With Homes Out Of Reach, Renters Are Re-defining The American Dream

Jordan Perkins, 36, could be a homeowner, but for now, he chooses to rent. He earns a comfortable salary from his sales job and is close to a seven-figure net worth — the product of an aggressive savings strategy he’s had since his late 20s. 

It just makes more sense right now, Perkins says. His two-bedroom condo in San Francisco, nicely situated with a view of the Golden Gate Bridge and Washington Square Park, rents for around $4,500 per month. “To buy the same unit, I’d be paying around $10,000 per month for the mortgage and need to put 20% down, not to mention insurance, HOA fees and maintenance,” Perkins says. 

As their peers pour through real estate listings in search of their “forever” home, a dedicated minority of U.S. adults like Perkins are moving in the opposite direction, finding that renting can provide a financial freedom that homeownership cannot. 

The numbers back them up: a Bankrate analysis of housing data shows that homes have become so expensive in recent years that Americans earning the median income are priced out of three in every four homes on the market. It’s also getting cheaper to rent, while the cost of owning is increasingly out of reach for most. 

What’s more, renters don’t need to shell out thousands of dollars to fix broken rain gutters or electrical outlets, and they’re not locked into a 30-year contract. Extra money in their budgets can be used right away or invested, not squirreled away in case an HVAC system busts. 

Perkins cites this as a major reason he’s been able to invest and grow his savings. If he owned, “my money would be tied up in a house — which might pay off eventually, but it might not,” he says. 

Besides, Perkins, an avid surfer, is determined to live a short drive from the waves. He tells me he could buy his childhood home in Idaho outright if he wanted to, but has no desire to be landlocked. “It’s not the life I want,” he says.

“Just because owning a home was my parents’ reality doesn’t mean it has to be mine.” 

With home prices ratcheting ever higher, prospective buyers are forced to squeeze even more money out of their budgets to stake their claim on a home. In many cases, buyers are spending much more than the real estate industry recommends, putting their finances at risk and making it tougher for the investment to eventually pay off. 

“Your home shouldn’t be where your wealth is,” Alabama-based mortgage broker Paul Leara says. When his clients are on the fence about buying, Leara urges them to consider what it costs to buy a house — closing costs, realtor fees, etc. — and instead think about putting that money into an index fund. 

“It will compound and grow to dwarf the equity you think you’re getting with a home,” he says.

Your home shouldn’t be where your wealth is.

— Paul Leara
mortgage broker with Mountain Mortgage

Leara’s advice echoes the mindset of renters in a variety of communities around the country. For them, the decision to rent isn’t about settling for what’s in their budget. It’s about creating a level of freedom, flexibility and control that homeownership can’t give.

This renter isn’t sure she can afford the hidden costs of homeownership

Sadie Evans, 36, of Lawrenceville, Georgia found out the hard way what a home costs to maintain. She previously rented a house in nearby Snellville from a woman who asked that she help contribute to necessary home repairs. “She said she was preparing me for home ownership,” Evans says. 

In total, Evans estimates she spent around $10,000 out of pocket on property repairs, the sum of her pandemic stimulus checks. “I just didn’t know better,” she says. “I have children, I was more willing to do things to keep a roof over our heads.” 

Evans is suing her former landlord — she knows now that she shouldn’t have had to pay for those property repairs. But she wonders if home ownership is something she truly wants or something she’s been conditioned to aspire to. “Are renters actually lower on the social ladder? Or do I really want to own a home one day?” she says. 

Now, Evans rents a house in Lawrenceville where she’s raising her three children ages 8, 10 and 13. This time, if the pipes burst or the roof caves in or something else on the house falls apart, she knows it’s not her responsibility to pay for the repair.

Evans is still toying with the idea of buying property one day, but she’s not in a rush to do so. “For me, renting is a conscious choice, not a fallback plan,” Evans says. “I want freedom to invest in my mobile mixology business and focus on building wealth in other ways before taking on the full responsibility of homeownership.” 

She likes the stability she has with renting; it’s allowed her to learn how to budget her expenses. Plus, now that she’s no longer paying for home repairs, she has more room in her budget to spend on her kids. “If my children want to play instruments, sports or pursue acting — whatever they want to do — they can because that money isn’t reserved for the home,” she says.

Buying a home felt like a rite of passage, until he was living paycheck to paycheck just to keep the home

When mortgage rates dropped to historic lows five years ago, John Santa Orta, 34, found himself signing a purchase agreement with his then-girlfriend on a house in St. Cloud, Florida — not because he yearned to own, but because he felt like it was just something he should do. 

“Everyone wants to own a home,” he says. “They say that the point is to pay off your house so all you have left to pay are property taxes.” 

The logic is hard to deny. 

Once you pay off your mortgage, your home is yours in perpetuity. You can leverage the equity you’ve built to get a loan, leave behind a tangible asset to future generations and make your living space your own. 

But tapping your home equity can get complex, and there’s no guarantee your home will still be standing when it comes time for someone to inherit it. Catastrophic home insurance claims have reached a seven-year high primarily due to climate-related disasters, according to a report from LexisNexis, an information and analytics company. Climate change is also expected to wipe out nearly $1.5 trillion in home values over the next 20 years. 

Orta said his experience with homeownership was anything but predictable. 

“Every year, our escrow payment went up,” he says, due to rising property insurance and home insurance costs. Soon, the monthly payments began to get dangerously close to their $3,500 comfort threshold. “We didn’t budget for it to go up every single year,” he says, and it forced them to live paycheck to paycheck. 

On top of growing escrow payments, he was hit with a surprise bill for property taxes. They had already paid for the year, but received a letter in the mail saying they owed an extra $800 because they were undercharged. 

“When we were renting, this didn’t happen,” he says. Their rent did go up by $20 to $30 per year, but it was more manageable than a three-figure surprise bill. 

Orta and his ex sold the house when they parted ways, each walking away with a $10,000 profit. He was stumped at how low the figure was, considering he’d taken good care of the home and seen his home value grow — he saw the figure rise each time he paid his mortgage online. “We were thinking we would get a lot of money when we sold the house.”

Renting helps me get control of my life.

— John Santa Orta

Orta now rents a 3-bedroom, 2-bathroom house, where his monthly housing payment is the same every month. It’s allowed him to grow his money in other ways; he’s contributing more to his 401(k) and dabbling in buying some stocks. But for Orta, the best part of renting is the freedom to live his life the way he wants to. 

Since becoming a renter, he’s traveled to other counties, something he wasn’t financially able to do while owning a home. He works as an assistant operations manager for Walmart; if his job asks him to relocate for a promotion, he can pack up and move — no home sale required. 

Like Perkins, Orta says owning a home is not a priority for him – at least right now – and that he’d rather pocket the money and stay renting. 

“I think there’s so much more to life than just working and paying bills.”