Homeownership not a cure-all
Perspective: Not all renters are 'NOHOs'
By Inman News, Wednesday, May 20, 2009.By DAVID M. KINCHEN
A story at Inman News caught my eye because after 31 years of homeownership, I'm once again a renter.
The May 18 story (click here to read), by Inman News columnist Jack Guttentag, calls renters "NOHOs" and suggests that renters are living for the moment -- paycheck-to-paycheck folks who lack the long-term perspective of homeowners.
Guttentag starts off being provocative and gets more so throughout the story:
"What distinguishes them is not their income, their mobility, or where they live -- rather, it is how they live. NOHOs live from week to week or month to month, depending on how often they are paid. Typically, they have nothing left at the end of the period, and if they run out early, they often borrow at high interest rates."
He also states that NOHOs "never get ahead of the game, and if they run into an emergency that costs money, they are in trouble. Because homeownership is rife with such emergencies, NOHOs should not be homeowners."
And he cautions that NOHOs, because they have no savings, should beware of "the hidden costs and risks of homeownership."
Talk about generalization! This description may fit many "NOHOs" but not us: We have savings and rarely, if ever, buy anything on plastic. That wasn't the case when we were homeowners. When we sold our house, we paid off our credit-card debt, which was much too high given our fixed retirement income.
Where we live now, property taxes are much higher than our former locale of Hinton, W.Va., and homeowner's insurance premiums -- because we're in a part of the country that's subject to hurricanes -- are exorbitant. I know an older couple in the New Orleans area who pay more than $6,000 a year for homeowner's insurance. That compares to about $600 a year for our former home in West Virginia. ...CONTINUED
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Submitted by William Metzker on May 20, 2009 - 6:41am.
I did not take issue with Dr. Guttntag's article because I didn't see it as being about all renters, but only those few who were naturals to get sucked into subprime lending. But Mr. Kinchen's response suggests a truth Dr. Guttentag didn't address: Home ownership may be a bad investment.
This notion violates an oft-spoken mantra among agents, who repeat without flinching something along the lines of "owning a home has proven to be a good investment over time." I do not believe this to be true (see The History of Money, Niall Ferguson).
Real estate-as-rental may be a good investment for some, because it makes assets into income streams and adds a degree of liquidity. But liquidity is remarkably unpredictable for home owners, and that's an enormously bad thing in a mobile and changing society, especially when it takes two incomes to make the mortgage payment.