

Still, the depressing thing about the ad was that, when you got down to brass tacks, the seller was essentially asking $99,000 for the lot -- and perhaps more, depending on if the buyer had to actually demolish the home himself or sink untold amounts of cash into the money pit to rehabilitate the place. Compare this to my home town back in Michigan, where the median home price is about $90,000, and the situation can be summed up in three words: depressing, depressing, depressing.

So, for the moment, I think I'm going to stick with renting -- unless I can find a nice repossesed condo that somehow manages to fit my needs. Sellers take note, though -- those needs include minor issues such as "all four walls" and "being fit for human habitation."

Posted by Benjamin Kepple at July 16, 2007 12:36 AM | TrackBack
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