Despite steadily rising home prices and brutal seller's markets in some areas, America's homeownership rate has been inching back up from its 2015 lows, reaching 64.2% in January. That leaves more than a third of American households renting their homes — thought not all of them want to be.
Many renters are quite content living lease to lease — especially after the foreclosure crisis laid bare the fact that owning a home isn't for everyone and can sometimes cause more financial problems than it solves. But according to NerdWallet's 2018 Home Buyer Report, they're in the minority: Only 17% of Americans surveyed prefer renting to homeownership. And their top reasons for renting suggest that the choice is sometimes rooted more in financial reality than lifestyle preferences.
Reason No. 1: Don't Have the Money to Buy
More than half (56%) of those who said they prefer renting to buying said they lack the funds to buy a home. Whether this means they haven't been able to save up a down payment or can't afford a mortgage, we don't know.
It could very well be both: Home prices rose 37% between 2012 and 2017, while more and more potential buyers are weighed down by student loan debt and struggling to save a down payment. And as mortgage interest rates creep upward, it'll only get more expensive to buy the exact same house.
Reason No. 2: (Financial) Commitment Issues
About a quarter of those renters said they don't want to be financially committed. This is perhaps the most healthy reason to keep renting. One of the biggest benefits to renting a home versus buying one — from a financial standpoint, anyway — is the flexibility it affords: If you're offered a dream job on the other side of the country or even the world, you're pretty much free to take it.
When my wife and I bought our home, this was our biggest mental obstacle: Betting hundreds of thousands of dollars that we'd want to stay at one address for the foreseeable future. A strong rental market in our area eased our concerns, knowing that we could — if that dream job came up and we needed to bounce — theoretically rent out the home and cover most of the mortgage. But with our life savings sitting in our checking account a few days before closing, we definitely had a conversation about bailing on the house and just traveling the world for a few years!
Reason No. 3: Bad Credit
Good credit is crucial if you want to qualify for a mortgage. So it's no wonder about one in five respondents (22%) said the reason they rent is because of bad credit. Somewhat surprisingly (or not, given our slacker heroes?), Generation X actually led the pack here, with 29% saying credit issues were holding them back, versus only 19% of millennials.
Reason No. 4: Don't Want to Deal With Maintenance
This is another very good reason to keep renting — the cost and burden of home upkeep can be staggering and exhausting. About half (51%) of respondents said they'd rather rent so they don't have to deal with maintenance issues, but don't assume that's because millennials are afraid of "adulting" — only 30% of millennials cited this as a reason they prefer renting. Meanwhile — and quite understandably — 71% of those over age 55 value the maintenance-free rental lifestyle.
Tell us: If you're a renter, is it out of choice or necessity?