"I’ve been renting for 25 years. And when I add up all that I’ve poured into that rental black hole, it’s formidable."
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The housing crisis has highlighted just how many people are living in homes they can't afford. According to data recently released by the US Census Bureau, about 15 percent of American with mortgages are spending at least half their income on housing costs. Do you know how much the government and most lenders say is the most you should spend on housing costs?
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Rent is a hot topic in the Bay Area, because we renters have a constant gripe about how much we're charged to live here. Whenever someone asks me how much I pay to rent my one-bedroom, the question always comes with some hesitant qualifier letting me know it's OK if I don't want to share. Personally, I have no problem answering someone when asked how much I pay in rent.
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Job losses have triggered a rental slowdown as many renters are recruiting roommates or turning to the guest rooms of friends and family. Reduced occupancy has prevented landlords from raising rents, and in many areas rents have fallen or remain stagnant.
Rental markets are slowing in places that weren't particularly impacted by the housing crisis.
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Adventure and possibility push new grads to move to a new city and many (including yours truly) do so with low entry-level salary offers in hand. While you're sure of your ability to pay monthly rent and are willing to fork over a high percentage of your salary, searching for an apartment without a certain level of income can be an incredibly frustrating process.
Many landlords require a renter's income to be as much as 45 times monthly rent, so new grads without that pedigree might find themselves as I did: moving in to a tiny apartment in a walk-up building with steep stairs, a blocked fire escape, windows that didn't fully close, and a charming water heater taking up half the closet-sized kitchen.
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Taking the cohabitation step with your honey is a big deal and it may take some time to adjust to the new arrangement. It also requires more thoughtfulness on both accounts, and inevitably more money talk is involved as bills and rent need to be paid.
A friend of mine is moving with her guy to another state in just a few months.
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Dear Savvy,
I have a major dilemma that I'm hoping you can help me with. I moved to Seattle for a job that seemed great on paper but turned out to be a total nightmare. They actually let me go after 2 weeks, without any reason given other than "you weren't the right one" — this is after I just moved several states away from home, and before I was given a chance to perform my job!
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The decision to continue renting or make the jump to buy your own place is one of the biggest financial decisions you can make. David Leonhardt of the New York Times offers a simple formula to help figure out if renting or owning is more costly: "You find two similar houses, one for sale and the other for rent, and divide the sale price by the annual rent. You can call the result the rent ratio."
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The benefits of renting include not having to worry about maintenance of the property and not having to take on a mortgage, but you also have less control over your living situation. When a landlord fails to make her mortgage payments it has a direct affect on the building's tenants, and that effect is eviction. Even if a tenant makes her rent payments every month she doesn't have any rights when the building faces foreclosure, and there's nothing that states she'll even get her security deposit returned.
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