There are many universally agreed-upon reasons why prudent people decide that buying homes is a course of action, flexibility has never been high on the list. In fact, the lack of flexibility associated with owning is more likely to influence the buy-or-rent decision. The common perception is that after you’ve settled into your new home, if unexpected circumstances arise that make a move necessary, it’s bound to take an awkwardly long time to sell. When you rent—especially on a month-to-month basis—picking up and moving is a simple 30- or 60-day affair.
That flexibility comes at a steep price, though. Renters must acknowledge that they are necessarily losing out financially for keeping their options open. Come tax time, what can be as much as a five-figure mortgage interest deduction is painful to think about. And reading about the latest 15%+ increase in homeowner equity can be equally aggravating—but at least you’re not ‘tied down’ to that king-size, hard-to-divest investment! Right?
It has long been a rule of thumb for buying homes that the cost and hassle of selling make it impractical if you don’t intend to stick around for at least four or five years. But rules of thumb can be misleading when surrounding conditions change—and what hasn’t been widely acknowledged is how recent history has made some propositions less realistic. If last month’s National Association of Realtors®’ Confidence Index is accurate (it is), there are any number of recent examples where the flexibility axiom hasn’t proved useful.
The key element is the national measure of how long it’s been taking to sell. According to the latest research, that seems to be 17 days. According to the NAR:
• In April, “properties typically stayed on the market for 17 days.”
• The number of days “in the prior month”? Seventeen days.
• And a year ago? Per the Confidence Index, it was 17 days.
Backing up that eye-opening figure were more details:
• Eighty-eight percent of listings stayed on the market for less than one month.
• That figure was 87% for the prior month.
• And a year ago? 88%.
For renters who signed one- or two-year leases in an effort to avoid quickly-rising rent increases, the “flexibility” advantage had already begun to evaporate. It’s a rule of thumb that will surely be valid again someday, but for now, it at least bears reexamination.