Tuesday, May 13, 2008

Rent Vs. Own

The Orlando Sentinel regarding the shift from owning a home to renting. The focus of the article is on Florida. When in it is read along side an article from The Record regarding that NJ renters are safe from foreclosure, renters appear in a strong and smart position. First key parts from the Orlando article

In some major metro areas, the cost of homeownership has gotten so high, and the spread between monthly outlay for renting vs. buying so great, that renting makes more sense and the momentum is in that direction, a new study shows.

... In the Los Angeles metro area ... monthly homeownership costs average $3,485 -- roughly double the three-bedroom rental average of $1,746.

Rentals are about $1,000 a month less than home costs in the Washington, D.C., area; in San Francisco, they're about $2,000 a month less. Orlando's spread is 23 percent, but in some other markets homeownership costs are "out of line with rent, . . . outpacing rental costs by as much as 300 percent."

... Homes in 34 of the nation's 100 largest metro areas are expected to lose equity during the next four years, making rentals a more appealing option for many on a purely economic basis, the center's researchers said. The center, a longtime advocate for government intervention in private markets, concluded that policies supporting affordable rental housing should be part of any solution to the housing crisis, along with "policies that keep owners in their homes, possibly through some form of government-guaranteed mortgage."

In many areas of the country there is a clear financial advantage to renting. But then we hear all of the stories about renters making their payments but the homes owners fall into foreclosure. Next thing the sheriff shows up at the renters door and the renter has little time to vacate the premises and find a new place to live. The article from The Record explains how that scenario will not be happening in New Jersey.

While nationwide, according to the National Low Income Housing Coalition, millions of homeowners and renters are in jeopardy of losing their homes, it's a different story in New Jersey.

... "This is an issue well set in the law. The tenants have a right to stay," Pascale said, describing New Jersey's landlord/tenant laws as among the best in the nation and a victory for the 50,000-member New Jersey Tenants Organization.

... In contrast to New Jersey's relative security for tenants, Danna Fischer, legislative director of the National Low Income Housing Coalition, said in most of the country, "the lease is terminated when there's foreclosure and the tenant is out of luck.

She agreed that New Jersey is one of the few states to preserve the lease through foreclosure but there is talk of national reform.

... Tenants should consider legal advice and turning to a non-profit like LSNJ if their income is low, he said. They should continue to pay rent the same as before unless a court order tells them otherwise. Neglecting to pay rent can be grounds for eviction. Sometimes it's tricky to know whom to pay the rent to while ownership is changing. If the tenant is unable to resolve the question, they could arrange to pay into escrow.

There is a housing term bitter renter - "originally a term used by housing bulls to disparage bearish non-homedebtors. Has since been co-opted by bears and is now used ironically. Technical definition: Someone who pays a homedebtor for the right to live in his home, at a huge discount and with no downside risk of falling property prices, rising property taxes or maintenance nightmares."

In New Jersey the lucky Bitter Renter does not have to risk falling property prices, rising property taxes, maintenance costs and being out of a place to live when foreclosure strikes. They are also most likely saving a bundle and will not have those sleepless nights after watching their equity disappear. Being a Jersey Bitter Renter is actually pretty safe and smart - plus they do not have all the HELOC debt the home owners have. No underwater issues for the renter either. But renters are not completely safe, for the few ways for new owners to evict read the Record article.

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