Renting vs. Buying a House–The Intangible Reasons

Renting vs. Buying a House–The Intangible Reasons

A couple of days ago I was listening to a great hour of radio from Tom Ashbrook’s On Point show on NPR. The subject was the hot housing market and the potential affordability of houses in a variety of housing markets across the country. The basic gist of the program: home affordability is getting harder and harder. There are a number of reasons as to why it is getting harder to buy a home. Part of that reason is certainly the lack of inventory. Home builders are not just building beginner starter homes, but it is apparent that it is difficult to buy a house at all levels of the market.

For us this is great. We have greater home equity, our net worth is increased, and if we need it we can tap it for some kind of extra expenses. We might even be able to use it as an emergency fund (another post for another time).

As I was listening to this program there were a couple of callers that struck me with their stories. In particular, one person noted that it was extremely difficult for them to buy a home because not only is the market they are in pricing them out, but they have all kinds of student loan debt, which precludes them from buying a house.

They aren’t alone. Huge amounts of student loan debt is pushing home ownership for millennials into their 30s. Mrs. ROB and I didn’t own our first home until we were 40.

This post isn’t necessarily to talk about the financial math behind renting or buying a house. There are plenty of articles on that. I want to talk more about the intangible reasons for why you might buy a house or not.

Should You Buy a House or Rent?

There are many reasons to buy a house that are financial in nature, just as there are many reasons to rent, particularly if you live in a high cost of living area, but what might be other reasons that keep you from buying.

First, you might want mobility. More and more Americans are turning to the gig economy for their primary form of income or for extra income. Speaking of Tom Ashbrook’s On Point yesterday he had a program on how more and more millennials are engaging in side hustles to make more money. There is freedom in not being job locked or location locked. When you buy a home in order to make it financially viable, typically, you need to live in that house for 5-7 years before you recoup your costs. 5-7 years in this job market can be a very long-time. So if you are thinking about buying a house think about your personal situation and whether or not you want to be mobile.

Second, the opposite side of that coin is that you might want to put down roots. I am of the firm belief that home is where you hang your hat. At the same time, the older I get the more I want to have “roots.” I want to stay in a place for a while. I want to get to know my neighbors. I want to visit a local pub and have people know my name. There is comfort in that. As much as I love traveling I don’t know if I want to be a constant nomad. I like a sense of normalcy. Can you obtain that by living in an apartment or rental home? Certainly you can. However, most people do not live in the same apartment or house that they rent for more than a couple of years. You are fairly transient. A house, at some level, provides some stability.

Third, you might have other goals financial or otherwise. One of the things that kept us from buying a house near our workplace was the high cost of homes. We were priced out of the market because, not necessarily by the price of the home, but because of high student loan debt. Paying off student loans or other debts can be of a greater priority or even saving for retirement. If someone were to ask me for advice, for example, if they should buy a house or save for retirement I would advise them to rent and save for retirement. Now I know it shouldn’t be an either/or choice, but if it came down to it I would rather have the money in hand and not locked up in a house than something else. Ideally you would do both, but sometimes our financial plans do not include buying a home.

Finally, the “perfect” idea of a house. The unfortunate thing is that in this housing market many people are going above their budget and paying tens of thousands, even six figures, above the initial asking price for a house. The problem with that idea is that people think they have found the “perfect” house. There is no such thing as a perfect house. It doesn’t exist. Our house certainly isn’t perfect and I don’t think I would want to live in this house for the rest of my life. However, the peer pressure of buying a house can drive people to do “stupid” things. Frankly, going above your budget to buy that perfect house, in the perfect school district, is just plain stupid because you put yourself at greater financial risk. You never know what could happen. There is no such thing as a perfect house and I wish we would stop acting like there was.

What Should You Do When Deciding About a House?

If you are buying a house, particularly in one of those hot housing markets what should you do?

  1. I think everyone should do a really deep dive on what they want in a house. Is it you want a house for a tax deduction? Put down roots? School district? I mean you can get some of that by  renting. And it might be cheaper. Why do you really want to own a house? What are your intangible reasons? I think wanting to put down roots by buying a house is a legitimate reason beyond finances.
  2. Don’t go over your budget. There is NO such thing as a perfect house. If you can’t get your house in your budget then maybe you have to consider a few things. Maybe you need to move to a different area? Save more money? Or just rent? Mrs. ROB and I made the decision that buying a house was right for us, but we made a conscious decision to look in areas that were within a specific budget. As Mrs. ROB likes to say she didn’t want to be “house-poor” and the truth is that a small mortgage allows us to deal with our student loan debt in a comprehensive manner. If we had a larger mortgage I would not be able to save as much for retirement. We wouldn’t be able to travel as much. We wouldn’t be able to do a lot of things. That is a decent trade off for me.
  3. Location, Location, Location. Just as there is no perfect house there is no perfect location. Many of my students would disagree. They consider the Boston area to the be the Mecca of the world. Many of them wouldn’t think about moving away. Hell, if they live 45 minutes outside the city it is like they live in rural America. I teach at a university that is only 30 miles from Boston and you would think that some of my Boston students had stepped into a different world because the university is in a smaller town. If you have the ability to have a profession where you could move (e.g. teacher, lawyer, computer programmer) I might encourage you to go where you can get more bang for your buck. Many parts of the Midwest and the South are extremely affordable. CNBC has a great article on 12 cities you can live really well on 60k a year. All of those cities are perfectly fine with me and all have modern amenities (restaurants, culture, etc). Sometimes we might have to get out of comfort zone or move to really get that house that we want.
  4. Don’t buy a house. Perhaps, you might make the decision to just not buy a house. And that is perfectly ok. There are many reasons NOT to buy a house. You might want to save. You aren’t tied to the maintenance to a house. In some respects it can be CHEAPER to rent than to buy depending on where you are. Right now I have a colleague who is actively looking for a house. One of the reasons I have tried to help him out is because he is paying through the nose in rent. It would actually be cheaper for him to buy a house than rent. That is not the case with a lot of people. I would rather sit out the hot housing market and see prices come down then get thrown into a bidding war. I would rather rent than buy a house. Luckily, I have a spouse who is willing to be flexible, but if we move to a hot housing market in the future I would rather rent for a while, put the money we get from the house aside, and just sit on it.

The Bottom Line: For those of you wanting to buy a house or who did buy one why did you do it? Financial? What were some of the reasons you made for the housing situation you find yourself in. And I didn’t even mention about choosing buying a condo, townhouse, duplex, or a single family. All of those also factor into buying a house. But what were your reasons? Please answer in the comments below.

8 thoughts on “Renting vs. Buying a House–The Intangible Reasons

  1. I rented an apartment months ago and then I bought a different one (so right now I have an empty apartment just sitting there until the contract ends).
    I bought it mainly because real estate prices are rising here in Sydney, so it’s a pretty good investment as well.

    1. Sounds like a great move. I hope to visit Sydney one day. Made it to Melbourne (we loved it) and hope to see other parts of the country in the future.

  2. We are debating buying a house in our new city. We bought our house in Dallas are renting it to friends since we moved. The plan is to keep the house in Dallas. Right now rent payment covers mortgage so we are good.
    On the fence. Looking for something in our price range and what we want in the house. If not we will keep renting.

    1. The great thing is you can take your time. God knows we didn’t buy the perfect house. It won’t be our last. Good luck with your search.

  3. My wife and I are currently trying to decide where we want to live next. We live in a house that meets our needs but we’d love to move a little further out of the city to get in a better school pyramid for my son. Plus we wouldn’t mind having a yard so he can stretch his legs and run around. So we’re starting to look now with the anticipation of finding a neighborhood in our future that makes sense for us.

    1. Good luck on your search. Assuming Mrs. ROB and I have kids in the near future we will be moving from our home. However, where we move will be a different question. Part of that reason might be a move back to our home state or if nothing else to another city with a better school district, which will cost more money. However, by that time we will have built some nicer equity in our home.

  4. This is a very insightful article. I agree that there are a lot of things that are needed to be considered if which option is best for you. Rent or buy a house.

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