Apartment Renter or Home Buyer? What’s the best decision for you in today’s housing market.

Times are difficult for anyone thinking about buying a home, especially if you are currently renting an apartment. The housing price spiral that drove up the price of homes has reversed, and prospective home buyers across the nation are perplexed by the thought of losing thousands of dollars in an uncertain market. Renters, on the other hand, are faced with making a difficult decision: does buying or renting make sense in today’s housing market?

Much to the dismay of many potentially good home buyers, credit requirements have tightened, new home construction has declined, and the risk of losing equity in a falling market is significant in some area. In short many home buyers are feeling themselves being squeezed out of the market. Apartment renters dreaming of owning their own homes may not be able to buy their dream home without sterling credit rating. On the positive side, sales of existing homes have started to improve, but this may not be enough to reinvigorate the housing market. Given the overall housing market situation one cannot help but wonder if renting an apartment really such a bad thing?

Home ownership is touted as the great American dream, a way to create wealth that can be passed on to future generations. Home ownership is considered so important by the government that it has created a multitude of ways for prospective home owners to obtain a mortgage. Normally, placing people in their own homes would be a sound and a good policy to follow, as everyone benefits. However the drive to make money from the least empowered, specifically the middle class, has resulted in the deadly Adjustable Rate Mortgage (ARM) and other creative mortgage financing instruments that have only lead to foreclosure and the collapse of the national economy as soon as the economic engine began to sputter in 2007. An inattentive or look-away government and greedy financiers allowed the sputter to turn into a choking sound in 2008. Mortgages fell into default by the millions and the panic began. Today, the government is attempting to remedy the situation by pumping trillions of taxpayer dollars into the nation’s lending institutions in an attempt to bolster the credit market and as we all know credit, not money, is the economic jet fuel that powers the economy.

What does all this mean to the family trying to decide whether or not they should buy a home anytime soon? For starters it means that buying a home is going to be quite a bit more difficult than before. Credit requirements have changed, not because people are less likely to default on their mortgage payments, but because lenders want to be absolutely sure that they have the money to lend other banks and borrowers. Interest rates, which are tied to a borrower’s credit score, are likely to be a bit higher for those without a low-risk credit score rating. Suddenly, a person’s credit score, which is tied to such factors as debt, making loan payments on time, student loans, judgments, and other personal financial information has become extremely important for home buyers.

A renter’s credit score is only used as an indicator of the tenant’s ability to pay the rent when they’re supposed to.

Beyond one’s ability to get a mortgage in the first place, however, are the problems that all mortgage holders have. That is, and despite what they have been led to believe by the government, social engineers, and lending institutions, homes are not an asset after all. A house is a home with a mortgage accompanied by property taxes, insurance building code compliance, inflation, maintenance and other expenses. Over the term of the mortgage, typically thirty years, although a fifteen-year mortgage is the smart choice, the home is supposed to appreciate in value and return a profit to the home owner upon sale. If you can wait thirty years to realize a profit in today’s market you are an exceptional investor. In short, a home is a liability that diverts personal wealth and investment opportunity into the bottomless pit of the bankers. As Robert Kiyosaki put it, “A home is not your asset, it the bank’s asset.” Renting an apartment may not be such a bad thing after all, at least from a financial perspective.

In conclusion, today’s housing market demands careful consideration of the pros and cons of home ownership from a financial perspective instead of an emotional perspective. The American Dream of home ownership is an emotional fixation that has served as the camshaft for the nations’ economic engine for nearly three decades. In a large part of the nation, the engine has seized up and may not be restarted for at least two years. In the meantime, renters don’t worry much about foreclosure and have the opportunity to invest their money in other assets – those that create income for themselves instead of paying for someone else’s asset. Renting may not be a bad choice after all, and for some it may be the only option available. That doesn’t mean renting an apartment is a bad thing, it only means that there is an opportunity afforded to renters that most homeowners neglect to take advantage of because they have been led to believe that their home is an asset that will be there for them when retirement time rolls around.