Renter Tenants Happy Real Estate InvestingMany Americans still see homeownership as a pillar of the American Dream, and buying a home is first on their list of financial priorities.  But renting has plenty of perks, from flexibility to lower risk to lower monthly payments (sometimes).  Without getting too mushy about it, who is happier at the end of the day, homeowners or tenants?  There are ways in which each are better off in the race for contentment, optimism, resilience and general health, so here are how each shake out.

What Makes Renters Happier

Mo’ Mortgage Mo’ Problems – Mortgages can be useful ways to leverage buying power, but they are also (rather large) debts that can wreak havoc if the borrower defaults on their loan payments.  Foreclosure is a far more damaging process to credit scores than eviction is, and mortgage lenders can go after defaulting borrowers for a deficiency judgment for all the money the bank lost because the borrower defaulted.

Further, higher mortgages come with higher stress, according to a Canadian study from 2004.  But the same study found that the least stressed people were owners with no mortgage, so consider mortgage and rent-related stress as being on a kind of a stress spectrum.

Time Spent with Friends – A study done by University of Pennsylvania professor Grace Wong Bucchianeri found that homeowners spent 4-6% less time with friends and neighbors than their renting counterparts.  What is less clear is whether age or housing density may be seeping into the data, as tenants tend to be younger and live in more urban areas with easier access to social outlets.  But the research does challenge the conventional research that homeowners lead more “satisfying” lives.

Similarly, Bucchianeri’s research also showed renters had less “house pain”, as she puts it: less stress and negative emotions stemming from their housing.

All You Need Is Love – Well, that and a roof overhead, food, etc, but a classic study by the University of Massachusetts found that married couples who rented their home had fewer verbal wrestling matches and more bedroom wrestling than their home-owning counterparts.  There was some speculation that contention among home-owning spouses may be linked to the fact that tenant and homeowner husbands alike reported working the same number of hours around the house, suggesting home-owning wives may be picking up the additional work involved in homeownership – and none too pleased about it.

Mobility/Flexibility – At risk of stating the obvious, the flexibility of moving at short notice does matter for both the tangibles, such as moving for employment (see this article on the correlation between homeownership and unemployment rates) and intangibles in life such as a feeling of freedom and the fulfillment that comes from living where desired.

Bottom Line: The Feeling of Financial Freedom

People who feel like they can do most of the things they want, whether these are vacations, or eating out at restaurants, or living in the neighborhood they prefer and sending their children to the schools they prefer, are simply happier people.  Whether renting affords someone this sense of financial freedom, or whether homeownership does, depends on the person and their finances.  An old rule of thumb may prove useful here however: people who plan on moving into a home and staying less than seven years should lease, while those who plan to stay seven years or longer should buy, because it takes about seven years for the average home to appreciate enough to handily reimburse the buyer for their closing costs.

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