The sour economy is pushing affluent Americans out of expensive mortgages and into rental agreements – and many seem happy in the bargain. New York City is a good case study of this phenomenon, as its residents' demand for rentals has continued to rise during the Great Recession.
Even the Hollywood set is opting to rent. Actor Will Smith doesn’t own a home in New York City, and apparently doesn’t want to. When he needed a pad for a long-term movie shoot, he didn’t think twice about buying in the Big Apple – he rented a 7,326 fourth-floor condo for $55,000 per month. The property had been listed for sale at $19.5 million, according to The New York Post.
Like Smith, more and more wealthy Americans are turning their back on mortgages, opting instead to sign a rental agreement. The trend does mirror that of most Americans, as a December 2010 Fannie Mae study says that 33% of Americans would rather rent their next home than buy it, up from 30% in January 2010. Among those who strictly rent, 59% say they will continue to rent even if they move, up from 54% in January 2010.
"Despite Americans' strong desire to own their homes, our study reveals that life events are greatly influencing families' decision to rent. This trend, coupled with the housing crisis, has caused consumers to approach homeownership with greater caution and thoughtfulness," said Doug Duncan, Fannie Mae (Stock Quote: FNM) Vice President and Chief Economist.
CNBC.com reports that affluent Americans are putting their money where their mouths are. In Manhattan, 200 new apartment leases valued at more than $10,000 per month each were signed and rented in the third quarter of 2010. Compare that to the same period one year earlier, when only 89 such properties were rented.
“More affluent Americans are opting to rent as oppose to buy,” Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach, Florida, told CNBC. “Within the last year, so many people have seen their family and friends get burned in real estate. They don’t see it as being a risk free investment as they used to.”
It’s not just New York City, either. Real estate agents in Chicago, Miami and San Francisco also report that more affluent homeowners are looking to shed their mortgages and rent instead.