Renting isn't reckless if you're not ready for homeownership

By Michelle Singletary
Sunday, April 11, 2010

Throughout my childhood, my grandmother Big Mama extolled the virtues of owning a home.

When I dared to move out of her house and get a one-bedroom apartment a year after graduating from college, Big Mama harassed me about renting. When my lease was coming to an end, she declared that I had two choices: Move back in with her or buy my own home.

I bought my first home -- a two-bedroom, one-bath condominium.

Even though I was in my early 20s, I was ready for ownership. I had no debt. I could easily afford the monthly mortgage payment, which was well below 36 percent of my net monthly pay.

My grandmother pushed homeownership, but not as an almighty way to increase my net worth. She taught me to view my home as a place to live and a way to stabilize my monthly housing expense. If your home appreciated in value, that was an added bonus.

When I sold my condo, it hadn't appreciated in value. But I was okay with this. I lived in a great place for more than 10 years.

How do you view owning a home?

It's a question that was put to people in a survey by Fannie Mae, the beleaguered government-sponsored enterprise that was created to help expand opportunities for potential buyers by making money available for mortgages.

In many respects, the mission was successful. Homeownership in this country climbed for decades, with the rate peaking in 2004 at 69.2 percent, according to data pulled together by the Hoover Institution at Stanford University. Homeownership jumped significantly from 1940 to 1960, according to census data, increasing from 43.6 percent to 61.9 percent.

But as the number of homeowners increased, so did the belief -- fueled by lenders and others working in the mortgage industry -- that a home was a savings account. We were enticed by lenders to tap into our equity, secure in the belief that a house would always increase in value. The financial wisdom we came to embrace was that draining our home equity was a risk-free deal.

We even took the Holy Grail of homeownership to a disastrous place by chastising people who didn't have a mortgage. People were counseled to get a home loan for the mortgage-interest deduction. However, that deduction was never intended to promote homeownership, wrote Dennis J. Ventry Jr., a University of California atDavis law professor, in the journal Law & Contemporary Problems. Ventry concluded that the mortgage deduction promoted overinvestment in residential real estate.

How true.

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