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
Guttentag, a finance professor emeritus at the Wharton School of the University of Pennsylvania, uses a broad brush to paint homeowners — many of whom are de facto "home leasers" because they now have little equity in their diminished-price houses — as more responsible than the flighty renter.
I’m not saying that homeownership is wrong, just that it’s not the cure-all many real estate brokers and homebuilders suggest. And I believe that’s what Guttentag is saying in his commentary. He really means that NOHOs may be doing the right thing by avoiding the expenses of homeownership.
Depending on your circumstances, renting may be a better option. If you’ve moved from a large house that is expensive to heat and cool, as we had, to a more compact space, renting may be kinder to your budget. We live in a state, Texas, where you get to choose your electricity provider — unlike West Virginia, where you are stuck with whatever utility serves your area. This is a big deal in our all-electric apartment.
Our energy costs are much lower in Texas, so we’re able to live on our fixed income much better than we did in what many presume to be the more affordable state of West Virginia. I think that makes us responsible shelter consumers — because that’s what it amounts to. Many people never pay off their house in their lifetimes because expenses exceed incomes.
The bottom line: Guttentag is right in much of his article, but he’s guilty of overgeneralizing about the living-for-the-moment nature of renters; many "NOHOs" are more financially responsible than homeowners.
Editor’s Note: David M. Kinchen covered real estate at The Milwaukee Sentinel from 1970-76 and at the Los Angeles Times from 1976-90. He has been a member of the National Association of Real Estate Editors since 1971 and was president in 1984.
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