Lifelong Renters Dodged the Housing Bust but Not Buying a Home Could Cost Them

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Isra Hashmi is one of the lucky ones.

And even so, she's watched her mother sink under a $700,000 mortgage for a home in California that she never could afford to begin with on a physician's income. Hashmi's mother eventually had to walk away from the house. She's seen her brother have to abandon his home, too, after his clothing business failed and he was foreclosed on. She stood by a friend who lost tens of thousands of dollars in a short sale when it was the last option to get out of a mortgage that was burying her in debt.

But Hashmi herself has never had to face what her friends, family and millions more Americans have as the crippling housing crisis unfolded. She might be the only one she knows who hasn't.

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20 Regions Overrun by Foreclosures
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Lifelong Renters Dodged the Housing Bust but Not Buying a Home Could Cost Them

1 in every 328 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 859
Change from July 2012: -18.89 percent
Change from August 2011: -34.13 percent

Source: RealtyTrac

Photo: Flickr/Chad Jones

1 in every 321 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 6,737
Change from July 2012: -11.92 percent
Change from August 2011: -22.30 percent

Source: Realty Trac

Photo: Flickr/Nrbelex

1 in every 309 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 5,819
Change from July 2012: +0.41 percent
Change from August 2011: -29.83 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 308 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 4,390
Change from July 2012: -13.40 percent
Change from August 2011: +25.21 percent

Source: RealtyTrac

Photo: Flickr/J. Stephen Conn

1 in every 299 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 2,002
Change from July 2012: -3.84 percent
Change from August 2011: +29.24 percent

Source: RealtyTrac

Photo: Flickr/hawleyjr

1 in every 297 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 908
Change from July 2012: -27.99 percent
Change from August 2011: +56.55 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 296 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,255
Change from July 2012: +40.22 percent
Change from August 2011: -8.66 percent

Source: RealtyTrac

Photo: Flickr/mrak75

1 in every 285 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 3,312
Change from June 2012: +2.89 percent
Change from July 2011: +47.33 percent

Source: RealtyTrac

Photo: Flickr/hao$

1 in every 282 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 541
Change from July 2012: -34.34 percent
Change from August 2011: -53.64 percent

Source: RealtyTrac

Photo: Flickr/C Oda

1 in every 274 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 3,184
Change from July 2012: -16.82 percent
Change from August 2011: -40.11 percent

Source: RealtyTrac

Photo: Flickr/El Cobrador

1 in every 267 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 9,238
Change from July 2012: +48.83 percent
Change from August 2011: +12.75 percent

Source: RealtyTrac

Photo: Flickr/Vince Alongi

1 in every 249 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 586
Change from July 2012: +14.68 percent
Change from August 2011: +52.60 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 235 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 16,192
Change from July 2012: +27.67 percent
Change from August 2011: +44.24 percent

Source: RealtyTrac

Photo: Flickr/vxla

1 in every 223 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 429
Change from July 2012: +87.34 percent
Change from August 2011: +22.92 percent

Source: RealtyTrac

Photo: Flickr/Loco Steve

1 in every 204 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 7,354
Change from July 2012: -8.21 percent
Change from August 2011: -27.22 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 189 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,236
Change from July 2012: -19.16 percent
Change from August 2011: -28.39 percent

Source: RealtyTrac

Photo: Flickr/inman news

1 in every 188 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,681
Change from July 2012: +178.31 percent
Change from August 2011: -2.38 percent

Source: RealtyTrac

Photo: Flickr/prayitno

1 in every 185 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,538
Change from July 2012: +62.24 percent
Change from August 2011: -1.47 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 153 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 458
Change from July 2012: +49.67 percent
Change from August 2011: +12.53 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 172 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,046
Change from July 2012: +13.57 percent
Change from August 2011: -22.92 percent

Source: RealtyTrac

Photo: Flickr/Tom Hilton

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That's because, even at the age of 39, Hashmi has never owned a home -- and she may never after seeing what's happened to everyone around her, she said.

A lifelong renter, Hashmi (pictured at left with her husband and three children) is in the minority of Americans who have never taken the plunge into homeownership. (Despite slumping to a 50-year low, the rate of U.S. homeownership was estimated to be 62.1 percent in the second quarter of 2012.) But she's likely among a majority of lifelong renters who today count themselves blessed or lucky that they've never owned a home. These are the few who have made it through the housing crash and resulting foreclosure crisis virtually unscathed.

"I'm still the only one I know who has never owned," Hashmi told AOL Real Estate.

It's not that she hasn't come close. Eight years ago, when Hashmi and her husband lived in Tucson, Ariz., they were on the verge of buying a home there.

"It was the middle of the housing boom, and homes were popping up everywhere," she said.

But when it came time to make an offer, Hashmi's husband raised a red flag. He realized that the mortgage their bank was offering them was way out of their budget.

"He said, 'This is freaking me out. I don't make enough money to afford this,' " Hashmi recalled. "He had the sense to realize that we couldn't afford it. And then we couldn't understand why we would even be offered this loan."

The couple decided against buying. A few years later, the housing crash would hit, as millions defaulted on loans that they couldn't afford and shouldn't have been able to qualify for in the first place. Four million people would lose their homes to foreclosure, and more than double that would face the same possibility.

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Lifelong Renters Dodged the Housing Bust but Not Buying a Home Could Cost Them

Median home price: $368,000
Median rent: $2,600
Breakeven time: 5.1 years

Ever dream of owning your own Brooklyn brownstone or Manhattan pied-a-terre? Keep dreaming.

New York
is one of the most expensive markets to buy a home in with a median home price of around $450,000. (The most expensive home on the market in New York costs $100 million.) Even with the highest rents in the nation, it still takes more than a decade of ownership before buying a place in one of the city's five boroughs makes more financial sense than renting.

Outside the city limits, prices get a little more reasonable. The breakeven time for the entire metro area is just over five years.

The best places to buy, however, are far removed from Manhattan in the distant suburbs of New Jersey. In Lake Como, N.J., for example, the breakeven time is just 1.8 years.

Photo: Flickr/Jaime Olmo

Median home price: $393,800
Median rent: $1,800
Breakeven time: 4.3 years

Even though home prices in Tinsel Town plunged by close to 40 percent after the housing bubble burst, homebuyers still pay a premium to live in the Southern California sunshine.

The median home price in Los Angeles is more than twice the national median. As a result, it takes a long time for buyers to breakeven with renters. If they aren't planning on staying four years or more, they're better off renting, according to Zillow.

Although rents aren't that cheap, either. The growing population has put pressure on housing supplies in the L.A. metro area, helping to push rents about 30 percent higher than the national average.

Photo: Flickr/jondoeforty1

Median home price: $209,300
Median rent: $1,430
Breakeven time: 2.8 years

Chicago's housing market appears to be slowly turning the corner. Home prices in the Windy City rose for the fourth consecutive month in June, according to S&P/Case-Shiller.

However, while median home prices are nearly the same as the nation as a whole, rents are considerably higher. That makes buying a much better choice financially -- even for those who are planning to move out in as few as three years.

And, in some of the least expensive communities, such as the town of Dixmoor, south of Chicago, breakeven times for buyers are just one year. While in the tonier northern suburbs, such as Kenilworth, it's better for the long haul. Breakeven time there is more than 13 years, according to Zillow.

Median home price: $163,100
Median rent: $1,030
Breakeven time: 2.1 years

Texas' largest metro area is blessed with plenty of open land to build on and a local government policy that's friendly to development, which has helped keep housing here extremely affordable.

The median home price in the Dallas metro area is 20 percent below that of the nation and, as a result, it takes only a couple years of ownership for buyers to break even on their investments, according to Zillow. Meanwhile, demand from a steady flow of new residents has pushed rents slightly higher than the average city.

The wealthy suburb of Westover Hills, west of Fort Worth, boasts some of the most expensive home prices compared with rental costs. The breakeven time there is nearly 11 years. But in nearly every other community in the metro area, the breakeven time is less than three years.

Photo: Flickr/rkrichardson

Median home price: $187,300
Median rent: $1,300
Breakeven time: 3 years

Urban blight in some central city neighborhoods has kept a tight lid on home prices in Philadelphia and the surrounding towns.

That has helped to keep breakeven time for homebuyers within city limits to just 2.3 years, a little less than the metro area as a whole.

Buyers who venture out to the stronger housing markets in Philadelphia's wealthy suburbs will have to wait a little longer for their purchase to pay off.

In the fancy towns along the Main Line west of the city, such as Tredyffrin, it takes more than eight years to break even, while in the bucolic far suburbs in New Jersey, like Haddonfield, it takes 11 years to break even, according to Zillow.

Photo: Flickr/yapsnaps

Median home price: $379,100
Median rent : $1,850
Breakeven time: 3.5 years

Uncle Sam's ongoing hiring spree has helped the D.C. housing market recover more quickly than most other metro areas.

Home prices have gained more than 11 percent  since hitting bottom in early 2009, according to S&P/Case-Shiller. The median home price in the area is now more than twice the national median, while median rents are a steep $2,000-plus a month.

Most of the best housing buys are inside the Beltway in Maryland's suburbs. In the town of Landover, for example, it only takes 1.4 years for a home purchase to start making more financial sense than renting, according to Zillow.

In the expensive suburbs west of the Beltway, it can take much longer for the math to work out for homebuyers. In towns such as Upperville, Va., and Middleburg, Va., it can take seven to nine years to break even.

Photo: Flickr/Sergey Vladimirov

Median home price: $162,800
Median rent: $1,594
Breakeven time: 1.6 years

Few markets got hit as hard as Miami did in the housing bust. Home prices are still off by nearly 50 percent from their 2006 highs.

In many communities, owning a home for a year is all it takes for an investment to pay off, according to Zillow. Even in some of the most expensive towns like Fisher Island and Key Biscayne, the breakeven point is only about six years.

Buyers may want to strike while the iron is hot, however. Prices have been on the upswing lately, rising about 7 percent between last November and June -- about twice the gain for the average city.

Median home price: $176,200
Median rent: $1,950
Breakeven time: 5.9 years

Foreclosures have plagued the Atlanta area recently. The metro area saw steady increases in foreclosure activity in the first half of this year.

Part of the increase is due to the national mortgage settlement which set new rules that banks should use to pursue foreclosures. The settlement, which was reached as a result of the robo-signing scandal, has opened the way for banks to clear their backlogs of foreclosures more quickly.

Now the market is flooded with short sales and bank-owned properties, depressing prices -- and creating bargains. The median home price in Atlanta has fallen to well below $180,000, which, combined with low mortgage rates, has made buying a great deal in most area communities.

But, as in most cities, it all depends on where you buy. In a depressed town like Jonesboro, where incomes is about 50 percent lower than the state average, you could breakeven in just over a year. But if you opt to purchase in the pricier Druid Hills area, it could take closer to 7 1/2 years.


Photo: Flickr/downeym

Median home price: $363,700
Median rent : $1,950
Breakeven time: 4.3 years

Boston real estate is wicked expensive no matter if you are renting or buying. Land is pricey and space is priced at a premium.

In fact, home prices here are 80% above the national median. And rents average nearly $2,000 a month in the metro area. That's high, but renting is still the better option for anyone planning a stay of less than five years.

Still want a place of your own? If you want it to pay off, you'll have to be patient -- or willing to commute. The best buying bargains are in old mill towns outside of the city, in towns like Lowell and Lawrence, where it takes just over two years for buyers to break even. But if you want to be closer to the city, in Brookline, for example, you'll have to wait more than 10 years to break even, according to Zillow.

Photo: Flickr/JasonParis

Median home price: $363,700
Median rent: $1,951
Breakeven time: 5.9 years

Limited land and an influx of well-paid tech workers has helped to make San Francisco one of the most expensive cities to live in the nation.

While rents are steep -- only trailing New York's -- home prices are triple the national level. As a result, the Bay area is most definitely a rental market.

It takes nearly six years for homebuyers to realize any sort of financial advantage over renting in the San Francisco metro area, according to Zillow. And in more desirable neighborhoods, like Sausalito or Mill Valley, it takes almost nine.

Farther outside of the city, in fancier communities like Atherton, Piedmont and Burlingame, it can take 20 years or more.

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"We looked at each other in relief and said, 'Do you realize what we just escaped?' " Hashmi recalled.

Today, the couple rents an apartment in Boston with their three children, and Hashmi said that they don't have any plans to buy in the future, even amid record-low mortgage rates and far lower home prices.

Even though renting might have saved people like Hashmi from deep pain as the housing bust took hold, is shying away from buying a home a winning strategy for the future? Not necessarily.

According to a Zillow analysis in August, buying has become a better financial option than renting in 75 percent of U.S. metros, where it takes an average of three years or less of owning a home to break even with what you'd pay in rent over the same time period. (Home prices are down about 30 percent from their peak in 2006.) In Boston, where Hashmi lives, it would take a while longer to break even: 4.8 years.

Stan Humphries, Zillow's chief economist, said that lifelong renters "have played the smart money for the last five years" by staying out of the buyer's market, but the fortune in that decision is turning a corner.

He pointed out that historically, over the last century, home prices have risen at an average rate of 0.5 percent to 2 percent per year.

13 PHOTOS
Cities Where Homeowners Are Deep Underwater
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Lifelong Renters Dodged the Housing Bust but Not Buying a Home Could Cost Them

Negative equity share: 37.8 percent
Total amount of negative equity: $23 billion
Delinquency rate: 10.3 percent

37.6 percent of underwater homeowners owe 20 percent or less, while 9.1 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Negative equity share: 38.7 percent
Total amount of negative equity: $17.5 billion
Delinquency rate: 4.7 percent

39.1 percent of underwater homeowners owe 20 percent or less, while 8.5 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Flickr/philipshannon

Negative equity share: 39.2 percent
Total amount of negative equity: $56.8 billion
Delinquency rate: 12.0 percent

32.2 percent of underwater homeowners owe 20 percent or less, while 15.3 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Negative equity share: 43.7 percent
Total amount of negative equity: $42.7 billion
Delinquency rate: 24.9 percent

22.5 percent of underwater homeowners owe 20 percent or less, while 30.1 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Negative equity share: 46.6 percent
Total amount of negative equity: $16.2 billion
Delinquency rate: 17.6 percent

25.0 percent of underwater homeowners owe 20 percent or less, while 21.6 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Flickr/Fifth World Art

Negative equity share: 48.3 percent
Total amount of negative equity: $24.3 billion
Delinquency rate: 5.4 percent

23.1 percent of underwater homeowners owe 20 percent or less, while 28.0 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Wikimedia/Shawn Wilson

Negative equity share: 49.3 percent
Total amount of negative equity: $19.6 billion
Delinquency rate: 8.2 percent

29.1 percent of underwater homeowners owe 20 percent or less, while 18.9 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Wimikmedia/Basil D Soufi

Negative equity share: 51.2 percent
Total amount of negative equity: $39.2 billion
Delinquency rate: 11.1 percent

28.9 percent of underwater homeowners owe 20 percent or less, while 22.3 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Wikimedia/Matthew Mendoza

Negative equity share: 51.6 percent
Total amount of negative equity: $35.6 billion
Delinquency rate: 8.0 percent

24.7 percent of underwater homeowners owe 20 percent or less, while 24.2 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Negative equity share: 51.9 percent
Total amount of negative equity: $15.8 billion
Delinquency rate: 18.2 percent

23.5 percent of underwater homeowners owe 20 percent or less, while 25.4 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Negative equity share: 54.4 percent
Total amount of negative equity: $38.2 billion
Delinquency rate: 7.8 percent

26.0 percent of underwater homeowners owe 20 percent or less, while 22.2 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

Photo: Flickr/I'll Never Grow Up

Negative equity share: 68.5 percent
Total amount of negative equity: $23.7 billion
Delinquency rate: 13.6 percent

20.4 percent of underwater homeowners owe 20 percent or less, while 36.0 percent of underwater homeowners owe more than double what their home is worth.

Source: Zillow

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"Despite what's happened in recent years, housing is generally a non-depreciating asset," Humphries said. "We think we've hit bottom on home values.... The steep drops are behind us."

The renters who avoided catastrophe during the housing slump have a golden opportunity to gain wealth by buying now as home prices are climbing back, Humphries added.

That's an argument that could potentially persuade Gerald Poindexter. The 43-year-old San Diego resident (pictured at right) has been a renter all his life, and he said that he felt like he "dodged a bullet" during the housing crisis.

"But never say never," he said about the possibility of buying a home in the future.

Poindexter said he mostly has stayed away from buying because of the overwhelming responsibility of owning a home.

"Your home starts to dominate every aspect of your life," he said. "You stay in a job you hate just to keep up with the house." And when the housing bubble burst, it only affirmed his decision to remain a renter.

But "I love a good deal," Poindexter said, referring to the deals available because of battered home prices. "If the right opportunity came along, I wouldn't say no."

Then again, have longtime renters really survived the housing bust without a scratch? After all, rental prices have soared across the country as ex-homeowners who lost their homes have flooded the rental market.

Gary Malin, president of New York City-based realty firm Citi Habitats, has seen some of the worst of it. Rental prices in the market that's already America's most expensive have beaten record highs multiple times over the last couple of years.

Still, Malin said, judging whether a renter has gotten off scot-free during the housing crisis depends entirely on individual circumstances.

"If you were in a position to buy at the height of the market but didn't, then you're still way ahead of the game," he said. But if you were only financially capable of paying average rents at the height of the market -- when they were much lower than they are now -- then today's surging rental costs are likely hurting your bottom line a lot more, he added.

Hashmi admitted that rising rents have been a struggle for her family. Their rent has gone up every year for the last three years that they've been in their Boston apartment. She said that they are considering moving outside the city to find cheaper rental rates. But for her, that still doesn't outweigh the comfort of being free of mortgage debt.

"It's the most amazing feeling to go to bed at night and be debt-free," Hashmi said. "There's nothing else like it."

See also:
Best Suburbs for a Slower Pace of Life
Romney's and Obama's Housing Policies
Election 2012: Will It Affect Your Decision to Buy a Home?


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