Tag Archives: high school

Obamas Buy Their Rental

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2011 portrait by Pete Souza of the Obama family

Realtor.com quoted me in Former President Obama Finally Buys the DC Home He’s Renting: 6 Smart Reasons Why. It reads, in part,

Former President Barack Obama has decided that buying beats renting. The former first family have surprised many by purchasing the Washington, DC, house they’ve been leasing and living in since January, coughing up $8.1 million to call the place their own.

After vacating the White House, the Obamas had moved into the 6,441-square-foot, nine-bedroom, 8.5-bath mansion, located at 2446 Belmont Road NW in the tony neighborhood of Kalorama. The neighborhood has since become the place for the new political elite, with Jared Kushner and Ivanka Trump moving into a luxe rental a couple of blocks away, and Secretary of State Rex Tillerson snapping up a $5.6 million Colonial Revival down the street.

The reason the Obamas decided to stick around DC in the first place was so their younger daughter, Sasha, then a freshman at posh Sidwell Friends, could finish up high school there. With only three years to go, renting seemed to make sense so that the Obamas could easily pick up and move once she’s done.

But apparently, there’s been a big change of heart. Why?

On its surface, their decision seems a bit puzzling, given Sasha now has only two–and-a-half years to go. In real estate, the general rule is that it makes sense to buy a home only if you plan to stay put for five years, because this allows time for your house to appreciate, which helps you recoup hefty closing costs.

“People who sell after a year or two of ownership will often find that they have lost money on their purchase,” explains David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School.

Nonetheless, real estate agents and other experts we spoke to say there could be plenty of reasons it’s smarter for the Obamas to buy rather than rent, even for this short span of time. Here are a few possibilities to ponder.

Reason No. 1: They’re making a commitment to DC

As presidential spokesman Kevin Lewis explained in a statement, “Given that President and Mrs. Obama will be in Washington for at least another two and a half years, it made sense for them to buy a home rather than continuing to rent property.”

Granted, you can read a whole lot into that “at least” if you want. After all, as Atlanta Realtor® Bruce Ailion explains, “Many buyers think they will only be in a property for two to three years and end up living there three to seven years. That is common.”

And it might be an indicator that our former commander in chief isn’t ready to shed the political life quite yet.

“Perhaps they want to keep a foothold in Washington, DC, for other reasons with regard to political advocacy and involvement,” says Florida Realtor Cara Ameer.

Reason No. 2: In certain markets, 2.5 years is long enough to make a profit

While 2.5 years might not be long enough to profit on a home in general, that rule varies widely by neighborhood, based on rent levels, home prices—and how quickly both are going up. And this is one hot neighborhood.

It isn’t known exactly what the Obamas were paying in monthly rent, but estimates hover at around $22,000. It’s entirely possible that the former first couple did the math and determined that buying made far more financial sense, and that mortgage payments would be less of a monthly nut. (To find out what’s best for you, you can crunch the numbers in an online rent vs. buy calculator.)

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Reason No. 5: This home will sell for a premium—he’s a former president, after all!

“It was always a little perplexing why the Obamas would ever rent if they planned to stay for anything longer than a year,” contends Washington, DC, real estate agent Rachel Valentino.

Her reason: “While they’re buying at market value, they can eventually financially benefit on the back end, where a buyer will pay significantly more for the celebrity factor. We aren’t Southern California, where every house has that star appeal. So, I can only imagine what a buyer will eventually pay to own a piece of history.”

Reason No. 6: Profits aren’t everything

“One lesson we can draw from this story is that buying a home should not always be seen as a financial transaction,” says Reiss. “Sometimes we buy a home because it’s best for our family at a particular time. Sometimes we buy a home because we fall in love with it. And sometimes those are the best reasons of all to buy a home, profits be damned.”

Mommy, I’m Home!

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cartoon by Mell Lazarus

The Pew Research Center has released For First Time in Modern Era, Living with Parents Edges out Other Living Arrangements for 18- to 34-Year-Olds (link for complete report on right side of page). This report adds to the growing literature on changes in household formation (see here, for instance) that have taken hold in large part since the financial crisis. There are lots of reasons to think that the way we live now is different from how we lived one generation, two generations, three generations ago.

The report opens,

Broad demographic shifts in marital status, educational attainment and employment have transformed the way young adults in the U.S. are living, and a new Pew Research Center analysis of census data highlights the implications of these changes for the most basic element of their lives – where they call home. In 2014, for the first time in more than 130 years, adults ages 18 to 34 were slightly more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household.

This turn of events is fueled primarily by the dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35. Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other. This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents. (4, footnotes omitted)

The report found that education, race and ethnicity was linked to young adult living arrangements. Less educated young adults were more likely to live with a parent as were black and Hispanic young adults. Some of the other key findings include,

  • The growing tendency of young adults to live with parents predates the Great Recession. In 1960, 20% of 18- to 34-year-olds lived with mom and/or dad. In 2007, before the recession, 28% lived in their parental home.
  • In 2014, 40% of 18- to 34-year-olds who had not completed high school lived with parent(s), the highest rate observed since the 1940 Census when information on educational attainment was first collected.
  • Young adults in states in the South Atlantic, West South Central and Pacific United States have recently experienced the highest rates on record of living with parent(s).
  • With few exceptions, since 1880 young men across all races and ethnicities have been more likely than young women to live in the home of their parent(s).
  • The changing demographic characteristics of young adults—age, racial and ethnic diversity, rising college enrollment—explain little of the increase in living with parent(s) (8-9)

It seems like unemployment and underemployment; student debt; and postponement or retreat from the institution of marriage all play a role in delaying young adult household formation.

My own idiosyncratic takeaway from the report is that, boy, the way we live now sure is different from how earlier generations lived (look at the graph on page 4 to see what I mean). Moreover, there is no reason to think that one way is more “natural” or better than the other. That being said, it sure is worth figuring out what we are doing now in order to craft policies to properly respond to it.