Renting: Wave of the Future

I have seen the recommendation to "walk away from your mortgage" cropping up everywhere lately.  It sounded like fringe advice at first, but now I have seen it advised by financial advice celebrities like Suze Orman, and most recently in a New York Times article.

In fact, the Times is running two renting-positive articles at the same time - one recommending that homeowners stuck in an upside-down or "underwater" situation with their mortgage just walk away, and one exploring the stories of people (specifically men) who bought houses, came to regret it, and went happily back to renting.

This is a far cry from the prevailing attitude of the last 20 years, summed up sardonically by financial adviser Dave Ramsey with the sardonic, "Renters go to hell."  With the rare exception of America's largest cities (like New York City), only the worst of the worst rented - every DECENT person owned their homes.  Renting had as big a social stigma as smoking or driving a clapped out El Camino.

For many people in the New York Times article "Men Happy To Be Free From Owning Homes," it was that social stigma that convinced them to buy in the first place.  That and the irrational exuberance of a market that promised you a 200% return on your investment of a home.  

"Looking back, [Mr. Berks] wonders why so many friends encouraged him to buy a house."

High five!  I remember a time in the early 2000s when it seemed like everyone I knew - and some people I didn't - was advising me to buy a home.  The funny thing was, it was always unsolicited advice.  Here I'd be, chugging along through my day, when suddenly someone would pop out and explain the "property ladder."  

The idea with the property ladder is that you buy something crappy, and then you sell it to someone else who wants something crappy, and use the money from the sale to buy something slightly better.  Repeat endlessly, until you're living in a mansion.  Wahoo!

The problem was that the entire concept of the "property ladder" was, I knew, pretty recent.  In my grandparents' and parents' generation, you bought a home and raised a family and eventually died there, the end.  So even though people passed it along as the wisdom of the ages, it really wasn't.  

The next thing about the property ladder is that it was predicated upon a real estate market which continually grows.  This not only defies logic, but even at the time, a lot of well respected experts were talking about the "real estate bubble," and saying that it was going to burst eventually.  Everyone who acts surprised at the bursting real estate bubble just wasn't paying attention.  

In the end, I decided that the real estate market looked just like a pyramid scheme.  And guess what?  It basically was.

I also knew that, working in the high tech startup industry, my income was hardly assured.  The job market was volatile even then, and people were talking about a high tech bubble bursting soon as well.  I hedged my bets, and I'm glad I did, because they turned out to be right, too.