Auston Woods Apartment Homes Blog

When deciding whether to rent or buy, you are making the choice to rent an apartment home or renting the capital needed to buy a home. Most Americans don't consider that they are renting equity (from the bank) to buy a home. As you are aware, very little equity is built in the first few years of paying a mortgage. Many people are surprisingly still very unaware of this fact.

This following article explains how renting is financially better than buying in about 75% of cases!

For the Past 30 Years, Renting Was Generally Better Than Buying

If homeownership is the American dream, then the nation had better wake up. That's the message from a new research paper that examines whether buying or renting a home was a better financial decision over the past 30 years. Most would find the result surprising: over the period Americans were better off renting between 65% and 75% of the time, depending on the investment alternative.

The article essentially looks at eight-year periods and assumes that a person invests the money he or she saves by renting. Since buying is generally more expensive than renting, renters have extra money to invest. It also makes a number of assumptions favorable to homeownership, including gains from the mortgage interest tax deduction, the option to refinance, and the ability to walk away -- loss-free -- from an underwater mortgage. Still, renting wins approximately three-quarters of the time.

The staff at economic research organization e21 explains why this result actually shouldn't be so shocking:

Counter-intuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

Housing advocates may respond by pointing out that at least the $8,600 in this scenario went towards home equity rather than simply being squandered on rent. But, as demonstrated in the Real Estate Economics article, the principal component of each mortgage payment - i.e. the portion of the mortgage payment that goes towards reducing the principal mortgage balance instead of interest - is an added expense renters don't have.

This turns the real estate industry's biggest talking point on its head: you aren't throwing rent into the wind each month, you're casting away equity.

Of course, that equity also provides a potential benefit. The analysis's eight-year rolling methodology appears to miss the biggest reward of owning a home: living rent-free once the home is paid off. After that 30-years is up, the longer a family remains in that home rent-free, the more buying pays off. Taking this into account would almost certainly change the result in some, if not all situations. Renting may be a better option initially, but there's no eventual reward.

An important point still needs to be made here: buying a home that you don't plan to live in for an extended period of time probably isn't a great idea. The rent you pay in the form of interest on a 30-year loan for five or even 10 years won't be any better than if you had just rented outright. But if you're planning on living in a home for 30-plus years, then you could potentially get some benefit from buying rather than renting.

Original article by By Daniel Indiviglio, The Atlantic

National house prices have dipped in 19 of the 20 largest metro regions, and declines in house prices are expected to continue given the 1.9 million in backlogged foreclosures. As the American economy shifts from buying to renting, with the number of renting households rising by 700,000 annually -- according to a USA Today analysis of Census data -- the number of homeowners fell by nearly 200,000 per year. Unemployment rates remain high and wages are down, which makes it more difficult for people to buy a house and prompts them to rent.

A number of studies continue to show that renting is better than owning for many Americans, with a house being a poor investment compared to renting and investing in inflation-adjusted Treasury bonds. In the paper "American Dream or American Obsession?," Wenli Li and Fang Yang from the Philadelphia Federal Reserve Bank concluded that the "adjusted real rate of return on housing actually falls below zero," and the national rate of return for homeownership between 1975 and 2009 was 1.3 percent, below the 3.375 percent return for stocks.

Home ownership translates into less money available for investment and owning a house limits mobility should a new job opportunity arise elsewhere. Some economists have even suggested that high home ownership rates correlate to high unemployment rates. Declines in house prices could make it difficult to sell if the house is worth less than its mortgage. Not everyone should own a house, and the recession has helped eliminate some of the stigma once associated with renting, now that 70 percent of Americans now agree that renting has its advantages over owning.

Article from National Multi Housing recent release

A good apartment home staff can make the difference between an ordinary rental and a dream home. A very crucial part of the apartment-finding process is talking with the manager and office staff about the property. Most people don't realize what the manager does within an apartment home community.

A good manager and staff is one who has their resident's well-being and comfort in mind. When renting and you have a maintenance task; a stopped up toilet, a leaking sink, or your carpet needs to be re-stretched, the apartment home manager has to take care of it.
 
Before you commit to a place, talk with the on-site manager at Auston Wood Apartments and ask us some questions about our maintenance.

Ask questions and, when you tour Auston Woods, be sure to look over the general cleanliness. With our 9 foot ceilings, crown molding and various homes with sun rooms, we know you will love the floor plans, the property and the neighborhood. We are very proud of our exceptional customer service, and inviting lush landscape.
 
When you decide to live in an apartment home in the desired Charlotte area you need to know you've made the right choice about your living space. You need to know your interests are taken care of; that you won't be left stranded should there be a problem in your building or in the complex. When you find this type of satisfaction you will feel confident in making a lasting commitment and a pleasurable rental experience.

We all need a place to call home but even with the real estate downturn, many people continue to think that buying a home is a good investment and a way for them to build wealth.  When times were good, this was not really the case for most people.  Wherever you choose to live, make sure it’s for the right reasons.  Owning a home can be rewarding. Renting an Apartment Home at Auston Woods can also be very rewarding.  Don’t just take our word for it – check out this article on Yahoo Finance.  The real estate downturn has caused more people to re-think their investment strategies.  Unless your home is directly putting cash into your pocket, even though it is great to have, it isn’t an asset.  We are interested in hearing your opinion on this subject as well…

Charlotte Living: Is Renting or Buying a Home More Subtable?

Auston Woods Poolside

The top 5 reasons that you should be thankful that you have chosen to rent an apartment home:

1.  You have flexibility!  If you owned a home and got your dream job in another state, it could take you months to sell your home and you may have to take a huge loss just to sell the home!

2.  You can go on trips every weekend and don’t have to worry about yardwork, cleaning out your attic, or repairing an ever-growing “to do list” of issues in your house.

3.  You have more expendable income to invest, go on vacations, buy school supplies, etc.

4.  You don’t have to travel to or pay for a gym membership or community pool.

5.  We take care of you!  If you have a service request, question, or a concern, our professionally trained team is there to make your life easier!

Auston Woods Apartment Homes

We truly appreciate that you have chosen to live at Auston Woods Apartments and look forward to serving you for many years to come!