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Jan 21, 2015

The Dream of Home Ownership Remains Alive

Samantha McLemore

Anecdotes do not make research, but they do help shed light on the psychology of some homebuyers. I sent out an email to some “renter” friends inquiring about their decision and got this prompt and thorough response from one of my dearest friends. I think it really illustrates well some of the underlying dynamics. Separately, my sister, who is a homeowner and has a young family, has told her husband they WILL move this year and a realtor is coming this week to list their house….

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Renting v. Buying


So, here are my thoughts...

Through my 20's I was always happy to rent for several reasons...

1) I couldn't really afford to buy in Washington or Chicago

2) I was never really sure I would be in either place long enough to think that buying was a good move for me

3) As I embarked on working at (a consulting firm) and traveled as much as I did, it was nice to not have the responsibility of home ownership...if something went wrong, all I had to do was call someone to fix it, I didn't have to deal with it

4) When the economy tanked, I was happy to be a renter because I felt like if things went south, I didn't have to worry about a mortgage. I could pack up and move home with very little to worry about.

Then I moved to Memphis...

1) I kept renting because I didn't know where I wanted to live and didn't want to commit

2) Then met John, got married and got pregnant pretty fast. Now I want a house badly...for the investment, for having a place that is our own to work on, and to have some security about having a home that can't be taken away by a landlord or something.

3) But we've had to save and it's hard because we kinda skipped the "starter house" era and are looking at the equivalent of a lot of people's second homes (a little bigger, something we can grow into)

4) We want to buy while the housing rates are still low (hahah now-ish)

5) We have been casually looking all fall and just signed on with a realtor over the holidays.

6) If we find something this spring before baby, I'd be happy...but ideally in the next year we'll find a place

7) The reality is that unless we buy a house at the very tippy top of our budget, a mortgage will likely be less expensive than our current rent.

8) The inventory stinks. Pretty bad. There is very little on the market in Memphis and things are moving really fast. Honestly, many houses are selling pre-market, just through word of mouth. We've looked at several houses via friends and many of them didn't ever go on the market at all.

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From our perspective as investors: Builder confidence is at 9-year highs, and Lawrence Yun, chief economist of the National Association of Realtors, estimates that new home sales will rise 41% this year to 624,000 and single family starts will rise 32% to 840,000. The homebuilders have sold off on margin fears even as mortgage rates have continued to fall. We believe that the housing market will continue its steady recovery and there are solid opportunities for long term investors in the housing stocks.




The views expressed in this commentary reflect those of LMM LLC (LMM) portfolio manager(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and LMM disclaims any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Because investment decisions are based on numerous factors, these views may not be relied upon as an indication of trading on behalf of any portfolio. Any data cited is from sources believed to be reliable, but is not guaranteed as to accuracy or completeness.

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