personal update, our new (rental) house, and why we'll never own a home

We've moved! We're renting a much larger, newer, and more comfortable house in central Mississauga. We've lost the huge backyard of our old rental home, but the backyard here is still a decent size, the largest of any house we saw that we'd want to live in. (The choices were huge backyards with old, un-maintained, falling-apart houses, beautiful new townhouses with either no backyard or a tiny square of cement, or this place!)

We have more space - way more space - in this house on two floors than we had in the old place on three floors. And after two major floods, we're pretty happy not to have a basement! The basement of the current house is a separate apartment, and those tenants do not share the yard.

One of the big differences in this house is that our landlord and his family used to live here, so everything is new and well-maintained. It is by far the nicest place either of us have ever lived in.

It will be a while until we're all set up, but I've decided - for once - to take it slow. Normally I run out and buy everything we need, do all the decorating right away, locked and loaded in two weeks, max. This time I'm in no hurry. Happily, our insurance settlement from the flood covered our moving expenses and car repairs, and we can replace a few of the most important items we lost.

"If you don't mind me asking, why are you renting?"

As we looked for this home, realtors and some owners expressed surprise that we were not renting only to bridge a gap between homebuying, but renting for the long haul. One owner was shocked that we had lived in our previous rental since 2007, and would be there still, if not for the flood. I guess renting is considered all right for young people who are just starting out, and maybe for older folks in transition, but a middle-aged couple isn't supposed to rent.

Yet one of the bright spots in our miserable summer was being able to simply walk away from that sewage-flooded house, with no responsibility to clean or renovate. Moving is never fun or easy, but within two weeks of the flood, we had signed a new lease, and within two months, we were gone. After the sewage flood, I could only think, "Thank [something] we rent!"

I mean no disrespect to any readers - most of you, probably - who own your own home, and never would have done otherwise. Each to their own, and I hope the market is kind to you.

For me, there are many reasons to rent, and I can find no compelling reasons to buy.

We can't afford it, and we don't care

When we were younger, it was much more important to us to "choose to be poor," so to speak - to keep our expenses low, have less earning pressure, and thus time to pursue our own goals. Renting gave us time to write, and when we could scrape some money together, to travel. Buying would have meant choosing a life path strictly for maximum earning potential. And beyond the downpayment that we didn't have, buying anything in the New York area would have tripled or quadrupled our monthly expenses.

Since then, the housing market has only gotten worse, from my point of view. Home ownership is ever more expensive, and the dream of easy money from buying and selling is ever more of a gamble.

The equation isn't only financial. Owning itself means nothing to us. We love a nice living space, and always try to have one, but we don't need or want the responsibility that comes with home ownership. In our previous home, in one year the furnace and oven both needed replacing. All I did was pick up the phone. It was someone else's bill, and someone else's headache.

The experts agree. Or do they?

The only thing we don't have is a house to sell. We have no means of generating a large amount of income from the sale of a house, which would presumably buy us a more comfortable retirement. We don't have that, it's true.

On the other hand, we don't have a house that we can't sell. We don't have the potential reward, but we also don't have the risk. We're most comfortable with that.

Conventional wisdom says that renting is "throwing your money away," and smart investors always buy. I never understood the first part, because I'm pretty sure than my rent buys me a place to live that someone else is responsible for maintaining.

The second part is based on several assumptions that don't apply to every situation. Once upon a time, it probably made perfect sense. My parents bought a home and paid off the mortgage in less than 10 years, with only one income-earner. These days, in any place we've lived, we couldn't pay off a mortgage in 30 years. And why would I want $500,000 in debt?

I notice, too, that most calculations of renting versus buying don't account for the cost of maintaining a home. Take this article, for example. Top 10 cities where renting is better than buying says:

Real estate research firm Zillow did the math and factored in all kinds of possible costs, including monthly rent and mortgage payments, insurance, property taxes, maintenance and closing costs, and expected price appreciation to come up with the exact point at which buying becomes less expensive than renting.

But the article itself seems to use a simple rent-multiplied-by-months equation.

This video looks at the economics of buying vs. renting, challenging the idea that buying is always a better deal. In comments, people give the usual arguments - "But at the end you own the house" - even when it's clear that the house has actually cost you way more than you would have spent renting.

In Time magazine's business section, a former homeowner considers renting. He writes:

At first I thought that buying a home would also be a smart financial decision. The more research I do, however, the more I realize that the notion of homeownership as a magical path to wealth is a marketing ploy of the real estate industry. In fact, home prices (like gold prices) generally barely keep pace with inflation.

There’s no question that buying a house makes sense for some folks, but mainly for non-financial reasons. Owning a home gives you stability (you’re not at the mercy of a landlord) and freedom (you can do what you want with the place). But financially, it’s not always the best bet.

I agree that homeownership is more stable than renting. But freedom? Not really. If you are hamstrung by mortgage costs or stuck with a house you can't sell at a profit, you're not free. The house itself takes up a certain amount of your time. You may enjoy that time and see it as well-spent. But it's not free.

The New York Times offers a sophisticated buy-versus-rent calculator that takes a large number of variables into account. I couldn't account for many factors, such as interest rates and property tax (one of the joys of renting, I don't know about those things), but from what I could tell, it would be 30 years before buying a home was actually better financially than renting in my area.

This article in the Financial Post (the business supplement of Canada's rabidly right-wing National Post newspaper) spells it out more flatly than most.

Does it make more sense to buy or rent a home from an investment perspective? It’s a question I get asked more than any other. The answer, in an era of historically low interest rates and perpetually rising real estate values, appears to be obvious: buy.

Just ask any real estate agent and they’ll tell you, “Don’t pay your landlord’s mortgage for him,” or “Build equity for yourself instead of flushing your money down the toilet,” and our favourite, “There has never been a better time to buy.”

It all sounds pretty convincing, but it’s wrong. Unless you need the security blanket of owning your home, it is nearly always a better financial move from an investing standpoint to rent rather than buy. The reason: People rarely consider three major costs of owning a home.

The three factors are: the costs associated with buying and selling, the operating costs of ownership, and the impact of a mortgage. The second factor - the cost of maintaining a home - is the one I find most people overlook. Friends have told me they pay nearly the equivalent in rent every month to maintain their home. About the impact of a mortgage, the Financial Post writer says:

This isn’t preparing for retirement. This is preparing for job interviews in your seventies when you should be enjoying cocktails after a round of golf.

I notice that even the very smart and sensible Suze Orman, who used to categorically tell everyone to rent only until they had saved enough for a down payment, has changed her mind. Orman now says, "Just because you can buy a home or condo doesn't mean you should. Here are some instances in which renting makes more sense."

She offers four reasons why you might want to rent. One is the down payment. Personally, I cannot imagine forking over that kind of cash in return for the right to pay off a huge mortgage. But more tellingly, reason number four is: "You don't really want the responsibilities and risks associated with being a homeowner." I appreciate the recognition that some of us just don't care.

A touch of insecurity

The only potential negative that has now arisen is that renting a house is not as secure as an apartment rental. Renting a house in Ontario, there is the possibility that the owner could choose not to renew our lease, if he wanted to sell the house, or move back in, or have a family member move in. That's what happened with our first house, in Port Credit, a risk we knew from the start. That move turned out to be very beneficial, but this could happen with any house we rent in Mississauga. We try to screen for that possibility, but we're depending on people to be honest about their intentions - a big if.

I think if it turns out we are moving too frequently, we would probably go back to apartment life. For now, we are carefully breaking down each box we empty and storing them all in the garage. One year from now, when our landlord renews our lease, I'll Freecycle them. If the landlord doesn't renew, we may save even more money by renting an apartment again.

It seems that for many North Americans, owning a home is a sign of adulthood, one of the three things you're supposed to do: get married, have kids, and buy a house. Lucky me, I've skipped all three!