Smart Moves by Ellen James Martin

RENTAL UNITS CAN OFFER BIG SAVINGS

Despite the recent economic downturn -- which has caused more young adults to move back home until they can find solid jobs -- the long-term trend is for more people in their 20s to live alone.

That's the finding of Eric Klinenberg, author of "Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone." In an interview, the New York University sociologist drew on U.S. Census data to support his conclusions.

Until recently, Klinenberg says many 20-somethings favored living with multiple roommates with whom they would have much in common. But that phenomenon has lately diminished.

"The fantasy of the collective housing situation has peaked. People living this way become disillusioned because there's always one roommate who doesn't pay the rent, who's messy or who just sits on the sofa all the time," Klinenberg says.

Statistics show that more young adults are delaying marriage until their late 20s or beyond. Yet as soon as they can afford it, many now seek the privacy and autonomy of solo living. And despite the housing-market turmoil in recent years, Klinenberg says a fair number of single people in their 20s now aspire to buy their own homes.

"Homeownership helps end the feeling of rootlessness. Single people who buy a place feel they're making a commitment to their life," Klinenberg says.

Margaret Carbonell Smith, a certified financial planner who heads her own firm, says interest among young adults in home-buying has begun to revive recently due to a combination of factors that can make buying more appealing than renting in many areas.

"It can be a really good time to buy a first home because prices are low and mortgage rates are also low," says Smith, who's affiliated with the Garrett Planning Network (www.garrettplanningnetwork.com).

Even so, she cautions would-be homebuyers who are single to be especially careful in assessing their financial situation.

"Buying a house is not a little purchase. And as a single person you have to remember there's no one else to pay the mortgage if something happens to your job," says Smith, who counts a number of young adults among her clients.

Are you a young single planning to buy a home? If so, these few pointers could prove useful:

-- Set conservative borrowing limits.

Among homeowners now facing foreclosure are many who used an adjustable-rate mortgage to finance their purchase. At the introductory "teaser rate," they were comfortable handling the payments on their mortgage. But once their ARM adjusted upward, they were in trouble.

Merrill Ottwein, a veteran real estate broker who works with many young homebuyers, says past problems with ARMs were often the fault of lenders who failed to fully explain all the terms of the home loan. But in other cases, borrowers were to blame for over-extending themselves. Either way, he says many homeowners might have avoided foreclosure had they simply taken a fixed-rate mortgage.

Smith, the financial planner, cautions all buyers, including young singles, against taking any mortgage (even a fixed-rate one) that feels uncomfortably large.

"Before you talk to any lender, sit down and take a serious look at your cash flow. When you calculate your expenses, make sure you include all your upkeep costs for the house -- including yard-work and painting," she says.

Also, don't assume the costs of home ownership will remain a constant within your budget.

"As a rule of thumb, I tell clients to expect a 3 percent annual increase in all their expenses except health care -- which is rising at about 8 percent a year," Smith says.

-- Search for a property a roommate might share.

You may be one of those young adults who longs to finally be free of roommates. Even so, Ottwein says it could be wise for single homebuyers to choose a property that could in the future be suitable for a rent-paying roommate.

"Sharing the house you own with a roommate can be a very smart financial situation. This can help relieve a lot of pressure from your mortgage payments," he says.

Single homebuyers who want to keep open the option of having a roommate should make sure they choose a property with an extra bedroom and at least two bathrooms.

-- Screen properties for energy efficiency.

Smith says that after moving into a house they've purchased, many young single buyers are unpleasantly surprised by the size of their utility bills. But she says more young purchasers are now beginning to shop for energy-efficient housing, the same way they're shopping for gas-saving vehicles.

To estimate the energy costs of any property you're considering, Smith recommends you ask the current owners for copies of their utility bills -- ideally going back two years or more. Be sure to factor in annual cost increases.

Also, he recommends you ask your home inspector to assess the energy efficiency of any property you might buy. Have the inspector check for energy-efficient windows, as well as insulation throughout the home.

-- Factor your social life into your home-buying decision.

If you're like most young single adults, having a high-quality social life is a top priority. In buying a home, you may be outpacing a lot of your friends. But that doesn't mean you'll want to move so far away that you'll rarely have a chance to see them.

"There's little worse than buying a home where you're stuck out in the middle of nowhere, stranded from your network of friends," she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)