Housing Crisis Turns Some Ex-Homeowners Into Lifelong Renters

Mark Williams renting instead of owning homeYou couldn't pay Mark Williams to own a home again.

"Give me the money for it," he said. "I'm still not buying a house."

It's not that he always felt this way. Williams (pictured at left) did profit handsomely from the housing market's boom years, selling a Sacramento home in 2005 for more than twice as much as he purchased it for in 2001. He also bought, rehabbed and sold several homes with his friends.

"We literally flipped a crack house for a $40,000 profit before the first mortgage payment," he said.

But after he lost his job as host of a political talk show in 2006, the conservative activist began to struggle to pay the mortgage on a McMansion that he moved into that same year in Lincoln, Calif. Three years later, Williams and his wife, Holly, filed for bankruptcy and sold the house in a short sale for $260,000, he said, adding that he had paid $564,000 to build it. Now Williams, who had a controversial tenure as spokesman for the Tea Party Express, leases a condo in Sacramento.

Williams is just one person in a group of homeowners-turned-renters who have emerged from the wreckage of the housing crisis: People who have sworn off homeownership -- forever.

"We stupidly played by the rules," Williams said. "We wiped out our retirement and everything trying to keep this thing afloat."

A Small but 'Committed Bunch'

Chris Clothier, who partners with Memphis Invest, an investment company that buys single-family homes and rents them out, said that many of his tenants have been scarred by the housing crisis and share Williams' disillusionment with homeownership. They've gone through the stress, shame and embarrassment associated with foreclosure, and it has sullied their idea of homeownership, he said.

"They're not going to enter the purchase realm again, regardless of interest rates," Clothier said.

As foreclosures continued to push more people out of their homes, homeownership in the U.S. fell to the lowest level in 15 years to a rate of 65.4 percent in the first quarter of 2012, according to Census Bureau data. The rate was 69 percent at the end of 2005, the bureau said.

But those who claim to never want to own a home again don't necessarily represent everyone who's been forced into the rental market because of the housing bust. According to a June survey by online listing service Trulia, 78 percent of renters at the time said that they planned to purchase a home. That was up from 72 percent when the same survey was administered in 2011, perhaps indicating that some of the skepticism about owning a home had waned.

Those who reject homeownership, however, are a "committed bunch," Clothier said. And experts say that vehement opposition to homeownership could continue to color the discourse about housing for years to come.

"They will remain a vocal group who want the government to do what it can to prevent another housing bubble," said Jed Kolko, chief economist of Trulia.

Fresh Appreciation for Renting

Still reeling from the housing bust, disillusioned renters like Thom Rigsby, 47, have also come to appreciate the benefits of renting, which they say outweigh the gains in equity of homeownership that are only possible in a stable market.

Rigsby said that he and his wife were only able to sell their home in Huntsville, Ala., for a $31 profit in 1996 after owning for several years. They then purchased a home in Dallas for $137,000 and, caught up in the frenzy of the housing boom, they borrowed against their equity over the next 10 years, he said. By 2006, he estimated, they owed nearly $300,000.

But then, Rigsby's two businesses folded, and the couple eventually lost the home to foreclosure. Now Rigsby rents a single-family home back in Huntsville and has enjoyed shedding the ancillary costs of homeownership.

"It's not just the mortgager that you have to pay every month," he said. There's maintenance and upkeep costs and, he added, when it comes time to move, selling costs take a big bite out of a return. (In Rigsby's experience, selling costs equaled 3 percent of his home's value.)

Sue Koch, a Chicago-based social-media consultant who was forced to sell one condo she owned for a $20,000 loss and now stands to "lose an exceptional amount of money" on another, said that she also cherishes the conveniences of renting.

"If there's something wrong with the unit or building, I can call a manager, and he takes care of it," said Koch, 40. "If I wanted to, I could pick up and go somewhere else."

Debt-Free but at the Cost of Stability

Not everyone who has found themselves in the rental market wants to pick up and go like Koch, though. They still want the feeling of stability in having their own homes, which is why many have chosen to rent single-family houses. However, that very arrangement could be the biggest gamble in maintaining a long-term residence.

Steve Jason, owner of Stara Estates, manages more than 30 rental homes in south Palm Beach County in Florida. He said that many investors who own single-family rentals have either a "short-term or midterm" vision, in which they intend to sell at a profit after home prices appreciate.

"Anytime you're renting a property, you run the risk that the owner will sell it," he said.

Jason, who converts homes into rentals, estimates that about half of his tenants who were former owners will never buy homes again. Many "came to the realization themselves when they lost their homes, that it just wasn't for them," he said.

Many families who currently rent may be offered the option to buy, but theoretically those who remain firmly opposed to homeownership would refuse it, even if they could qualify for financing. That would mean they would have to relocate.

But the hassle of finding somewhere else to settle their families may be worth it, in their minds.

"Severe economic crises often have long-lasting effects on the people who live through them," Kolko said.

See also:
Single-Family Rental Houses Draw Millions Impacted by Foreclosure Crisis

As Rental Market Tightens, 6 Tips To Get the Home You Want

90% of Bank-Owned Homes Held Off Market, Estimates Suggest

Rent or Buy? 10 Major Metros
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Housing Crisis Turns Some Ex-Homeowners Into Lifelong Renters

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.

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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.

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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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