A Bay Area family talks of moving to Portland, Oregon where they have friends and family and can secure a nice-size house and even land (what a concept!) for what it might cost to buy a two bedroom condo in San Francisco. But it just doesn’t seem to be the right time to sell the 40’s era family home Gary Hauser grew up in, and now shares with his wife and daughter. It also doesn’t seem to be the right time to invest in something new. The answer? Rent with no repent.

“We’re thinking of renting out our house while renting something either in Portland or an apartment in a sunnier location in San Francisco until the market picks up,” Hauser says. He may be onto something as renting could very possibly be replacing buying as the new American dream.

Rental Savings

There are strong arguments for renting instead of buying including the steady climb of mortgage interest rates along with the difficulty in securing in loan.

Rising Rates

An average 30-year-fixed went up 12 basis points to 5.23 percent April 1, while a 15-year fixed climbed to 4.53 percent and a jumbo 30-year fixed loan jumped to 5.92 percent. And while housing prices might be lower, renting costs have dipped as well, making it easier to get a better deal on a nice house in an upscale hood.

“It’s just a chain reaction since properties are going down in value, the property owners will eventually lower their rent to keep up with the market,” says Stop Stupid Stuff, a mortgage tutorial site.

While more people may be able to afford buying right now, the mortgage sites argues you can actually save a great deal by renting in certain locations.

“Some would argue that the difference in mortgage and rent is not that much that makes renting a bad idea but if you are living in a posh location where the mortgage could reach $5,000 a month, you will be able to rent a property within the same location with less than $4,000 a month,” it tells us. ” The $1,000 difference per month is just too large to be ignored.”

According to James L. Harrison of the Real Estate Blog, if you can afford not to sell your home, you can benefit from a steady cash flow that you can apply to your expenses and taxes while retaining ownership and making a profit. If you are relocating, you avoid the risk of selling and losing money, and can simply enjoy the income until you come back. He argues you also unload a lot of headaches assumed by the renter.

“You shall no longer have to pay the mortgage interest payments, insurance payments, property taxes, maintenance, repair and cleaning services,” he says. “You might be surprised to know that all costs of collecting your rent like traveling, local transportation, maintaining, and repairing your rented property can be deducted form the tax. Moreover, the depreciation expense is also taken care of my the amount of rent that you are getting. Hence, you have a good tax shelter, and save a lot of money.”

Disadvantages to Renting

Playing Landlord

The biggest disadvantage is having to play landlord, according to Alla Gershberg, MBA and a principal with the Paragon Real Estate Group in San Francisco. “Managing a rental house and tenants can be a hassle and cost a lot if you choose to hire a professional property manager,” she finds.

She adds that once you decide to sell, it can be tricky. “If you decide to sell because of rent control laws, evicting tenants to sell the home later may be problematic, prohibitively expensive or even impossible. If it’s impossible to evict the tenants, then you have to show it while it is tenant occupied, which can bring up multiple issues pertaining to appearance, showings and open houses. It makes it virtually impossible to perform any staging of the home to make sure it shows in its best possible light.”

She adds that rental properties rarely show as well as owner-occupied properties and renters often neglect basic upkeep and maintenance. Agents also find most buyers don’t want to buy tenant occupied homes and those buyers willing to deal with the issue expect a significant discount on the price.

“Renting for an extended period may affect the $250,000-$500,000 exclusion from capital gains for ownership occupied properties upon sale.”

Like most agents, Gershberg discourages clients from putting off selling homes  because it can be difficult to predict when the market will actually pick up, and meantime, the rental market also can weaken at the same time. She figures in terms of making an investment, you will probably fare better in the end from selling.

“It depends on the property,” she shares. “Rents in good neighborhoods are doing well but unlike multi-unit rental properties, single family home rents typically don’t generate income commensurate with current values. In other words, you could invest the proceeds of a current sale more profitably than the return one gets from rental income on a single family home.”

Renting a Room, Good Compromise

Until you decide about renting or selling, it might pay to simply rent a room in your house to eke out some extra income, just as our grandparents did during war time and the Great Depression. It will also give you a sampling of what it is like to play landlord, including collecting monthly rent and asking your tenant to do his or her part to keep up the room and shared grounds. Just follow the m.o. of best landlords, and do a good background check!  Remember, you can also take something in trade for that great green gardener, organic chef or babysitter that happens to need a room. It could be a great win-win situation.

Images: The Truth About…, All starplr, TV Rage

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“Get real! This is the biggest crisis humanity has faced,” warns Annie Leonard in her latest environmental education video, The Story of Cap & Trade. It is getting mixed reviews as the dust settles since its recent release.

A follow up to her widely popular animated eco tutorial, The Story of Stuff, it offers a pureed breakdown of how energy traders (greedy corporations and industries) and Wall Street financiers hope to get rich off of pretending to save the planet. The method to the madness: capping carbon emissions by giving permits to the polluters, who will in turn have the free license to pollute, especially in the third world where lax standards pose disastrous consequences for farmers and villagers.

Leonard’s release of the video comes on the heels of what many considered the failed talks for climate change solutions at Copenhagen, and identified the devils in the existing caps and trade proposals. These include issuing free permits to major polluters rather than selling the permits instead and allotting dividends to citizens and paying back ecological debt.  She also cites fake offsets which let polluters make false claims about what they will do the cut emissions, as well as the most dangerous devil of the plan – distraction.

Leonard tells us relying on the scheme weakens our ability to make strong laws away from fossil fuels.

While climate talks in Europe or on Capitol Hill have yet to scratch the surface on global caps on carbon emissions, the video illustrates (with charming, monochromatic animated stick figures) that education of the masses is crucial for curbing any crisis, as witnessed with the AIDS public information campaigns of the early 80s.

Leonard is adept at making sense of it all with her wholesome, kindergarten teacher approach to feeding our overwhelmed brains one truth at a time. In the end, she basically throws up her arms to declare about the process, “It’s protecting business as usual.”

Not all agree. “Just colossally ignorant,” is how one Grist writer sums up the video’s treatment of the trade entities, such as Enron, and how Europe has botched its attempts at handing out permits to cut emissions. Of course, many of the critics calling the critique of cap and trade deceptive also lump Leonard with the rest of the “Left” making up all of this hogwash about fossil fuels contributing to climate change.

Meanwhile, eco activist Michael Gaworecki, writing for Change.org, agrees with the video’s arguments, but says he isn’t sure the cap-and-trade plan isn’t the best mechanism for lowering carbon emissions that we can put in place  in enough time to make a difference.

“America needs to take the lead on stopping global warming if we’re to stand a chance, and anything perceived to interfere with unfettered capitalism is unlikely to fly in the good ol’ US of A,” he says.

Gaworecki adds that the few alternatives, such as a straight-up tax on carbon pollution, could be simple and effective, but “would never make it out of the American Congress alive.”

Image: Telegraph

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The signs seem to be everywhere: We are becoming a more frugal nation that needs to be fed deals and discounts as we plow through increasingly difficult financial times.

According to a new report by the Associated Press, frugality is the now the new norm in America and it stems from necessity. We are working less and earning less while the costs of food, schooling and housing remain pressing obligations we struggle to meet. So everyone seems to be cutting back across the board – white collar, blue collar, affluent, illegal.

The report finds consumer spending will never return to pre-recession levels, unlike what we witnessed after all other recessions since World War II when thriftiness took a back seat to the demand for new cars and shiny goods.

But this recession has taken such a huge bite out of spending and our old ways, Baby Boomers are unlikely to return to the affluenza that got us here in the first place. While the new frugality is good for the family budget and the planet, it is hurting the national economy including everyone associated with the housing market (sellers, contractors, laborers, suppliers) as well as gardeners, handymen and domestics.

And anyone who hangs at the local mall has seen how quiet things are, as shoppers buy what they need and buy it on sale rather than loading up on seasonal items they can do without.

The auto industry has seen a huge decline, from sales of cars and trucks averaging 16 million a year in boom times to a recession level of 10 million a year. The result could be further consolidation among auto makers and a loss of new vehicle taxes that aid state and local governments.

The report cites a Gallup survey taken last month which found seven in 10 Americans are cutting weekly expenses consistently through the summer. This is linked to the worst downturn since the Depression with unemployment currently at 9.7 percent and rising to double digits before the end of the year. Those who have jobs are earning less and have lost sizable percentages of their investment nest eggs.

We have always seen frugal behavior in some Americans, those wise enough to save more than they spend, to reuse what they can, to eat leftovers and take public transportation, turn off the lights and the heat and air whenever possible. Without even knowing it, those people are the real deal when it comes to being green. And now as the rest of us jump onto that bandwagon, they can proudly say, “I told you so.”

Image: timparkinson

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