Once happy homeowners, now reluctant renters

(CBS News) DOUGLAS COUNTY, Colo. - About those rising home prices: In Phoenix -- hit hard by the housing meltdown, prices were up more than 16 percent in July. In Detroit, they jumped more than 6 percent. And in Denver, prices were up nearly 5.5 percent. All of that are good news for the folks who are keeping up with their mortgages.

But people facing foreclosure are running into a new problem. Nationally,the availability of rentals is now at its lowest rate since 2001.

When John and Gina Burnett bought their home 10 years ago in suburban Denver, they thought they would spend the rest of their lives here with Gina's son, Keith, who has Down's syndrome.

Home prices rise, but still only at 2003 levels

But John lost his job three years ago in the construction industry. "What happened to all the jobs?" John asked. "Where did they go?"

Now they face losing their house to foreclosure, and for them an unplanned transition from homeowner to renter.

"It's very hard. It's painful," said Gina. "It's frustrating." She acknowledged that is not all the way the American Dream was supposed to come out. "We've done everything that we possibly to keep this from happening. "

And as more foreclosed families need apartments, they are driving up demand and prices.

Nationwide vacancy rates hit a 10-year low in 2011, and rents increased 4.7 percent since last year.

"At one apartment," said Gina, "it would cost approximately $3,000-$4,000 just to get into the apartment." She added that she doesn't have $4,000 and doesn't know what they'll do.

Ron Throupe, a Denver real estate economist, said it will take at least two years for new construction to ease the tight apartment market, and much longer for foreclosed families to buy another home.

"They lost their equity so they're going to have to save in order to buy a new home someday." Throupe. As for how long it would take for them come back and do that, he said, "Likely 5 to 7 years."

Gina is 51, John is 60 -- ages when life should be about the good days ahead.

"At this age, we should be looking at retirement. And that's really hard," said Gina.

Instead, the Burnetts are looking for an apartment. They know that the longer it takes, the higher their rent may be.

[Vietnamtwo]

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[vianetta]

Ok, the solution to the problem here is not that difficult to visualize. Right now, renting is too expensive *and* owning is too expensive. Why are people overspending on rent? It's crazy. Go homeless. You don't have to look like a bum to do it. Use your money and live well while homeless. Most cities have areas where one can park a vehicle for a few days for free before a need to move it for street cleaning. For hygiene get a gym membership or even more inexpensively, use wet naps. There are many options for dry washing these days. Save thousands of dollars per month, don't waste thousands of dollars per month.

[john92021]

apartments are scarce but empty houses are plentiful, makes sense. Owning a home is not what it use to be. I don't own now and don't miss it that bad. I am free to move for a job, better rent, bad neighbors, ridiculous tax increases, outrages utility charges, crime encroachment and environmental pollution. As we have seen home ownership can be a path to ruin. I still own a cottage, it's taxes are getting ridiculous but it is still a possible lifestyle alternative. I don't see why you would buy in an obvious economic collapse. Better to buy rice and beans than a new iphone.

[mari1963]

I love renting. I would never own a home again. I love the freedom of calling someone else to fix whatever is broken. And I love being able to leave and move on when I want. I don't have to wait and sell a home if I want to go and live somewhere else.

That said, I do not feel sorry for anyone who bought a home they couldn't afford. They had no business doing it and intelligent tax-paying, living-within-our-means, citizens should not have to bail them out.

If you lose your home because you over extended yourself or made bad, greedy decisions, then you deserve to lose it.

Renting is great. Try it. It beats being on the street.
Be grateful you can go rent something and stop whining!

[addict42]

The whole situation is madness and scarey as any of the currently employed American workers could be cast in a similar fate. All we can do is downsize our expenses as much as humanly possible foregoing restuarants, movies, concerts, and other unnecessary expenses. Personally, I am socking away as much of my paycheck as possbile because there's a big question mark whether I'll have my current job next Spring.

[Nearwater]

I don't think they did anything wrong to get where they are. This could happen to my family just as easily. We had to move to another state for jobs and downsize on a home and we may have to do it again. We are just 40 and 45 and we both have college degrees. No job is forever anymore. (unless you're a teacher)

[maiingan]

In no place in this report is it said that landlords' costs are rising. But it is said that foreclosed families are "driving up demand [for rentals] and prices." It's not in fact the case that this increased demand for rental dwellings is driving up prices. It is the decisions of the landlords alone which is causing prices for rentals to rise. They're trying to charge what the market will bear, except that the market really can't bear higher rental prices. If potential renters being pushed out by foreclosure coud bid on rentals, they'd try to bid the prices down, not up, as they are in bad financial shape already. The "law" of supply and demand doesn't actually force any buyer or seller to do anything with regard to prices. Landlords have got renters over a barel, but are not over a barrel themselves from their suppliers - just greedy.

[Honest-Engine]

I ask anyone buying a home download the MS Excel Loan Amortization spreadsheet available on MS Office Web Site. Punch in the numbers. Multiple the payment times 30 years. Be sure to add the yearly insurance, maintenance and property tax payments. Notice Excel breaks the payment down Principle vs Interest each month. What do you notice the first 15 plus years of the loan, Principle vs Interest ?

[Jaylah54200]

If you have to have a 30-year mortgage, you've obviously bought a house you couldn't afford.

[tmittelstaed]

I assume John and Gina didn't go looking for jobs outside of Denver because Gina is working. I also assume that they are underwater so selling their home was never an option. And I assume that they bought a home that had a mortgage payment that they could make when both were working but not when just one of them is working.

The article is right - they are screwed. So, what happened?

To put it simply - they overbought, they bought a house that was too expensive. Yes, I know they could afford it when both were working. But, not when just one was working. That's too expensive a house.

There are no easy ways out of this. If John had gotten a job flipping burgers, maybe worked 2 jobs like that - and if that income in conjunction with stripping down every last expense that wasn't absolutely required could have allowed them to meet the mortgage - then maybe they could do that until John hits age 65 and they can get SS. But, it's too late for that now, if foreclosure proceedings have started. Now, all they can do is rent - and rent as cheap a place as possible. And very likely they will have to rent far, far away from where Gina is working, and it will be small, and they will have to get rid of most of their furnishings, and they may even have to put their Downs son into state-run housing. And they will have to do this for 5 to 7 years, until John gets on SS.

All I can advise them is do not gamble with medical insurance. My family has a relative that was in the same spot that they are in now - and decided to save money by not carrying health insurance. The upshot is she has nothing now, medical bills have taken everything.

[Jaylah54200]

So you're assuming that the Down's syndrome son stayed at home by himself while John and Gina both worked? Do you have ANY idea what home care costs for a situation like that? (Obviously not.)

And if they've already used up all of their savings trying to stay afloat for three years of unemployment, what on earth makes you think that just John's social security check is going to be enough to live on?

And THREE jobs "flipping burgers" wouldn't come anywhere close to what John was making before.

Sure, it's easy for you to suggest that they put their son in a home. Wonder how anxious you'd be to do that if it was your child?

[Jaylah54200]

by sallychicago September 25, 2012 11:41 PM EDT
Can someone tell me what's so bad about renting?

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by Honest-Engine September 26, 2012 12:47 AM EDT
A house is absolute money pit nothing more. Any body tell you its an investment is nuts. You add up all you spend for a house for 30 years what ya got, a house.

_________________________

Obviously, neither of you has much financial savvy or has ever owned your own home.

The difference between buying and renting a home is basically the same difference between buying and leasing ("fleecing") a car.

At the end of the loan period, you own it and you don't have to make rent/payments on it any more.

It's true that if you are in a job where you end up having to move every few years, buying a home probably isn't your best option. Just like if you're one of the people who thinks they have to always have a new car every 2 years (which means you never get out from under the car payments anyway), leasing is probably your better option.

It's also true that, when you own your own home, if your roof springs a leak or your water heater goes out, it's up to you to do something about it. But I don't know any landlords who are "non-profit" property owners. The rent you're paying is more than enough to cover those property taxes, repairs, utilities, etc.

If you buy a home and live in it for 10 years, at the end of that time, you can sell the house and get at least most of your money back. (It used to be that you could make a profit on it, but that was due to the artificially inflated "value" of housing.)


If you rent an apartment for ten years, you move out and get NOTHING back.

Consider this: You buy a home when you're in your 30's. You pay off the mortgage and live in it -- payment free -- for another couple of decades. (Yes, you do have the expense of upkeep, but that's still less than rent.)

Now, when you're in your 70's and you don't want to keep mowing the lawn every week, shoveling the sidewalks and driveways every time it snows in the winter, and clean out the gutters every autumn, you can sell your house and use that money to buy into a nice apartment/town-home in an upscale retirement home. Whereas, if you'd been renting all that time, you would have just kissed all that rent money goodbye and wouldn't have the money saved up for that required buy-in.

[skeezix06]

In the future I think you'll find elderly homeowners living in their homes till death or as long as possible because they aren't going to be able to afford the rent, period.