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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.

We made renting seem so financially reckless that it surely encouraged people to jump into buying a home before they were ready.

The Fannie Mae National Housing Survey, conducted in December 2009 and January 2010, polled people with home loans and renters to gauge their feelings about the current state of homeownership, including whether they view a home as a safe investment.

Turns out many still see owning a home as key to increasing their wealth.

The Fannie Mae poll found that seven out of 10 respondents said buying a home is still one of the safest ways to invest.

However, the survey also uncovered a new trend regarding homeownership. Survey participants ranked a safe neighborhood and living near good schools ahead of making money on their home as a leading reason to become a homeowner.

Twenty-three percent of renters said they changed their plans and are putting off purchasing a home.

Hallelujah!

"Consumers are still committed to owning a home but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage," said Doug Duncan, Fannie Mae's vice president and chief economist.

It's what Duncan said next that I think is a sign that maybe, just maybe, people now understand that a home is not an ATM or a risk-free investment.

People, he noted, "are rebalancing their attitudes toward housing and homeownership by adopting a more realistic, long-term approach and are less willing to take risks. This focus on sustainable housing is better for the economy, better for the housing market and better for America's families."

In the Fannie Mae poll, respondents cited poor credit or a belief that they would not be able to afford the purchase and upkeep on a home as the top reasons for delaying homeownership.

It's great that people are viewing homeownership with much more caution now.

You are not a financial failure if you rent. It may be the smartest financial move you make until you are ready to handle a mortgage.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

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