The Sprint to FI

Renting vs buying a home in 2020

“I know you like your apartment, but when are you going to buy a house and put down roots?”

I have a coworker who asks me this question every couple of months. At first I said, well, we are pretty new to Colorado and don’t know where we want to live yet. Then she asked which areas we’re looking in, and I realized that for some reason I didn’t want to tell her that we aren’t looking at all right now. That old message — you’re not a successful adult until you own a house — is somehow still on replay in my head. It’s utter bullshit of course, but it’s still there. According to a 2019 survey by ApartmentList, renter stigma is alive and well:

One hypothesis is that renter stigma exists because renting is antithetical to traditional American notions of success and wealth through homeownership. Our survey uncovered how deeply-ingrained this notion is. The vast majority of respondents (86 percent) believe that homeownership is important for personal success.

Would I like to own a home? Sure, if money were no object. I’d love to have an extra bedroom and a yard to plant stuff in. I still long to have a little farm with a few animals and a big garden. Or maybe a cute city house with a tiny yard in a walkable neighborhood. Or a mountain cabin in an aspen grove the middle of absolutely nowhere. But we could rent a single-family home instead of an apartment if that pull gets to be too strong. When I’ve owned homes in the past, I did enjoy the feeling of a house being mine, even if it was heavily mortgaged. But it wasn’t without its downsides.

I wrote a long time ago about the Fallacy of the American Dream, so I won’t rehash that. We’re in a very different place now, but many of the good reasons we rented then still stand. The lack of  surprise maintenance costs is still a big deal. Now, however, there are some additional reasons. In this crazy, fucked-up year 2020, when coronavirus has infected more than 4 million people and unemployment’s at an astounding 16%, renting gives us the flexibility to move to a smaller or cheaper place if one of us becomes unable to work. Breaking a lease is always quicker and easier than selling a house, especially in an uncertain market.

In addition, Denver real estate prices are insane. Not NYC or SF insane, but still ridiculous. Homes and condos in our neighborhood are completely unaffordable ($1M+ for a two bedroom, plus hefty condo fees, taxes, etc.). However, rent here is within our budget, so this apartment gives us the opportunity to live in a great area we’d otherwise be priced out of. At some point we may get tired of living in the city, but for now it’s fun. And I have to admit, I love not having a mortgage.

As of last year, about 30% of Denver residents rent, so we’re far from alone. As it turns out, renting is also getting a lot more popular with retirees. RentCafe predicts that by 2035, renters older than 60 will comprise 31% of the rental market. This makes sense to me; at our ages, a 30-year mortgage wouldn’t be a good idea. In addition, one of the things we want to do when we hit FI is travel a lot, and renting gives us the flexibility to downsize, put stuff in storage, and go explore the world. And Tony has elderly parents in another country who may need our assistance at some point. Allons-y!

Finally, some financial experts agree that renting isn’t necessarily a bad financial move. From a study on homeownership quoted in Kiplinger’s:

Renters could, on average, accumulate more wealth than homeowners if they invested the equivalent of a down payment plus the difference between a monthly mortgage payment and rent in a diversified portfolio.

I haven’t done the math on the amount that we are currently saving, but I suspect it’s close to this strategy. The money we’d use on a down payment is currently in our 401k, IRAs, and other financial accounts, invested in S&P500 index-targeted funds, so I think we’re on the right track. If the market cooperates between now and the time we might be ready to settle and put down roots (5-10 years), we’ll have the option to buy outright or continue to rent — whether it’s here, or in a location we’ve discovered in our travels and perhaps has more geographical arbitrage mojo.







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