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Last updated: May 18, 2022 • Real Estate Investing

Could Renting Become a Part of the American Dream?

Many generations have been born, got to grow up and live in America believing in the “American Dream”? That “American Dream” made everyone strive for more. Whether it was more profit or more space by purchasing a bigger house, the idea that if you strive for more, you will get access to more has been a founding principle for Americans for generations.

Can we still say that that principle is still achievable in today’s reality? We’re not going to get into information related to the pandemic that is still affecting our lives, the 2008 economic crisis, or the growing geopolitical or environmental threats we’re facing. Those are all catalysts that affect the economy in which all generations of homebuyers live.

Not sure about you, depending on the generation you belong to, but today’s economic reality makes it almost impossible to live. Not because we can’t breathe the air or drink the water, but because it’s not affordable. Our grandparents, and even parents to some extent, were able to afford to live, purchase a home, and maybe even a vacation home on their salaries. Back when our grandparents were buying their first home, they could sustain a family of four or five from just one salary. The truth of the matter is that we can no longer say that.

The American Dream vs. the American Economy

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By simply looking at a chart of how incomes and home prices have changed since 1950, you will understand why each Millennial is outraged when their financial struggles are disregarded. Back then, the median household income was $2,990 while the median home value was $7,400. Quick math shows that in 2.4 years the average family could fully own their home in 1950. In 2010, the median household income stopped at $49,500, while the median home value was at $221,800. The same math underlines that an average family needed $4.4 years to fully pay for their home. That gap only widened since then with the median home value being at $375,000 after a 16% increase between 2020 and 2021, while the median household income was at $67,500. That brings the ratio to 5.5%.

That is the simplest explanation for the current housing situation. Purchasing power is dropping by the year and fewer and fewer people can afford to purchase a home. It simply isn’t a viable option. The examples above consider spending every cent to pay for your home. But you can’t do that because there are still plenty of other things that you need. This is why mortgages came to be. But in today’s world, a mortgage feels more like a ball and chain around your neck and less like a life vest that’s supposed to save you.

Why is Homeownership so Important for Americans?

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While people across the globe are dreaming of one day owning their own home, few nationalities pursue that dream as ardently as Americans. Historically, there has been a drop in homeownership across the US since 1980 and millions of Americans can not reach that dream despite their tries, according to The New York Times, Americans have the highest homeownership rate in the world. This is the norm that we grew up in. 

Among the multiple reasons behind it, there has to be something that sets Americans apart from the rest of the world because the whole globe knows about the American Dream. So, why is homeownership so important for Americans? The answer is simple. Economy. 

The housing market no longer represents only the roof over our heads, but in America, it’s a solid investment opportunity. The rate at which housing prices change can even invite speculators and investors that oversee the overall appeal of a city or neighborhood and invest when prices are low so that they can sell when prices climb. This is something that happens across the US and it leaves first-time homebuyers unable to actually afford those prices.

Still, if you do manage to purchase a home when prices are low, you’ll be able to make a pretty penny when prices sky-rocket. Just looking over the last few months we can see how drastic housing prices can change. Furthermore, if the purpose of a home was to provide stability and security for child upbringing, nowadays, it’s more about capital investments than basic needs.

Homeownership Through the Ages

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Walt Whitman once said, “a man is not a whole and complete man unless he owns a home and the ground it stands on.” Other quotes that share the same sentiment can be found throughout this country’s history as well. From “my old Kentucky Home” to “Home Sweet Home” ideals Americans started to believe that to own a home is to be American. Quotes similar to that originated at historical milestones whether they came from William Levitt, Bill Clinton, or George W. Bush. Still, what stuck is that owning a home is what makes you American. Unfair and rather discriminating but things changed since then.

Since then only the wealthy, well off and financially comfortable can afford the American Dream. It’s no longer about how much you work, how hard you push yourself, the truth of the matter is that incomes did not grow at the same rate as home values. Those jobs that would make it possible for a young professional to purchase a property are unavailable to many of them which led many young people to create their own jobs and side hustles to be able to access the American Dream. The bad news is, that the American Dream can become an American Nightmare due to foreclosures. When job stability is nonexistent, and savings are low because you just spent all of it on your downpayment, losing your job doesn’t only mean that you’ll be left without a job. That job pays your mortgage. If you don’t pay the mortgage you don’t have a home. So what is the alternative?

Is Renting Better than Buying?

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Today’s real estate market can seem terrifying to someone who witnessed the market crash of 2008. With everything that is happening around the world and the volatility that can transfer to real estate pricing, it’s to be expected that people think twice, or three times before borrowing money that they’ll have to give back with interest to buy a home. Right now, few people can be sure that their real estate decision won’t hurt them in the future.

So how do you know whether you should rent or buy? We’ll go over a few renting vs buying pros and cons of each option, but first, let’s see when it’s better to rent rather than buy and see where we get from there.

Lack of Savings

This, alone, should tell you that buying may not be the best idea. And don’t only think that having enough money for a downpayment means that you have the finances necessary to embark on the homeownership venture. A great tip is to look at your savings and try to establish how long they could last you. If you could cover basic budgetary needs for the next three to six months, that shows you are responsible enough to go ahead and buy real estate. 

However, if not, better stand your ground. Renting isn’t all bad so there’s no need to overlook it entirely. You don’t have to own a home by the time you are 20 or 25 or 30. Life flows differently for everyone and these types of decisions should be based on financial responsibility and not age.

Short-term Accommodation

Whenever you’re considering buying a house, try to determine how long you think it will remain your home. If you have plans to move across the country in five years, buying a home should only be seen as a passive investment opportunity. You can buy a home even if you only intend to live there for a year, but it won’t be the safest investment. Real estate investment can be profitable, but long-term investments have a higher return on investment rates. 

However, tying yourself down to a mortgage if you know you won’t live there for more than a couple of years, don’t make the purchase. You’ll have the mortgage to worry about, might lose financial benefits that can be available for first-time home buyers. Also, depending on state laws, you might be affected by tax penalties if you sell too soon.

Level of Stability

If you’re at the start of your life, fresh off the university benches, new in the job market, or changing city, state, or jobs, it might be wiser to rent for a bit. Get your bearings. Let the new city, job, stage in life, introduce itself to you. Discover where you are and where you’re heading before you get tied down to a property and a mortgage loan for the next decade. What if you don’t like the city, job, or state? You’ll still have a house, a mortgage, and all that stuff to deal with and consider instead of just packing your bags and leaving.

Renting is ideal for these types of situations as you can easily change your mind. The level of stability you have in your life can also mean the stability of your finances and your creditworthiness. A new job might not provide 100% security for a home purchase. Student loans can also complicate things. It’s better to wait a bit for things to settle before you take out a mortgage.

Renting vs Buying Pros and Cons

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Your American Dream can be as dreamy as you wish even if you rent so don’t let that concept sway you towards buying when you can’t afford it, so let’s see what are pros and cons of buying. Let’s have a renting vs buying pros and cons match and see which one will come out victorious. We’ll go into more details regarding the advantages of renting versus the disadvantages of renting as well, but first, we’ll cover the main talking points.

Renting Pros

Freedom – renters have a substantial amount of flexibility when it comes to their plans. A lease doesn’t tie you down to a property for 30 years as mortgages do. Homebuyers need to go through the whole home selling process if they want to pack up and leave. This can cause logistical struggles, a lot of paperwork, and hours spent in limbo until the property you purchased sells. As a renter, you are free to do whatever you want. Either you wait until your short-term lease is over or you find a sublessor in case your lease allows you to.

Simplicity – renters, most of the time, only need to make a phone call or complete an online request if something needs to be fixed around the apartment. Maintenance issues like leaky pipes, plumbing problems, or electrical issues are most often handled by the owner of the property. The landlord is the responsible party in this situation, not the renter, making it less stressful for renters to manage these situations.

Renting Cons

woman trying decide between renting or buying

Less say – this comes in opposition to the simplicity aspect described above. While renters don’t have to worry about maintenance costs related to essential features in an apartment, they also have less control over what is happening with the apartment. Furthermore, if the landlord decides to sell, they have no choice but to move or buy the apartment, if thats even an option. They can try to persuade their landlord but the final say isn’t theirs. During the selling process, if the renter hasn’t vacated the property yet, the landlord can come at any time for repairs, renovations to revitalize an old rental or maintenance. Also, if they have people interested in the property, they can bring them over, show them the property and discuss the possibility of purchasing the property.

No Equity – While renting is much more affordable in the short term, you don’t gain equity with every rent you pay as it happens with mortgage payments. Paying your rent every month doesn’t mean that you own more equity every month. That money is the fee for your use of the property, not for your ownership of the property. Any investments you might think of spending time on, won’t be money invested in your home, but money spent on someone else’s home. Still, the fact that you don’t build up equity means you aren’t responsible for expenses the property can cause like property taxes, home insurance costs, or maintenance costs. These costs are paid by the landlord, not the renter.

Buying Pros

business loans real estate concept

Equity – we ended with equity, so let’s start with it. Homeownership is the best path to build equity. Real estate is the most tangible type of investment as the value of the property is real. You can hold it and wait for it to appreciate, growing your return on investment, or you can capitalize on it whenever you want. Equity is considered by many the simplest way to grow your wealth and it can be a path to more investments in the future. The basic idea is that you are investing in a property that you own and you can profit off of, not in someone else’s property that you have no interest in, nor will you profit off of.

Tax Breaks – throughout the real estate industry, it is known that among the most famous benefits of homeownership is the tax breaks that are available for homebuyers that purchase property from the US government. Some of the potential tax breaks that you could benefit from are mortgage interest deductions, credits for first-time home buyers, and expense deductions for home offices. They can be accessed depending on the situation you are in.

Buying Cons

wooden block taxes fall

Large upfront payment – most homebuyers, especially first-time homebuyers, need to save up a lot of money in order to pay their downpayment for their home. The general suggestion is to cover 20% of the home’s purchase price through your downpayment. This amount might not be affordable to many people making the whole process that much more difficult. It truly depends on the individual’s financial situation. There are programs that are offered by the US Federal Housing Administration, that make it possible to pay a smaller downpayment. Still, most homebuyers need to save up, in some cases, tens of thousands of dollars if not more in order to be able to live their American Dream.

Responsibility – being a homeowner means that you are responsible for any maintenance situations required by the property. You’ll be in charge of hiring repairmen, paying them, making sure that they fix the problem safely and in accordance with the laws in your state. Any damage that the property can suffer will fall on your budget and your time. It doesn’t matter if the property is damaged by natural disasters or electrical outlets going haywire, you are the one who will pay for it. 

Advantage of Renting

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Those who have some experience renting might have encountered the following advantages of renting. They are among the most common lines used to promote renting over buying. Take a look at these advantages of renting and consider them before making a final decision.

  • Lack of property taxes – if you don’t own a property, you don’t have property taxes to pay. That’s basically all there is to it. You don’t own something that you would be taxed for.
  • Lower monthly cost – as one of the most important advantages of renting, lower monthly payments in 2021 were considerably appealing for young and old people alike. Unless you’re renting a villa, your rent is almost always going to be lower than mortgage payments.
  • No maintenance costs – while we already covered this, aside from making sure the home is clean and the grass is green, your responsibility doesn’t increase the cost of renting because you’re not the one responsible for them.
  • Flexibility to change your mind – homeowners, most often, need to sell a home before they can buy another one. Renters can be asked to wait for their lease to be over, can sublease the apartment if the contract allows them to, or can just leave and suffer the consequences of canceling a lease before it expires.
  • Opportunities for other investments – if you have some money saved up, but not enough for a downpayment, invest it in stock, bonds, or yourself if you don’t have plans to buy a property anytime soon.
  • No fire or homeowner’s insurance – simply put, this is the landlord’s responsibility. Yours might be, to get a renter’s insurance that protects against loss of personal property and provides protection against personal liability lawsuits.

Disadvantages of Renting

rental agreement form signing

Of course, like everything else, there’s a flip side to renting. The disadvantages of renting can seem more impactful, partly because we tend to give more importance to the negative aspects of life. Regardless, we consider that it’s better to be aware of the disadvantages of renting in order to make an informed decision.

  • Restricted by the lease – if you have a puppy but your landlord doesn’t accept one, if the lease specifies that, you can’t have a dog. It can get as far as forcing you to either get rid of the dog or move. Some people just don’t like dogs. I, personally, don’t like those people.
  • No equity – as already covered before, monthly rent won’t build up equity. The monthly mortgage does that and a mortgage is a loan you make in order to buy a house.
  • Unfortunate landlords or neighbors – you can pick and choose who your landlord is but you can’t choose your neighbors. While you do meet your landlord before you sign on the dotted line, you’ll only meet your neighbors once you live there.
  • No homeownership – you don’t own the property so any changes you want to implement in the home need to be approved by the landlord. 
  • No tax deductions – no homeownership means no tax deduction for the property, usually, but there are alternatives you could look into.


 What you need to understand is that the renting vs buying pros and cons can vary but they all apply to your individual circumstances. While you can ask for the opinions of other people, read articles online such as this, or talk to real estate professionals who are more updated with the ups and downs of the real estate market, the final decision is yours. You will have to own it, assume it and live with it. 

It’s as simple, or as complicated, as that. It’s adulting and you can’t have an older adult, an “adultier” adult to tell you what to do. I mean, you could find one, but if you’re letting someone else make that decision for you, you might end up holding them responsible for the outcome. Regardless of who that person is, it’s not the most pleasant situation. Make up your mind and if it’s not the best decision, you’ll do what you need to do to fix or reverse the situation when that moment comes.


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