Part of it is simply that I bought a house with more space than the places I usually rented. More to clean, more to maintain, more things that can go wrong, etc.
But the biggest thing is that I'm the only one in charge of maintenance. There's no one person I can call for every single problem. Keeping track of regular maintenance, performing that maintenance, and learning how to DIY things takes a lot of time. And even if I want to pay someone to do it for me, I still have to research contractors, coordinate estimates, and schedule the project. And I still need to learn enough about the project to determine whether they're doing it right!
Home ownership is definitely a lifestyle choice first and foremost more than a financial one.
Respectfully, that assertion isn't really supported by your anecdote.
The thing is, you can actually find these people. My landlord has one. Sage old handiman who knows everything about how the building works and fixed half of it himself already. Seemingly he can do every trade. He's under the building doing plumbing or electric one day. Landscaping the next. Installing appliances. Paint and drywall. Roofing. Most of the time it's him by himself, but he will occasionally bring out his crew of similar sage old handimen who know seemingly everything there is to know.
You don't need a contractor. They will give you the runaround. You need to find a handiman like this. Not easy I'm sure, but they are out there.
Can confirm it’s not easy. If you want to describe a method of finding one, I’m all ears.
Mine took 3 weeks to replace a broken HVAC when it was 35 degress out. 5 days to fix a toilet that when flushed dumped sewage into my downstairs neighbors ceiling.
Maybe if you're treating yourself as a tenant but your run of the mill rent extracting (or worse, middle man) landlord is the cheapest creature on the land.
I believe I've encountered that guys electrical work, and it ain't sage :)
(I.e. there are a few of those "fix it all" guys, but they're not always code compliant. They do get stuff done, though)
Honestly, it sounds like you enjoy it.
If you are doing it with that frequency I think you just are "into" your house.
It really isn't, and I don't know why so many homeowners act like it is.
I bought my house in 2015. It was built in 1983.
The only things I've had to do are a roof replacement, HVAC upgrade, and deal with a broken water main.
Sure, none of those were cheap, but that's 3 events in 11 years, and the first two I expect to not have to do again for at least 15 years, and the water main was a random one-off thing, and it didn't flood the house. It put a lot of water into my crawl space, but it didn't become a problem.
People who swear by renting will use it as evidence to show that owning is more expensive than renting, but I think they just ignore that those costs are factored into the rent, not to mention the fact that once I noticed my roof had a problem, I had people out the NEXT DAY to give quotes on replacing it. When I replaced the HVAC (Old A/C compressor was frequently tripping the breaker and was underpowered), I was able to choose to upgrade rather than dealing with a landlord who would install the cheapest thing they could find.
But ah...I've digressed.
The point was that home ownership isn't nearly the maintenance burden some owners seem to claim it is, and when there is a problem, being the one in charge of getting it solved, rather than having to harass a landlord into solving it, is nice.
Home ownership sucks and after selling my previous home I'm so glad to be renting. Just never having to deal with another contractor makes me so happy. :)
But as far as when I owned my own home, cutting the grass was just part of my routine and at least guaranteed some physical activity instead of working all day during covid.
Mine come and go but it's no where near every weekend since I've purchased in 2019. What sort of things occupy this much time?
The only periods where housework took up every single weekend were during renovations, which can take extra time on an old house like mine.
Simply maintaining a house shouldn't take up every single weekend unless you have a humongous old house on an extremely large property.
If you're living in a new house you may have peace for a few decades, but at the cost of everything piling up the longer you wait. Exchanging corroded drain pipes someone thought was a good idea to bury in concrete is especially fun. At some time door hinges break, window mechanisms break. Water pipes clog, electrical is outdated (e.g. landlines are out, ethernet or fiber is in). The intercom breaks, wasp nests are under every second roof tile, there is a water intrusion in the cellar, a storm knocks down the fence, the washing machine breaks, the garage door motor dies, the asphalt on the runway cracks and needs a tar pour, the attic needs to be insulated, a portion of the roof needs to be retiled, the wooden parts of the facade need to be repainted, a drainage needs to be dig to avoid water piling up into a garage, a doorway has to be added to a repurposed storage space.
And mind, I was the son of the house, this is only some of the stuff I worked on before I moved out with 18.
There was constantly something to be done. What and how much is mostly a function of (1) the age and build quality of the house and (2) your own standards when it comes to maintenance.
I've lived in a new construction condo as well as a 1970s home that had renovations in 1990s and 2010s.
New construction you deal with a lot of defects that show themselves in the first few years. You also contend with modern construction just being lower quality materials in a lot of cases unless you do a high end build for yourself. So the floors, cabinets, etc are going to wear out much faster.
My 50 year old house of course had a ton of deferred maintenance from previous owner that resulted in break-fix work on plumbing, heating, cooling, siding, roofing, etc.
I type this as I have 2 faucets, a fence, some driveway potholes and paver stones to mend, an irrigation head to replace and a new central air unit coming in next week. Dishwasher was replaced 2 months ago.
For me, it's hard to put a price on the reclamation of _time_ spent otherwise thinking about those issues, to say nothing of the money. I just don't have time to think about even 1/60th of what's involved in getting vendor quotes for roof reshingling or painting or whatever, and even if I do have the time, I'd rather pull my fingernails out than spend it that way.
I sure do miss that mortgage interest deduction, though. I had no desire to accrue equity in the property--and indeed, if I had more equity, I would have lost even more money than I did in the 2008 crash--but I loved my super high-interest loan. It meant that my most of my housing payment was tax-deductible, and that's fantastic. My only regret, besides buying itself, is that I didn't take out an interest-only mortgage.
However, this isn't a Great Recession sob story. The condo would be way too much work and cognitive bandwidth theft even in the best of times, and that's like a tenth of the structural, landscaping, etc. issues one has to think about with an SFH. No thanks, man. I have other stuff to do.
I mean, of course I tell myself this is the last time we're ever moving, and that this is the forever spot. However, experience suggests this is never, ever the case, and there's no actual precedent for that.
More than anything, I’ve come to admire those who learn how to do this stuff consistently because it is hard.
There absolutely can be if you want to pay for the service. Look up home concierge / residential management services, like Para Home Services.
The issue historically is that these concierge things are expensive (should be solved by tech/ai) and the warranties create their own class of problems (claim frustrations etc).
But home ownership is expensive, no way around it. But the work in coordinating etc doesn’t fundamentally need to be.
I sadly don't get much benefit out of renting beyond freedom of movement and higher cash on hand in my current place. Sometimes I've lost my freedom to stay though.
I have a, perhaps irrational, fear of getting stuck with a house.
The US doesn’t understand how to make the housing market functional. I’d love to have a condo where a great many things are handled by the association but the math never maths, as they say, and a great deal of the issues is because condo associations aren’t well regulated and they often don’t account things correctly.
Condos are in a lot of ways worse for ownership. You have communal costs you can’t control, risk of irresponsible neighbors (leaks), and limitations on who/what/when/how of repair or renovation you want to do within your own unit. All of which introduces coordination overhead, cost and time.
And as the house ages, you get things like repainting interior rooms, more frequent plumbing issues, major HVAC repairs, roof replacement, repaving driveway, electrical upgrades, remodeling, etc.
We downsized to a townhome to avoid some of that (half the walls are shared, so no exterior upkeep for those; smaller yard; fewer rooms).
Is it good to do these maintenance items? Sure. But also, the house isn't going to come down if they aren't done. You go around your city right now you will find very few homes are actually upkept to this level. Most see the bare minimum to avoid the city fining you for the grass being too long, and many are sold in whatever state they are in.
It hadn't been done for about 5 years when we moved in, so one of the neighbors spent 200 hours cleaning it up for us. Not joking, 200 hours of labor. Scotch Broom is a literal nightmare.
It can occasionally feel like an endless stream of tasks.
How much an individual homeowner cares about the minor cosmetic things vary, but skipping out on regularly checking the major stuff can lead to incredibly expensive problems like flooded basements, structural issues, major leaks, etc.
If they didn’t, living in a rental that the landlord doesn’t spend anything on maintaining would be fine.
Nothing is getting better with time, only worse.
But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or owner move ins or any of that other stuff that renters deal with.
And if you have kids, they get a sense of home and place.
But don't do it for financial reasons.
That is not the right way to see it.
If you have the cash to buy upfront, then yes, real estate is not that good an investment, unless you have a loaded portfolio already and want to diversify a bit, get some high inflation hedge, etc.
The real value of buying a home is leverage. That is, most people cannot go to a bank and borrow $500k. The bank will just not make a blank loan like that without any idea of what you're going to do with it.
Buying a home though is well understood and borrowing is made relatively easy.
For most people, buying a home is the only way they have to actually get significant leverage from borrowing.
It's probably worth making a closer comparison though:
* Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments, another 400k in interest by the time you're done. Your home probably appreciates by that much in most markets, which gives you a million dollar asset at the end. In some good markets, it may appreciate by 3-4 times, which would mean you have a 1.5-2 million dollar asset.
* Pure Financial Investment: put $50k into a fund, add sustained regular $2500/mo contributions. Let's imagine that the fund averages a conservative 5% annual return and we do this for 30 years. The outcome should be... a bit above 2 million dollars.
All investment involves risk and variable outcomes, but the BHL plan probably has a more varied outcome. Parity may be as common as substantial profit.
The PFI plan, on the other hand, performs really well even considering conservative 5% returns: over 2 million dollars (minus 400k you would have probably paid in rent). Bump it to 8% returns and we're looking at 3 million, a performance even many good real estate markets couldn't match.
Its major problem is that you need to be disciplined about putting the chunky contributions in, which means you need to consistently have rent-payment-level disposable income to make this work. Many working people don't.
Leverage lets housing costs go to equity and interest payments, which is key leverage for people who don't have disposable investment income. But less key for people who do.
A house in a long term play. I didn't buy until I know where I wanted to anchor. That's the deal. I didn't want to be in a situation where late age destitution came because I couldn't afford where I wanted to live anymore. I got to see that play out with older relatives who did go the rent only route. Course I have to pay property taxes, but as it stands it's less than $200/mo and I don't imagine it'll rise above that taking inflation into account. That is something I can afford in retirement even on social security.
There is maintenance, but living in a neighborhood full of elders, a lot of it is truly optional. And honestly I think the only maintenance I've paid thus fair is the yard only because I don't want to do it myself. For me financially this is a hell of a deal with the only trade off that I must stay here. And... I'm settled enough that I'm willing to do that. I moved all over in my early career to find where I wanted to be.
9 years into my current home and my 20 year mortgage is substantially less than renting a similar house in the same subdivision. And because it's 20 year, the interest rate is lower, and when I retire, I'll only have to cover tax and insurance at a fraction of the future rent.
I considered putting it up in the bullet points. Apparently deciding against that lost my expressions of this point to some readers, including yourself.
But yes, this is why the analysis after the bullet point mentions the profile of people who don't have $2500 disposable income. The leverage matters more to people in this situation.
Having seen this conversation play out more than a few times and even turn a tad fighty, I think this is the fault line:
* people who do this kind of analysis frequently and generally have high disposable income often see that they can leverage compound interest rather than pay it, so the Pure Financial Investment plan seems like a slam dunk to them, and for their profile they're probably right.
* people who generally don't have high disposable income see that they can use leverage to make their rent payment do double duty, which seems like a huge win for them, and for their profile they're probably right.
What I did leave out is how a mortgage can bound your living costs. Another commenter correctly pointed out rents can expand dramatically. Where incomes track rents, I don't think this makes a dramatic difference, and that's why I didn't include it, but it's true this isn't guaranteed, and mortgage can function pretty well as a hedge.
It’s really a form of various hedges wrapped up with a bow, that for many people is desirable (and since we HAVE had appreciation it doesn’t “turn out bad” most of the time anyway).
Anyone who says “renting/buying” is the only way to go is missing something.
It forces you to make some assumptions on market returns and such, but it gives a pretty clear picture. The biggest variable is how long you expect to live in the same place (longer favors buy) and the next biggest is the ratio of average rent to average housing payment. The inflection point being that if you live in one place long enough to pay off the mortgage, then it obviously starts to be much more advantageous to buy, but that requires you predicting your life 30 years in the future.
This is true, but the vast majority of people - especially in the US - don't move around the country or even state every few years. One of the biggest, perhaps the biggest, pro of renting is that you're not tied down to one place for very long.
It's pretty rare that someone buys a house then is suddenly forced to move hours away.
When you run the numbers honestly it's really, really hard to get similar gains renting as you can buying, especially 30 years in the future.
In one situation you are paying someone else for a place to live, and when you stop doing that after 30 years, you’re out on the street.
In the other situation you are paying someone else for a place to live, and when you stop doing that after 30 years, you have a house.
After 30 years you either have a house or enough cash to buy that house. In many cases, the rate of return on the cash is sufficiently greater that it is significantly more than the value of that house.
A careful re-reading of my comment will reveal that I did mention rent as a factor in at least two places: one as an opportunity cost to be reckoned with for people following the PFI plan (with which my example still comes out looking good), one as a cost of living substantial enough for many working people that they do not have significant disposable income, which makes leveraging their largest living cost appealing.
> Interest rates are closer to 6.7% which means your $2500/mo doesn't even cover your principal and interest of $2600 which is to say nothing of PMI (which will be required since you didn't put 20% down), homeowner's insurance, HOA fees, or property taxes.
Using a 5% interest rate was one of several simplifying assumptions that I chose to be generous to the Buy Housing on a Loan plan.
You are correct that interest rates are presently and historically higher than that, and that mortgage insurance, homeowners insurance, property taxes, and some maintenance costs that under the BHL plan can add up to significant housing costs that aren't going to equity and therefore aren't well-leveraged. In other words, the BHL plan actually comes off worse than I made it look.
(If there's a counter side of that, it's that landlords can and will pass on those costs so they're reflected in rents... but sticklers will notice that landlords who are done with amortized costs or who financed at lower rates can choose not to do that and may have incentives to depending on the market.)
That's in absolute terms. There's a relative point too: the higher the interest rates, the more the field tilts towards the PFI. It magnifies debt/leverage, making that path more expensive, and it magnifies return from invested income, making that path more rewarding if you can swing it.
> And don't forget that other than insurance and taxes, your mortgage payment is capped for 30 years.
I did leave out the bounding effect that a mortgage can have, and that's arguably an important missing point.
Wy would someone do that? My observation is that incomes also tend to grow in rough parity to rents in many markets -- in fact, local income growth is probably the primary variable local rents are dependent on (at least in a functioning market). This means during prime earning years decades from retirement, rent changes might be an acceptable simplification. But you're probably right that the closer you get to retirement, the more important bounding costs is. And there might even be other situations where the tradeoff starts to make sense even for earners with significant disposable incomes.
Well yeah, in the last 20 to 30 years in most countries the story has been the same. My parents bought a house in Brazil in the early 90's for 30k and we're now selling it for 400k. My relatives in Australia bought a house in Adelaide for 400k around 5 years ago. Prices exploded there and it's now around 700k. They got 300k dollars in a few years while actually earning less than that in salaries over the same period.
On the other hand, me, in Europe, managed to lose money on a house I bought 10 years ago because I overpaid (at the time it was really hard to buy as competition was huge) and after COVID, prices in my region fell 20% and never recovered... Also, I invested too much on a new building in the property which people in this country don't actually value a lot, so the investment did not pay off.
But before that I had made 60k on an apartment in just 2 years. So, while I know too well that the housing market can be unpredictable, I would continue to bet on it going up in most markets since the conditions which made prices increase have not changed.
This.
I worked for a medium sized company in the early aughts. It was a family owned business. The eldest brother was the owner and we often had lunch and he would tell me that once I make x amount, then I should buy this kind of real estate. When you get to this xx amount, then buy this kind of real estate. Fuck the stock market, only real estate goes up in value every year like clockwork. At the time he had several rental properties and three or four houses located all over the country.
That was until 2008.
Its funny, I ran into him at an architecture conference a few years back and one of the first things he said to me was, "Remember that real estate advice I was giving you? You can completely ignore that now!" and we both had a good laugh about how drastically the market had changed since 08'.
I have done repeated financial models of this over the last 15 years and it has never made sense to buy a house for me.
When rates were low, if I had bought a house and then stayed in it a long enough time to counteract transaction costs, it could have been ok, but in expectation, basically everyone buying a house would have been better off investing the money from their downpayment & repayments into the stock market.
- care about the long-term effects of their actions
- care about the plan of their surroundings
- plan to stick around
Notably this is equally applicable to any occupant-owned property (e.g. condos > apartments).
As much as I hate many stupid rules and seemingly unfair application of them, I do like that it mitigates against people that just don't give a shit about their property or the impact of their life choices on others.
You don’t need a potentially abusive and/or rent-seeking HOA for this. My locality controls for all of these potential issues through local ordinances.
I live in a "town" (Reston, VA) that has a notoriously strict HOA. But, it mostly applies to buying/selling and home additions. And it's very consistent. Each subdivision within Reston also has its own HOA that's run by the owners and in charge of regular community upkeep. It works out, as long as you perform due diligence up front and know what you're buying. I don't know anybody who would claim it was abusive or rent-seeking - just mildly annoying sometimes.
All the stories of people who bought in HOA areas and then got fined for having a work truck… I have little sympathy for them because that would’ve been in the HOA docs which were provided during contract negotiation.
The next step would be looking around the neighborhood to ensure that the rules are actually being fairly enforced. If the covenant say no work trucks, but there are work trucks parked at every third home then that’s indicative of a problem may or may not be an issue to you depending on your line of work, but it’s something to keep in line.
There are other things you can check as well. For example, ask for the HOA finances. Are they doing regular capital projects and do the budget seem reasonable? Do they have enough money in the bank for unforeseen capital expenses? Again not always a dealbreaker, but those are things you need to know and people frequently don’t bother asking about.
The renters all have rubbish in their front and back yard, have more pets that they let bark and poo everywhere, smoke weed etc.
There are tax advantages that favor owning (in the US), for a primary resident and not an arbitrageur - mortgage interest and capital gains when you sell are not taxed, while capital gains in a non-retirement account are.
You can gain by appreciation and leverage, of course - but you can just as easily not, you don't know if your city is going to be the next high-flying Austin or Boulder, or run-down Detroit. My own house has been flat in estimated value for four years in an area that I thought would continue to rise.
If you own $400k of stocks, you can sell any increment of dollars you want over time. You can take profit, you can take money out to cover needs, etc.
With a house, sure you can "take out home equity" but its just a loan against your home you have to eventually sell to cover or pay back.
It's like having a $400k position in your companies stock that you can only sell all at once with a 10% round trip transaction fee.
Just one example, owning a home protects you against price shocks. As others have pointed out, this can sometimes be a bad thing, because when prices decrease you are also leveraged.
But it’s pretty important to a lot of middle class people that they are protected against forced relocation due to 5x housing price increases.
Of course, there’s other reasons to not own a home.
My point is that localized housing markets have all sorts of factors that are perfectly explainable by economic theory but aren’t just “Econ 101, run the supply and demand” curve.
I bought for $850k in 2017. Selling now asking $899k and no-one’s buying. Think of my ARR with inflation and opportunity cost here. I sold Facebook shares to get this. I have made zero return from rents overall. I’d likely have earned $1M if I hadn’t sold those shares.
[0] https://investment-estimator.com/s&p-500-calculator says $850k in 2017 would be $2.8M by 2026.
Do you happen to be a young person looking to move for better prospects (economic migrant)?
That said, landlords don't always have a choice to not lose money. These are investments, there is inherent risk.
I think I disagree on this front, but that’s probably because I ended up buying a home due to a mix of FOMO, bad landlords and rent not being too far from mortgage.
Plus from a psychological perspective it’s hard to say don’t do it for financial reasons when anyone who bought a home in the last 10 years (forget 20+) has seen insane appreciation. I’m jealous of everyone who got practically free money (2-3% mortgages) on an asset that has increased at least 50%. Life probably doesn’t get better than that and makes me wish for such nice things.
At least my “rent” is “set” for the next 29 years (I just bought last year) so hopefully at some point my mortgage would be something to be envious of.
The ratio has a wide range from city to city.
Full financial analysis gets complicated quickly because you have to consider mortgage rates, inflation, opportunity cost of the invested money, and how long you're keeping the house. It's possible to pick the more financially optimal decision using today's numbers and then have your perfect plan clobbered by a collapsing housing market, extreme swings in interest rates, or being forced to move early.
Our household income is 300k, and I took a big risk purchasing a home in Socal where mortgage is 50% of our take home income. In a space of 1 year or so, we went from saving two out of four paychecks each month, to sinking two into mortgage each month.
For me, we have one kid and we plan to stay put for at least 10 years. It's a good school district. The quality of life is excellent considering the weather, outdoors, cultural diversity, things to do, and proximity to international airport. We have friends and family here.
But to me what mattered most is that I am 40, our income is going to plateau. Renting is good advice, but in 5-10 years, we won't be able to afford rent here, let alone buy. On the other hand, I can refinance now and bring my mortgage down to what I was paying for rent previously, and in 10-15 years be mortgage free at a place with all the benefits I mentioned above.
I'd also argue there are financial advantages (on top of the psychological ones) to the price stability as you don't have to hedge against your housing cost shooting up as much.
https://www.macrotrends.net/3072/us-house-price-index (~3x in the past 30 years, about 3.7% return per year)
https://www.macrotrends.net/2324/sp-500-historical-chart-dat... (~15x in the past 30 years, about 9.3% return per year)
This is in line with conventional wisdom on return rates for these asset classes: https://awealthofcommonsense.com/2024/01/what-is-the-histori...
Unless you are comparing retrospectively hot-shot real estate with retrospectively mediocre stocks, then stock market investment has always won out substantially over real estate investment in terms of raw return rate. This makes sense, given that if the opposite were really true, then it would make no sense to invest in productive businesses as opposed to holding companies that just hoarded empty houses indefinitely.
It's not a choice between $1m in housing appreciating at 3% and $1m in stocks appreciating at 9%. It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.
Back around 2020 when mortgage rates very briefly dipped below 3%, there could have been an argument. But such is no longer the case and not likely to return soon.
This guy breaks down the analysis very cleanly to a first-order approximation, using 2019 figures: https://www.youtube.com/watch?v=Uwl3-jBNEd4
> It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.
Just to drive the point home: It would be $100k in stocks appreciating at 9% and monthly rent subtracted, or $1m in housing appreciating at 3% and a $900k debt growing at 5%+ interest.
Many people in Seattle that bought $1M leveraged with $100k now own a $800k asset. They've lost twice as much as they invested. They would have been much better off investing that in stocks without leverage.
The inventory of housing currently on the market is anomalously high and there are relatively few buyers. I know a few people that will be lucky to sell for as much as they paid a decade ago. People who bought during the COVID bubble are underwater.
This feels more like the beginning of a macro trend than a temporary blip.
At least now they have some sense to cap the rental raise percent but I’ve had to deal with 15-20% increases before, and not to mention the cost of parking in an apartment.
I probably made a mistake buying but I couldn’t take the bullshit from landlords and all the headaches that come with people wanting more money.
Home prices have doubled here since 2014. We are having a modest dip right now.
I've sold a home I lived in to rent something equivalent because the rental rate was a fraction of my carrying costs. Saving the difference in costs added more to my net worth than the appreciation on the property.
Owning does give you a lot more control over your life in certain ways, which some will find a lot of value in. If you're someone who likes doing home improvements then buying a house makes a lot of sense.
Whether or not you plan to stay in the area for a while is probably the biggest factor. Buying a house makes it a lot harder to move in the future, but it also means you can't be forced to move. I had a horrible rental experience where I suddenly found out I had to move on short notice. It happened right after starting a stressful new job. Combining those two stressors made for some rough months.
I know a lot of other folks with similar stories of having to scramble out of a property on short notice. Maybe the rent gets jacked up to an unaffordable level, or maybe the landlord who said they were renewing the lease suddenly changes their mind.
Even if your property doesn't appreciate more than inflation you can still profit massively from owning just through the loan amortization. Only being forced to sell during a market crash could realistically cause a big downside, but the upside is substantial compared to the risk.
It is also the safest leverage investment most people can do and the cheapest way to diversify away from stock market.
In fact paying off your mortgage is usually better risk/profit calculation than buying bonds as mortgage interest is usually higher than bond interests[1]. If you hold any significant amount on bonds you are better off using that money for a downpayment.
Everyone here is doing the cold hard math on 100% stocks when every financial advisor says you should diversify to reduce risks. Of course if you go 100% stocks and assume average returns will keep going forever (and not, you know, go full 90s Japan) the math will say stocks. But if you add any sort of risk lowering diversification a mortgage is usually the best one you can get.
[1]: I live in Sweden where almost everyone has floating interest rates for mortgages, I know US people can lock in their interest at low or high rates for decades which can skew the calculations
If you buy property it will be yours, forever. You will pass it down, you will be forever part of the community, and your children, and so on.
Both my parents come from big farmer families, and lots of poverty. When my grandparents managed to end serfdom in the late 50's and their rented farm became their it was a huge deal: that became the family home. Like our own castle of sorts.
But i guess it's a different culture, my country has the higher percentage of home owners in europe for a reason, whereas most of northern europe housing marked is dominated by speculation and renting agencies, among the worst sort of leeches that have ever lived.
Renting and owning may not be all that financially different to you with a mortgage of 30+ years, but it will definitely be financially different to your heirs.
As someone who moved 6 times in 8 years (admittedly, some of those were for work), and every time, I relied on moving things myself/with friends, I was just tired any more!
For the last move, I hired movers since I was already married by then and our stuff tripled (yes, mine was a very small portion).
The fact that I don't have to move for a while now gives me a lot of peace!
In the late 90's I, like a number of my married friends, 'owned' a house in the Bay Area. Dot coms were going crazy, the economy was insane, and people who got big equity payouts were buying places with their stock. At the height of all that, my Sun stock holdings were enough to pay off the remainder of my mortgage but I got the "opportunity cost" talk from my financial advisor about how tech stocks were returning 15 to 20% and more, so what I should really do, is refinance, and put my equity into tech stock! I didn't do that but at least two people I knew did. And when the crash came, the friends that had refinanced ended up selling their houses an moving out of the area, and I was left with the dread associated of being an "older" engineer when tech jobs were on the way out. But I still had a mortgage and kids to support. Had I paid the house off I would be in a position to take a job with much lower pay than my last job and still stay in my house (with just the tax,insurance,utilities and maintenance costs). The psychological cost of 'uncertainty' is especially burdensome on me (which, I suppose, is why I make a good operations person).
I told my wife that if I ever had a chance to pay off the mortgage again (prior to paying it off the old fashioned way of making payments for 30 years :-)) I would. In California, you are required by law to be able to make a payment larger than you requested payment and any excess goes toward the principal. So we started making bigger payments, and between that and some bonuses and stock recovery we managed to pay it off. I still got complaints from my financial advisor that she could get us a better return than that, but I didn't care. I wanted more certainty than that.
Now that story works because I knew that I wanted to stay in the Bay Area, there were jobs that I would be interested in (even if they didn't pay what I would prefer) and that was important to me. A relative who was more management in retail (started at Sears) found owning was a problem because it made relocation harder. As a result, even though they owned now and then, they lost money during the mortgage crisis (needed to move with their house underwater) and didn't get the advantage of just staying in one place.
My wife's parents simply rented out their place and moved to a new place and bought a new house there. They ended up collecting a few properties which were their retirement plan, being sold off over time to pay for expenses when they could no longer work. That was more 'investment like' in my mind. But it was also a lot of accounting work with property managers etc.
Buying a home works really well if you are married and you both have salaries (and initially no kids). The US tax system is set up to 'reward' that behavior with a better rate for married filing jointly and a mortgage deduction for owning a house. It cuts out a lot of uncertainty. But it also means moving is a bigger deal. In today's market, if you bought a house with an < 6% mortgage and are looking at buying with on >9% then they feel a bit locked in.
You'd actually end up in a much better place historically, homes were never a particularly good investment in the US, but there are very few people who can pull it off and actually invest the difference and not just spend it.
Even so, there's still a benefit to owning which is that you aren't paying the agency fees, elevated maintenance fees, and landlord profit, which are all non-zero.
Firstly within investing, I am assuming that a person has safety net amount of money before properly investing. This is something that I have heard some people don't exactly do.
As such, what happens is that, they might lose a job and have to pay rent and might have to sell the stocks or any index fund/investments that they had within the market (which depends on if the market is doing good or bad too) and overall snatches opportunity for money to actually grow for years.
I recommend having a safety net but I must admit that there is still some psychological stress overall due to multitude of factors, as such, if possible, buying a house feels like it might be overall decent choice and the differences might not be so much.
that being said, I do think that it depends upon the land prices and many other things overall too.
Also, this is tangential but I used to be a boglehead, still am but with recent cases of Nasdaq[0] & I think S&P bending towards SpaceX and AI IPO's by literally bending rules, it does feel like the investment markets might be more shaky given other factors
(Not a financial advice at all) but I recommend looking towards dimensional index funds which do just a very bit more than index funds if the addition of floaty investments like SpaceX and other IPO's make you fear similar to me.
But the thing is that the downstream effects of it will still be visible, for example, just imagining if SpaceX gets added to IPO and then quickly added to Nasdaq/S&P and then it falls substantially for any reason. The thing is that the market itself would be spooked and other funds would be impacted too.
I have belied in the market efficiency hypothesis but a lot of it feels like private equity trying to raise evaluations to then push it to index funds (by in this case, asking nasdaq to bend the rules to force passive investors to buy and hold the bags basically impacting retirement accounts too and perhaps even govt bailouts but basically it becomes privatization of gains and socialization of losses and becoming too big to fail.
I must say that it feels a bit of blatant corruption in some instances like the one for SpaceX and this removes my confidence within markets.
I do recommend overall diversification for world stocks and also housing if affordable.
I wish to still invest in markets but with a bit more caution rather than blind optimism. Also no, active investing doesn't quite work either reading john bogle books and other resources and passive investing is still superior to active investing overall but just with more caution. That's all.
[0]: https://www.thestreet.com/latest-news/new-nasdaq-rules-open-...
I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in an apartment, because rent could go up any year and exploit me for liking my home. Property value has gone up by 50% in the years since I bought.
And while I agree that it’s nice to customize things to your preferences, this has a downside in that it’s easy to get carried away and overspend. Might as well get the nicer finishes when you are remodeling, right? After all you’re paying so much for labor anyway. And you can’t have just your kitchen nice, now you need to upgrade the flooring in the whole house. And soon your small $30k improvement is $150k
Most landlords I've dealt with are an absolute pain to deal with when something breaks. It's often not that easy, maybe in high-cost / luxury rentals. Arguing over what is normal wear-and-tear, while knowing you cannot afford decent legal advice, and you also can't pay for the "unexpected repair" is just as bad.
> And you can’t have just your kitchen nice, now you need to upgrade the flooring
Yes you can. There is no need to have everything perfect...
Edit:
> You never have an unexpected $20k repair show up.
If this was even close to coming even with the added cost on rent, no one would be a landlord. It's obviously a lot less than rental overhead. So people could just set that aside (or get insurance).
The good one(s) acted like their job was providing the service of housing. They had a budget and paid themselves a salary, and if there was money left in the repair budget at the end of the year they used it for improvements to the properties.
The bad ones treated it as an investment. My rent money went into their own pocket, and any expenses -- repairs, taxes, mortgage payments -- had to come out of their own pockets, and they did their best to not pay for any of them.
I'm under a guy that just manages 20 or so doors now and he's a good dude, but I have to wait a longer time, generally, like when my heat wasn't working at the beginning of the winter and his plumber had the flu. Luckily it wasn't bad weather yet, but I definitely felt the potential for strain.
I've never understood why people argue that the model of appealing to a landlord to perform house work is psychologically superior to doing that same work yourself. As a tenant, you have an inherently somewhat adversarial relationship with your landlord - they want to minimize costs, and they aren't the ones directly living with the household problem. You are living in their property and are bound to what they replace or repair, and how, and to some degree on what schedule.
Not being able to make my own decisions about what constitutes a household problem and what should be done about it is the single biggest annoyance of renting for me. It's the main reason I would like to live in an owned home; and this intangible facet of living is more important to me than any financial argument about the costs of renting vs owning.
Just something as simple as "that ceiling fan doesn't work so well, and squeaks once in a while when on high" can easily be remedied yourself when owning the house by just going buying and installing a new ceiling fan.
Regardless of how handy one is, with a landlord that's generally not allowed without permission, the landlord often won't install as nice of one as you might like, etc.
This goes for every fixture that's not part of the rental. Major appliances, flooring, even door knobs... Like if you suddenly want an electronic keypad on your deadbolt.
Of course, this flexibility has to be something you care about. Not everyone does, but for those of us that do...
I've lived in my current apartment for 9 years and I've never met the guy who owns it now (it was sold). I'm also not getting my deposit back, so that doesn't matter.
It's the big stuff that's annoying. Can't install A/C or an exhaust fan in the bathroom, for example, simply because I can't afford it. I'd totally feel comfortable upgrading the stove/fridge and tossing theirs or putting it in the basement. They're not going to find out until I move out anyway.
Maybe. Probably, given what you've described. But you're still relying on an assumption and the behavior of someone else. It could be sold again tomorrow to an owner who has a real problem with those sorts of changes and it would be out of your control.
"Rent is the most you'll pay for housing, but mortgage and property taxes is the least amount."
Not my experience, at all. All landlords I've had were lazy assholes who did the bare minimum, but never forgot to increase rent on the 1st of January, every single year.
Paying someone else for no other reason than to have the right to a roof is Middle Ages shit, that future generations will no doubt liken to serfdom.
My uncle built his own house; it took him ages (and still hundreds of thousands of dollars to buy the materials and land).
It’s when you are looking at long term living that there’s a problem.
I don't think I have ever once had a positive "hey this is broken let me call the landlord and they'll fix it quickly" experience.
The current place has this stupid thing where the dishwasher is attached to a circuit that has ac on it so if you run both it flips. I have to flip the breaker everytime i use the dishwasher.
We are extending the fence in our backyard.
However, getting rid of the parking means the project will likely detract from the value of the home. But since we don't have a car, let alone two, it makes sense for us to do the project anyway. Despite the warning of our realtor when we purchased the home.
I've noticed a lot of folks are afraid to personalize their homes because of concern about the value when they eventually sell.
But here is another consideration. Sales tax. If I buy a car and trade one in, the sale price that I pay taxes on is the price of the vehicle I am buying minus the trade in.
For instance, if I buy a new car for $30,000 and trade in a vehicle and they give me $15k for it, I pay sales tax only on $15k. That saves me about $1k in my area in sales tax. If I could have sold the used car for over $16k, then I would technically be money ahead. But your time is also worth something. For it to be worth it to me, I would need to be able to get at least $17k for the used vehicle to make it worth the effort.
Then on top of that after COVID dealer gave me $5k tradein for an Ecoboost car with a leaking cylinder wall, check engine light, missing parts, etc. where KBB was less than that. I really don't get it.
It’s really not a lot of work and if $2000+ for a few hours work is pitiful, I envy your financial position. List on Craigslist at bottom market prices (you’ll still come out way ahead of the dealer), aggressively filter out tire kickers, sell it within 3-4 showings.
The law is very favorable to people being allowed to sell their personal vehicle without jumping through additional regulatory hoops.
Americans really get extremely stupid when car related anything comes up.
Firstly, my home isn't principally an investment vehicle.
Secondly, I'm pretty sure I can find a buyer who can conceive of popping over to the grocery store around the corner a couple times a week rather than pretending like they're living off the grid and have to drive 100 miles to the nearest town to buy their monthly provisions for a family of 13. :)
I said it this way to my GF this weekend: "If I own the home, I can choose to do irrational things like demolishing things that are perfectly fine".
She was like "Perhaps you should rent, LOL."
As a renter in a place that protects renters from radical increases year over year, I'd argue the only compelling sense of stability would be trading the risk of being evicted for that of losing the house
> I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added panelling to the walls. I added a few outlets to rooms that needed more.
I think this is an interesting differentiation that would either be very compelling for a hobbyist or carpenter, or someone who works on cars, but it's also crazy to me if I frame homeownership this way. I don't think a condo would really provide the surface area for such customization *if* I were a person to be interested in doing it, nor would a townhouse or duplex. It seems that at least in my city, the premium to be able to do something as common as paint the exterior of your home, is like $2.5m CAD, or $1m more than a newish townhome, or $1.5m more than modest condo, or $10000/m more (just on the mortgage) than renting a sufficiently sized place.
That's partly because the kind of place I can rent is dramatically smaller than the minimum size of a place that has a modifiable exterior, and it's one of the most expensive cities. I guess it's sort of a framing that makes clear how dystopian the class divide is; I don't have any interest in painting my house, but if I did, I'll never be able to, and if I could (at the current rates), I'd have to be incredibly unimaginative to allocate that much to the house that could hypothetically be painted.
I guess people who value the concept of a home in that way more than anything else would simply move someone where they can buy one, but I value so many other things more than hacking away on the walls that it's an absolute no-brainer to continue renting where I want to live despite the ambient sense that I have no sense of permanence secured by land
This was my first time living in a house as opposed to an apartment. It's been three years of bitter regret, and I'm very eager to sell the damn thing and leave the nightmare behind. In the last three years, I had to re-paint the roof, replace the garden fence and a bunch of related stuff in the garden, replace the water boiler. I had to climb on the roof of the house to rake the leaves at least twice a year (not expensive, just scary). I had to repaint areas of the house because the previous owner did a crappy job painting them.
But, most importantly, it's a piece of junk. It's a typical front brick wall with the rest of the house made of wood covered in dry wall. Its foundation is going to skew and sink because... that's the general condition of everything in the Netherlands: the ground water is too close to the surface, so the foundation is too shallow. I can't hang anything heavy on the wall because the wall can't support it. Every wall is crooked and bent and so is the ceiling, so, for example, it's not possible to put a curtain railing on the ceiling...
Everything is made of perishable materials which will last five to ten years tops, and then everything needs to be torn down and redone. Looking at how my neighbors are spending their lives on the hamster wheel of infinite repairs... I want absolutely none of this. Some people enjoy sinking their time and finances into this black hole, but I'd rather just buy hard drugs for the same price all the way until I die. It's just an arduous and unrewarding toil.
HOA complaints typically are about control not really cost, and the terms are disclosed before purchase so not unpredictable at all, you are allowed to see the full financials and can see the financial health of the organization before committing. Insurance costs are directly correlated to risk, the costs are only as out of control as the risks (which are well known in Florida). E.g. if insurance expects to have to replace a roof every 5 years on average, and to replace a house every 30 years, expect to pay for 1/5th of a roof and 1/30th of a house in your insurance bill, on top of all the other risks.
Luckily, at least, we don't have an HOA. Well, actually, we technically do, because we have a shared driveway with three houses on it, and legally here shared driveways are required to have an HOA. But all three of us despise HOAs, so it doesn't have any money, rules, meetings, or do anything. It's just on paper only. We have informal meetings to sort it out when the driveway needs maintenance. After just a couple meetings we figured out that meeting first, alcohol second is the correct order.
As for the insurance, the best advice is just to avoid high-risk areas like flooding zones.
But yeah, for a single family home in a not-too-flood-prone area it'll be very predictable.
I’d argue rental is more predictable. Housing has a huge amount of upkeep — $10k ac, $5k water heater, $20k roof…
Last house I owned in the U.K. was 60 years old, original roof. Was advised it might need $10k of work if I wanted to out 10kWp of solar on it to the weight of the tiles.
$180 a year into a “roof fund” doesn’t seem extreme to me.
If your household is a typical HN high earner, and you are early in your mortgage's amortization schedule, the tax money you save by deducting interest can fund a $10k emergency repair fund too. Maybe even in less than a year.
The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowing that you might need to go through the hell of apartment hunting and moving annually is awful.
It’s been much nicer to have a mortgage with more or less locked in monthly payment, even with the maintenance costs that come with the territory. It’s more predictable and frees up mental bandwidth for other things.
I'm guessing you bought in a place that is seeing a rapid increase in property values, which I saw in 2020-2022 by owning in a zoom town. That would explain why insurance and taxes are increasing.
Not necessarily true. Our HOA fees doubled precisely because of drastic insurance premium hikes. There wasn't much that could be done by them to avoid that, and in fact they worked hard to reduce some of those premiums the following year, which resulted in a lower monthly fee for everyone.
The cost of owning absolutely does increase over time. The mortgage payment is just one part of the fully burdened cost. Furthermore, there is a real risk of an unexpected $20k expense that you have to pay for. Owning is less predictable than renting because the liability and risk surface area is much larger.
Someone else has to approve repairs and contract the labor.
My experience with corporate landlords is that they're incentivized to maximize income, which is emphatically not the same as keeping you renting the place as long as possible. Realpage for example optimizes for higher income at the cost of turnover and lower occupancy.
I imagine this is also likely passed through in the cost of rent in other places.
That said, it's totally possible to have a legal and fiscal framework that makes renting affordable and safe.
The government, particularly in Western countries with insane pressure on the rental market, needs to act as a homebuilder and landlord of the last resort. It keeps supply up, prices and risk down.
We've had a couple of generations locked into the housing market as an investment, and it's causing demand crunches which have artificially inflated prices and are choking and dividing our societies.
I'd happily spend my life in a rental if it was affordable and safe, and part of a considerably more fair society.
We were quiet, predictable, don't-rock-the-boat tenants, and the rando owner mentioned that they valued that enough that raising rents wasn't worth the potential risk of new tenants who might cause them more hassle.
My sister was a sex worker for a while when she was younger, and trying to do things like rent was difficult because her income fluctuated a lot (always enough to cover rent, but she'd save during good months for poor ones) and she was technically self-employed. Or if you're on any form of disability, or if you had a medical issue that trashed your credit, etc. People getting out of prison, and so on.
If you stray from the happy path, woe unto you when dealing with large companies.
In SF, you can’t evict tenants because you sell the house, and you can’t evict tenants with kids during the school year (without a just cause).
Said by the same people who asks: "Why the young are not having children?"
It just seems nice to be able to customize the structure without being tied to a particular location.
Absolutely. I had three landlords in a row promise all manner of things. "We're never coming back, moving to the country" (followed by "my wife hates it, we're moving back"). "We're looking to do other investments, we'd happily sign a 5 year lease with you if we could" (WA law limits residential lease lengths. Just as well for them because they decided "the property market is so hot it'd be irresponsible of us not to sell").
While I've had landlords that were not prepared for a long-term lease, I've never had an issue getting one anywhere I've rented. I've also had this work against me i.e. rents actually decreased halfway through the contract.
If that premium is too high though, you can be worse off than accepting the risk of variable costs.
Another drawback, you're likely to have less negotiating power with a corporate-owned rental.
You lease remains in force even with a change in ownership. So in most cases there will be no immediate impact to tenants.
Unless you think landlords are running a charity, some part of your mortgage is going to them as profit (over a large enough sample of renters anyways), and some percentage of your rent is covering 'bad tenants' (which you're not, right?).
Their entire improvement section is also something renters tend to not think about. It's a weird situation when renting that you aren't incentivized in any way to make improvements to where you live. You might not even be allowed to.
With home ownership though, things like a modern kitchen, a shed, new laundry machines not only better your life today but also (likely) have some value add. Though you also get the luxury of being able to ignore the value add if you just really want to paint that room neon pink for some reason.
You can make the same argument about a bank not being a charity and making a profit from selling you a mortgage (both are true but are not helpful indicators about rent vs buying). Similarly the interest you pay is insuring the bank against bad debtors, which you presumably will not be.
> With home ownership though, things like a modern kitchen, a shed, new laundry machines not only better your life today but also (likely) have some value add.
You can improve your living situation in a number of ways when renting. If you want a new kitchen or bathroom, rent somewhere new with those things. Renting also affords you the freedom to leave when things go from good to bad (crime, noise, building ammenities, etc.).
So when you rent you have to cover the landlord's profit/risk and the bank's profit/risk because the landlord probably has a mortgage.
Home buying/rental is a totally fair comparison, but I know several people whose main justification for buying a home, rather than continuing living in an apartment, was that they wanted to, "stop throwing their money away". Totally ignoring how home ownership is actually more costly than renting a suitable apartment.
Of course, I fully recognize their are a lot of advantages to home ownership. Some of which you already called out. However, I doubt those advantages are actually sufficient to justify a small, but significant, portion of home purchases.
This works great until people are priced out of the market dropping house prices a bit and then you've just got a lot of debt and houses worth less, you go bankrupt and someone _really_ wealthy pick up all your houses at a discount.
You can at least hope that the really wealthy guy didn't get that way selling a "get rich in the property market" book.
There are quite a few studies about this, but it is something which is not discussed broadly enough. But there is a inverse relationship between home ownership and income.
Because for most regions across the globe, once someone buys a home, they start looking for work that's in geographic proximity to their primary residence. And in most parts of the world, incomes generally tend to stagnate since higher paying jobs are almost always away from where people live.
Now a lot of people believe that they will pick the higher income, but the amount of logistics which goes into thinking about selling your home or renting it even often dissuades people from trying to look for a job which pays significantly more.
Interestingly, some multinational companies that I know of facilitate the entire transaction for their executives and senior managers when they need to move cities or countries because of this effect.
Owning a home for the purpose of investment and not living is a different matter, and the same effect isn't seen there.
* recent 2026 video: https://www.youtube.com/watch?v=aU7v87EhDBI
* 2025a: https://www.youtube.com/watch?v=j4H9LL7A-nQ
* 2025b: https://www.youtube.com/watch?v=lBG-g1CKfgs
* 2021: https://www.youtube.com/watch?v=q9Golcxjpi8
* 2019: https://www.youtube.com/watch?v=Uwl3-jBNEd4
The 2019 video goes over a handy "5% rule of thumb": start with the purchase price of home, take 5% of that: if your rent is less than that, better numbers-wise to continue renting (and investing the difference); if your rent is more, probably better numbers-wise to buy/own.
The company he works for created a tool to examine the numbers:
* https://research-tools.pwlcapital.com/research/rent-vs-buy
It’s also more likely that you’ll feel good about spending money to improve the home if you think you can get the money back when you sell. (And then you get to live in a more pleasant place for years)
"Locking in" a rate for multiple decades is mostly (only?) an American thing:
* https://www.tandfonline.com/doi/full/10.1080/15214842.2020.1...
* https://www.investopedia.com/why-your-30-year-mortgage-exist...
* https://www.cnbc.com/2024/05/07/why-the-30-year-fixed-rate-m...
* https://www.deeded.ca/blog/why-canada-doesnt-have-30-year-fi...
While a ≥20 year amortization period is common, the mortgage term is generally shorter (2-5, 10 years) is most other places.
The downside of doing that is you end up "locked in" to the property too. They now have a strong disincentive to sell, because they'll lose that sweet sweet interest rate and relatively low payment. I'm unsure what the broader effect is on the market.
Everybody is so obsessed with squeezing out the maximum amount of money from everything, it's exhausting.
Guessing what your yearly house-owning costs will be, and what the market will be when you sell, is in the realm of crystal ball scrying. Sure, you might be able to guess "reasonable" estimates, but individual instances aren't necessarily near the mean value.
Or, hear me out: buy low and rent high.
Most people do not do this, and many homes thus slowly degrade in value. It is a fast track way to destroy potential generational wealth.
Home repair issues also tend to be bursty (rule of three...). You'll have a few years of nothing that'll lull you into a false sense of security, then suddenly three major issues will come up. So far this year I've had nearly 10K in random expenses pop up (!!) and based on the life expectancy of my HVAC system I expect I'll have some more major expenses next year.
If there is one near to you, join a tool library. It is a huge savings over buying specialized tools for one off jobs. Tool libraries are an amazing community resource.
Find a good reliable handy man, even if you know how to do things yourself. Hopefully one you can trust with your door code so if your neighbors report running water while you are away on a trip you have someone you can call who you know will take care of it.
Except in my experience the lack of upkeep doesn't actually affect the value all that much. In many places the vast majority of the price is the land and people seem less interested in valuing based on the condition of the structure. It may affect time to sell, but that seems about it. Sure some credits might be offered during escrow for some repairs, but again often the money is insufficient or the seller simply says no.
In some places buyers will bulldoze perfectly good homes just to build a different one, just because the land is so valuable.
In other places, there are abandoned homes that municipalities can't even give away because the cost to bulldoze is more than the land is worth.
If the place you're in looks more like the former, maintenance doesn't matter as much. If it looks more like the latter, maintenance is going to be more important to your sale price.
Also if the house is at least mortgagable by someone then buyers will still bid the price up to infinity on debt even if the house is only usable for bulldozing. The land value itself is also way lower for places without a house since the land value is loanable in one case and not the other.
Rob Carrick, a now (semi-)retired personanl finance writer in Canada, observed that owning a home tends to not be a forced saving plan but rather a forced spending plan:
* https://www.instagram.com/reel/DWG223bPjvf/
* https://thewealthybarber.com/video/owning-a-home-is-so-expen...
Full interview on The Wealthy Barber podcast:
I wouldn’t buy it, but it’s super easy to not take care of a home, live in it, and have it appreciate in value.
A fairly unintuitive resolution to this is to setup a "fun and nonsense" budget and force yourself to spend it every half year, or to make a conscious plan on how to spend it over the year. If you plan the budget right, it won't hurt you, but it will force you to make your life better.
Maintenance, especially of owned property, seems similar to me. You should be saving up for the real "oh shit" situations, and you should accumulate a budget to just do things continuously. 6 months of routine maintenance budget saved up, what do we spend it on actively, before it becomes a mess?
Just a seemingly never ending stream of major repairs, which is taking up money we could have used on actual improvements (HVAC upgrades/mini split installation, reinforcing insulation, kitchen upgrades, etc.) that might actually raise the value of the home. Instead, I'm just hoping the repairs will keep us from losing money on the house when we sell.
[1] https://99percentinvisible.org/article/tying-architecture-to...
This way one’s housing costs feel like a bargain and savings (including repair reserves) quickly rack up unless the individual in question has serious problems holding onto money.
I agree with the first part, people absolutely do shoddy work or none at all but the value doesn't seem to go down. My mother bought a house had it inspected beforehand but massive issues with the foundation and the roof showed up the following spring when there was heavy rain. Sure, all that can be fought with attorneys and insurance (both cost time and money) but it doesn't feel very good psychologically or physically to be dealing with so much paperwork and house repairs.
Sorry to rant, I think your comment is spot on... owning a house is expensive.
I misjudged the scale. Going from .5 acre to 10 I feel like the amount of time I spent on home and property maintenance before could all be allocated to just one bucket titled "nature." Mowing, whether it's lawn, meadows, trails, tree line, all on different schedules. Trees die, they fall, hang up. The volume of brush, invasive species, pulling it, burning it. When we bought it, I made a mental note: "we'll have to replace the driveway." That driveway is asphalt, and 1000 feet long. The quotes for that alone are in price territory of a luxury vehicle. Irrigation, 12 zones, repairing, winterizing. Septic is another ticking clock. When that goes, you're in for 5 digits. Don't have a suitable secondary location? Engineered system, multiply everything by like 3.
So remove that time from my schedule, that's what I have left for home improvement work.
We're deep into it and really enjoy aspects of it. But if I could talk to my pre-purchase self, I would advise that the scale difference is huge, and consider the amount of time that goes into baseline maintenance when deciding how much of a "fixer upper" to take on, especially when acreage is involved.
If you expect the whole place to be manicured like a city lot, yeah, that's a huge amount of work.
We maintain the areas around our house. The rest is just oak woodlands. Looks like nature because it is nature.
Likewise never reduce your paved or roof covered square footage. Even if you don't want that parking space or patio or falling down barn the developer who might be your next buyer is factoring that in.
But for the length they last it is less than my city sewer bill. Though if my septic fails I'll connect to the city system was the quote I got to do that was about what a new septic costs.
But that's the quote just for the connection. Then you get to pay a sewer bill every month.
And comparable or worse than owning a house in farther out.
Your luck with landlords can wary a lot, and your rent payments may increase substantially with little notice. The landlord may also sell the building with either different management or repurpose it for something else and you will have to find a different apartment.
You may also suddenly have unpleasant neighbors. That is true with a house as well, but the distance between you and them is closer in an apartment.
As a dog lover, If you wish to have a big dog your may not be allowed to. If you want a yard to kids to play, you cant. If you want chickens you cant. (I know many in Denver who do) If you wish to install extra cooling /AC/heatpump you probably cant.
None of that negates your arguments fully, but the case is far from as black and white as you make it.
Not all, but a lot of the debate between renting and owning include something like this, but you can rent a home, and you can buy an apartment.
Interest rates sure have made it less of a good deal than it was ~5-10 years ago, but it's usually still worth it in the long run.
Not only that, but when interest rates come down it's usually pretty easy to refinance
Which means the potential losses are leveraged too. Plenty of people have ended up in that position. It isn't all upside.
You are improperly accounting for risk. People don't own a diversified portfolio of houses, they typical own one house. The "if you hold it long enough" is to some extent disqualifying. Many people never see any real return over multiple decades.
Where I live rents won't cover the interest payment on a new mortgage. The return on renting is insanely good here in addition to the increased optionality and reduced risk. I've owned many homes, I'm just not emotionally attached to the idea of owning one nor deluded about the rate of return.
I agree though that this is a very location-dependent thing to consider. Local renting rates vs property values is hugely important when determining if it makes sense economically or not. In your area you'd probably be taking a loss compared to renting until rents rise enough to make your mortgage look appealing and appreciation offsets those early losses, which could be a long time depending on the situation. And you may not want to do that at all even if the math looks ok depending on your risk appetite!
My original comment was just address shortcomings in the original post omitting benefits to home ownership, it's certainly not a cut-and-dry issue which is why I had problems with the post originally.
For sure though, there are real risks esp if you shop at the edge of your affordability
I feel like renting your first 1-3 flats in different cities is a valuable learning experience. You will learn where you want to live, what is important in a flat, its layout and its utilities and materials. It will save you a ton of money longterm if you know how thick the walls, well isolated the windows, locality of things and many other facets have to be...
These days it's not so easy, prices have risen by 50%+, but you still pay less on a mortage than the equivalent rent, by a large margin. Renting (if you can buy) is pretty much throwing your money away.
To each their own, and I'm probably pissing money away, but I want to live with the feeling that I can quit this 'housing subscription' (that's what it is, just another subscription) within a month and not even have to think about it.
If you're just looking at the numbers, it's worth doing the math. Obviously many things will be estimates.
Most people don't do apples to oranges comparisons, because a 2-bedroom, 1.5 bathroom you're living in is not comparable to a 3-bedroom, 2 bathroom, quarter acre house on a lot you're considering buying.
So it's obviously not just math, but also preference, or need.
Local house prices, tax rates, utility rates, services for maintenance and upgrade... they'll all vary greatly depending on the area. And if you're moving from an urban apartment to a suburban house, you're changing how much you'll drive, maybe even need an additional car. But maybe you turn in your rail pass, and decide to cook at home more, and eat out less.
If you think you can decide this based on a formula (or some folk wisdom), well you probably can, for yourself. But of course there's no one universal right answer that applies to most people, because there are too many variables and too many options.
Both my coworker and I had AC issues. For him, he called his landlord and that was it in terms of hassle. He then went after his landlord for a rent reduction due to the AC being an issue for a week.
I instead had to buy a portable unit as a stopgap while I dealt with finding contractors to give me quotes on a new central air system which cost 5 figures and probably 20 hours of time.
I then sent a maintenance request to my landlord and they came the next day and fixed it in 15 minutes.
First one already mentioned in the comments is you can be kicked out at any time within your rental agreement. I was "lucky" enough to get our rental sold two years ago and then again this year. Packing and looking for another rental with 2 months notice is not fun (and boxes smell).
Another difference is location and place itself. You'll have much fewer rentals in a very nice neighborhood, and even those that are rented out, are the worst - corner lots (3x gardening cost/effort), facing major roads or other things that make life less comfortable.
Rental condition is not under your control. At least in Seattle area owners I rented from didn't keep the house well maintained, which resulted in:
* roof leak (no moss treatment performed, grew and lifted shingles).
* 25 yo furnace "worked" until one midnight my family had to evacuate and call fire fighters due to CO alarms getting off. Four days without heating after that (owner offered to reimburse for the cheapest hotel nearby).
* Appliances are not replaced until they break. I looked at one property few weeks ago that had original once white appliances. I asked if owner is willing to upgrade them, the agent laughed at told us they will fix it if something doesn't work after we move in.
Also yes they replaced the dish washer and refrigerator with new ones before they broke or died while I've been there.
Staying put reduces the time and money you spend on borrowing, closing and moving, but most importantly, it keeps you from lifestyle inflation that is the biggest financial risk to homeowners or renters.
These are the dynamics in most of the United States in the broadest age range. They only break down a bit at the extreme low end (rooming with a bunch of people) and in the most expensive and house-constrained cities.
1. you can rent a single family house so the space and utility are the same
2. if interest rates recently increased very rapidly, the owner can afford to charge rent much lower than the current mortgage would be because they are locked into a lower interest rate.
A rental house is almost always more expensive if it's an apples-to-apples space, or the renter's use of it is significantly restricted even though it looks similar. Sometimes both.
There can be temporary mispricings of rent vs mortgages, but they correct, and they go in both directions. There are always small mispricings in housing markets that let individuals do exceptionally well (or be ripped off.)
this isnt a valid response. you are just wrong. https://constructioncoverage.com/research/cities-where-its-c...
As the population of the US starts decreasing (due to lower immigration, and historically low birth rates) and the urbanization trend completes, it's unclear why the value of land should go up, and therefore why real estate should increase in value.
The rest of the debate is very dependent on things like tax treatment (e.g. SALT and property taxes), personal preference (stability of fixed rent vs right to stay forever/customize), and transaction costs.
If you're able to own a rental property in today's economy it feels like you'd have to be stupid to not be able to make above-market returns
The long-term promise of buying a house isn't necessarily "number go up" but "after 25 years you own it outright".
West EU here, bought a new, architecturally wrong (yikes) house in 2012. I knew its conception would spell trouble, and sadly I was not disappointed on this part almost right off the bat. But the location and the price (right on the aftermath of the 2008 financial crisis and economical fallout / market bottom) were good.
After 14 years it cost an average of $130 per month on maintenance, mainly to correct on multiple occasion the conception issues aformentioned after the 10y warranty. Utilities are about $170 per month. And taxes are now about $1700 per year (rise 3-4% every year)
This $250k purchase must have cost less than $2k in fees, the credit was... well no credit. Spent almost 100% of my savings except some cash for my business. On the overall this house cost me less than $500 per month so far. Not really surprising for a new house, certainly.
And its market value rose by 60% in 14 years.
Yep, ownership is (was ?) very profitable in the west EU, mind the location.
Of course, this kind of credit is _incredibly_ risky. People don't think of it this way, but a mortgage is essentially a massively leveraged bet on your local housing market. Which is already gives your risk profile an incredible lack of diversity. The most valuable thing you "own" in the time of your life when you buy a house is usually your future earnings potential, and your house will be the second most valuable thing you own. The thing is, both of these things are highly correlated with your local economy, so buying a house doubles down on your already high exposure to local economic conditions. People think of owning a home as a kind of boring, safe, low risk/low reward investment, but it's really exactly the opposite.
You can borrow from your property’s value by neglecting maintenance, and that is sometimes even harder to notice than dollars in a bank account.
This is one of the ways condo ownership can bite you.
But I fully agree that mortgage forces people to actually save money, most people would just spend it all.
There's also a potential HOA fee, even in many neighborhoods with freestanding homes.
But there are tax benefits of home ownership too. The interest deduction used to very significant, although less now since they raised the standard deduction. There's also a $250K/500K non-taxable capital gains benefit when you sell a house for more than you paid.
There's always a loud minority that love to boast that all they had to do was replace a washer back in '86 for 50c
Any half-competent realtor will tell you that if you aren't going to stay in a house for 3+ years you will probably lose money on closing costs/fees.
Contrast this with my house, I stayed in it for ~6 years and the house went up ~$100K in value. During that time I put ~$50k into it (AC, Insulation, Pest, replaced some pipes).
But most importantly, it was mine. I did have to manage my own maintenance but I've lived through almost a decade of renting at differently places and the "included" maintenance is dog shit. At one point I had water in my kitchen floor such that as you'd walk water would come up through the seems in the vinyl for well over a month... on the 16th floor. I also had long streches where the elevators weren't working and every year they increased rent $50-$100/mo. Right as I was moving out they wanted to add a $25/mo pet fee and the removed our cable modems and made everyone use wifi-only (limit 10 devices). Yes, some of those could be avoid renting a house not an apartment but I've lived that life as well and it ain't all roses either.
TANSTAAFL. Maybe renting and owning come out about even for most people in most situations, but a lot of the "perks" of renting really sucked IMHO and I greatly preferred being in control of my own destiny, never having to ask permission, not feeling like a second-class citizen, not having the owners stop by or want to show off my unit to a prospective customer.
I have zero desire to go back to renting until it's time for nursing home/assisted living-type place for me.
There will always be people who break even after 15 years, just like there will be people who hit the lottery and sell for 5x while the ink on their mortgage application is still wet. But 5-ish years on a standard 20% down no points 30 year mortgage seems like a good rule of thumb outside of VHCOL areas.
Changing cities? Sell or rent out your house. Not harder than moving apartments.
> That's $12,777.92 to get the loan.
This is something I don't quite understand when people talk about homes: they just bought a $425,930 home. If they're getting a 30-year mortgage with a 20% down payment they will pay a total of $902k at current mortgage rates. The closing costs are such a tiny fraction of what you're spending. You wouldn't go into a store and refuse to buy a $40 item when you realize you need to pay $3 in sales tax, why would you be bothered by having to pay 3% of the home's value or 1.4% of what you will end up paying in the end?
Same thing with property taxes: my home-owning friends complain about property taxes like they're some huge imposition. OP is paying $515/month in property taxes. My rent has gone up by more than that in the past 3 years that I've been in my current apartment.
That being said, I appreciate this post for the breakdown of all the expenses. I'm considering becoming part of the land-owning elite, so this is useful.
Without high property taxes, more homes would appreciate in real terms.
> You've probably heard someone say something to the effect of "renting is just throwing your money away". Don't believe it. It's a glib statement that simply isn't true.
No, the statement is completely true: 100% of your rent money goes to someone else, and you also don't get any asset to sell later on.
However, this statement doesn't exist in a vacuum. You need some place to live, and you have to compare the cost of renting to the cost of owning.
To give an example, the typical rent in Toronto is $1000~2000/month, and the typical home ownership cost (including principal, interest, taxes, and maintenance) is $2000~3000/mo. We can just pretend that both are around $2000/mo.
If owning is still $2000/mo but suddenly rent is $500/mo, then renting suddenly becomes a great deal - even though you are still literally "throwing money away". You can use that differential $1500/mo to invest in a savings account, stocks, etc.
And speaking of that, I realized that the biggest cost in owning a home isn't the mortgage (and you correctly pointed out that paying down the principal doesn't change your net worth). The biggest cost is the opportunity cost of the down payment, when you could have instead invested in the stock market at 7~10%/year.
Continuing with the Toronto example, if you bought a home for $500k with 20% down, then the counterfactual if you had continued renting is that the $100k chunk of money could've generated $7000~10000/year = $580~$830/mo, which is a substantial fraction of the $2000/mo rent.
Shoutout to this article again: "You Are Naturally Short Housing" https://thezikomoletter.wordpress.com/2012/12/10/you-are-nat...
Why don't we say this about other expenditures? Am I throwing my money away when I buy dinner and not a cow? Did I throw my money away by buying a carrot and not farmland? I don't think the statement is true or false, it's just meaningless.
The oft-repeated statement that "renting is throwing your money" is an implicit contrast to owning a home, where the mortgage payment "builds equity" in your asset that can be sold later.
"Throwing money away" means you don't get to own something that can be sold for money later on. That's why we "throw money away" on gasoline, but not "throw money away" in a savings account.
The second part of my argument is that throwing money away isn't necessarily a bad thing, because the alternative (such as paying to own something) can end up being more expensive and being a worse deal financially.
How is it foolish to spend money on housing?
I've never heard someone claim I am throwing away money when I buy something consumable except rent. It's a stupid statement that doesn't convey any useful information.
OP uses that phrase to imply the (un)worthiness of spend. You're using it to mean that it doesn't build or maintain equity, which is true almost tautologically but wouldn't be very meaningful unless your audience doesn't understand what it means to rent something.
We bought our house 10 years ago and it’s basically doubled in value since then. Which is way more than the money I’ve spent on interest.
It seems like this is also based on buying somewhere with a super low deposit, which I agree is probably a bad idea.
Specifically: people think about maintenance costs as a "con" in owenership, but its not like in the alternative (renting) you'll get all of those things for free. The owner just won't do any maintenance beside the bare minimum required by law.
Renting an apartment and owning a home have so many differences that it doesn't make much sense to compare the two.
Many people seem to assume they'll be moving every few years, but if you want to stay in the same place for life the equation looks very different. I hope to be done paying the mortgage around the same time I'm too old to work for a living, and if that lines up it's a pretty big win on the own instead of renting side.
Assuming of course you make an informed purchase of a home given your particular circumstances.
Most homes in the US appreciate in value, unless you live in rural Pennsylvania.
I also believe buying early forces you to be more financially responsible and makes purchasing your first family home later in life a lot easier.
So I always recommend young people to make the sacrifice and buy a place.
Your first home doesn’t need to be your dream home.
My first place was 700 sqf in a very shady area of the city, but it came with sweet tax abatements for several years and the area improved a lot but the time I sold.
There are always opportunities like that in almost every city in America, even in today’s market.
Is that true.
Homes for the majority of human history have not been something that "always appreciates", the condition of the domicile might actually be worth less than the components it was constructed with.
At some point, nobody who isn't already on the ladder can afford to buy, then you've hit your market saturation. Then it's about how much more can you squeeze them for.
If interest rates rise, house prices fall, because most people buy at the edge of their affordability -- and soon there'll be no homes that they can afford at all, or: the house prices must stabilise and not "forever appreciate".. they can't both be true.
1) When a bank loans you $1e6 to buy a house, they are effectively deputizing you to act as a money manager: they allow you to make an investment that will hopefully appreciate more quickly than the interest rate. There are many other investments that have this property (e.g. the stock market), but banks won't loan to you to invest in them!
2) A mortgage acts as a forced savings rate: you pay the bank every month, and when you're done after 30 years, you have a large asset. So a large mortgage is (for some people) a good psychological commitment mechanism that imposes financial discipline.
And anybody who is saying their property value went up, so it was worth it, you really couldn't know that at the time. It wasn't a given (tbf neither is the market going up). Also, it's not like the property actual increased in value due to some quality upgrade, it's due to artificial scarcity. If the political winds change to encourage more housing, that trend could reverse.
There are arguments that you can customize a house you own more and that's true, but that's not a financial argument. I don't think a lot of big renovations pencil out anymore the way people expect. Paying X to renovate a kitchen doesn't increase the value of the house significantly over X anymore because the costs are so high and the high inflation erodes your dollar value much more quickly than in the past.
Those that have updated and added additional features to their home did so with materials and services bought during high pricing. It is true that a deck built a year ago is going to be 20% less for example. later when selling a home how will this reflect on the bigger picture for the total price. Let alone the market when the cooling takes affect you will owe more than what the home is worth lets say. So my confusion is brought by a conversation with a coworker. Stated that he wanted to buy a home at 21 years old i said that unless you have a family and know that you will be stable in that location for arpox 5-7 years that sure, however when the market cools and your locked in mortgage rate is XX% how will you sell you home and come out even or even +.
Response: equity
me: you mean negative equity!
response: homes are only going up.
me: to what a million dollar for a two bedroom, one bath dwelling located in a busy street and minimal parking and adjacent to neighboring property.
He seemed convinced, he seemed to convince me that i was wrong.
Wire your network however you like. Those walls are yours.
Invest in as much solar power as you want. The only limit is the sun itself.
Want to be a Ham? Be a ham. The antenna goes wherever you want.
Charge your EV as long as you want. The EV charger is yours and only yours.
Also, do you want a cat? A dog? A massive tree? Just get it. Nobody can say no.
Walls are your's? Not when it falls under some heritage laws/building codes which forbid too much deviation from the original.
As much solar as you want? Again, very much depends on not disturbing someone elses view, or the 'general character' of the surrounding landscape. OFC again dependent on jurisdiction.
Big bad antenna? See above. Cats 'n dogs, again dependent on country/county. The same for tree.
All of this applies to some regions only, where your next neighbour is far away, out of sight, usually.
And even then you can have shit like 'water rights', like in Colorado.
Maybe it is different if you buy an old house?
I recommend everyone who's making this decision to do something similar as an additional perspective. So many variables will be dependent on location, personal finances, and goals
Similarly, taxes will depend on the locality, loan costs depend on the lender and the loan amount. Utility costs in SFBA can be easily 4-5x higher than elsewhere in the US, etc. So your totals could be easily 30% or 300% of what's outlined in the article.
The one important point that the article makes is that your ongoing costs will also vary dramatically depending on how much work you're willing to do yourself, especially in high-regulation, high-labor-cost areas such as SFBA. A basic job, such as replacing a leaky flush valve, can be hundreds of dollars in plumber costs, or $19.95 if you go to Home Depot. Hiring a painting contractor can cost thousands. Etc, etc.
I've also seen several homeowners outright taken advantage of. My main example in the US are various "mold remediation" contractors, who can help you in some really bad situations, but they're just as happy to charge you $20,000 to do nothing of value based on vague fears.
I currently pay almost $2500/mo in property taxes here in SF (about $100/mo in parcel taxes). FML.
The property tax goes up slightly every year, but not faster than inflation.
There are recurring things to maintain (repaint every ~10 years), the roof has been patched about 10 years ago, might need a new coat eventually.
This is where the margins of home ownership open up. Doing your own yard work also has added benefit of giving you routine awareness of potential issues around your property before things become much more expensive. Irrigation and drainage issues are usually obvious when you are standing right on top of them. I would argue that if you aren't willing to push a mower around your property, you might not want to own that property.
Also, DIY yard work also forces you to maintain various tools and skills that are extremely useful for adjacent applications. For example, lawnmowers and standby generators tend to have similar principles of operation. The tool and knowledge I use to gap the spark plugs for my mower works just as well for the generac.
I save almost 6 figures of money per year of owning versus renting just because of timing. I guess the moral is: get lucky or optimize your living situation for how you want to live instead of worrying about cost (unless it's huge)
In the US at least the tax system is also heavily setup to favor home ownership. Mortgage interest and real estate taxes (which are baked into rent) are tax deductible for the home owner and not for the renter. That’s another big difference that adds up over time.
I have paid about 90K in rent now over the last 15 years and this also includes water and heat.
My friends with houses in my area pay about that much in property taxes plus heat that I pay for rent...
I pay this small amount and make 6 figures and I put the majority of my income into index funds. I am fairly sure that I am coming out way ahead of a house. Plus how do you put a value on the time sink for maintenance and upkeep? Mowing, shoveling, etc.
I calculated it recently and in retrospect I would have been vastly better off renting and buying VOO with my equity stake. It doesn’t help that taxes + maintenance have cost almost the same as rent even if you don’t count the actual purchase price.
In almost all jurisdictions that’s not how property tax works. You’d only pay proportionally more if your home went up more in value than your neighbors. Also, property tax goes up on rentals too, it’s just baked into the rent vs something a separate charge. In the US the homeowner gets to deduct all or part of that tax from their income taxes while the renter must pay that with after tax dollars.
Renting and buying tends to work out the same in the long run if renters invest the difference on the early years - but which they rarely do
The difference is that after 30 years you can own the house and have a low-cost place to live in your old age (not free, you still have prop taxes, repairs, etc.), whereas with rent you have nothing. That is significant.
But really, the biggest benefit of paying a mortgage is related to the value of money.
Over 30 years your rent will increase substantially in then-current dollars, while your mortgage remains fixed. Which means that it essentially gets cheaper over time.
Consider that the US national average rent in the US was ~$550-$600 30 years ago, and is ~$1700-$1800 today.
Renting has no similar protections. Your choices are, "Pay the (increased) rent" or "Move"
In 1960 rent was about 10% of median income. Today it’s more like 30%. This might sound bad but in 1960 food was 30% of median income and today it’s around 10%. Prices are always relative, it’s impossible for everything to get cheaper. There’s no reason to assume rent is especially prone to this except that it has been over a certain period. Other periods it has been the opposite.
This is like saying, "you don't need to hedge inflation as long as everything goes right"
You don't need to hedge inflation ... until you do.
Other things that change the math:
- Only allowing individuals to rent living spaces (no corporations)
- Only allowing individuals to buy houses (no corporations)
- Not allowing corporations to buy influence in Washington DC
Anything that puts the focus back on what's the ethically and morally right thing to do for humans changes the math.
And don't get me wrong: I'm a capitalist. But for some reason, some capitalists really get upset with this kind of language.
I wonder why?
End of story. That's the entire conversation right there.
Note how much money he made on the house he lived in for a decent amount of time... (~330k, minus minor investments on repairs)
Renting is better than buying if you're not going to live in the house for any real duration (real meaning 5+ years).
Otherwise... at least in the US... the financials around 30 year mortgages and a target inflation rate mean buying is going to work in your favor.
Will this blow up at some point? Meh, maybe? But for now, owning is FAR better assuming you actually hold onto the property. The longer you hold, the better it gets.
Yeah, subsidized mortgages (via government insurance and mortgage interest deductibility) tilt the market towards home ownership in most of the USA.
Most of the rest of the world doesn't intervene in its housing market as much and the ROI on owning vs renting can shift. Switzerland will tax your home on the potential rental income of your home, whether you rent it out or not (I think this recently changed, though). The home ownership rate is historically between 30-40%. Basically farmers and the upper quartile of income earners are the majority of owners. The result is that most Swiss have their wealth in more liquid assets and are also highly mobile for work.
> Will this blow up at some point? Meh, maybe?
Owning is also turning into a problem for many Americans. Some people are trapped in their homes because moving means resetting locked in low interest rates. Insurance has made home ownership extremely expensive in much of the states that were fastest growing over the past decade. I'm sure solutions (good and bad) will come, but sometimes it's nice to just be able to hand in notice and walk away.
Yes, it will take effect in 2028. Although that's unfortunate, it was a good tax to equalise tax treatment of owners vs renters.
The Swiss market is also different in many ways: no capital gains taxes except on real estate, which really shifts the invest against house appreciation towards renting.
> Basically farmers and the upper quartile of income earners are the majority of owners.
I'm not certain the second part is very true. Of course, given how prices are you need to be rich to buy, but I think the bias is a lot more towards age than income: those that own are overwhelmingly those that bought a long time ago or inherited.
Finally, rent control results in some crazy price to rent ratios in the big cities: Zürich is around 35. But as usual with rent control, it's if you can find the right place.
Another thing to keep in mind is the lumpy nature of costs, meaning you need to have access to cash to pay for multiple major maintenance projects in one year. My largest single-year expenditure for maintenance was 25k in a LCOL area pre-pandemic. That would probably translate to 50k today. If you have to dump that on a credit card, good luck digging yourself out of that hole.
It's common to hear that renting means you might need to move at the end of any 12-month period. Well, that cuts both ways. You have the option to move away at the end of any 12-month period too. Lots of folks had to turn down job offers in the aftermath of the housing crisis because of their homes.
However many of us knowingly exceed that point. For example we pay ~$500/mo over that point. Though there is no really comparable rental, we definitely could have chosen a more cookie cutter rental to be about +$6000 / year.
That doesn’t mean it’s equal for any given individual of course. So it’s important to do your own calculations and make your own decisions. But I think the fact that it is debated so much shows that it is probably roughly equal on the margin.
My gut feeling is that repairs and maintenance cost more with condos than if you own a home and you're handy to fix minor stuff and know how to find good contractors for bigger jobs. I imagine condo jobs becomes more difficult and contractors charge more for those jobs. But I don't have data to back my hunch. Condo has extra issues in dealing with neighbor problems (issues with garbage, pets, unpaid fees, noise, etc...) and you have to maintain shared spaces (hallways, elevators, etc...) and you end up paying for that via your condo fees.
Condos can also benefit from efficiencies of scale - e.g. there are plenty of small jobs on myself that I do myself, but between the time spent on research, and expenses/trips to pick up supplies and tools, I'm spending multiple hours of my time/money on things that someone experienced/equipped could bang out in 20 minutes - but any decent handyman is going to charge their call out rate of $100 + materials for a 20 minute job. vs at appropriate scale a condo corp can effectively just have/share a full-time handyman and save a pile of overhead.
However, not all HOAs are actually financially responsible. So they might raise monthly fees, issue “special assessments” (lump-sum charges that can be $10k+) or take on loans. And they decide when they will do that.
Condos are generally the worst of both worlds, because you have almost all the responsibilities of homeownership combined with nearly all of the restrictions of renting an apartment.
There's a reason they appreciate significantly less than other types of property.
Sure sometimes they do make bad decisions, but you're welcome to just show up to their board meeting and give them some advice.
You may own your condo, but the condo board can also hit you with a 6-figure bill for building repairs and aggregate maintenance. Enough to force you to get a new loan, even when you might still be paying your mortgage.
And if the tenants take issue with these kinds of bills (they frequently do), they can tie things up while things get worse and more expensive to repair.
This was actively a problem for the tenants at the center of the Surfside condominium collapse, with maintenance needs directly related to the problems that resulted in the collapse.
I pay them on the portal and if something needs fixing I put in a maintenance request and they get it fixed. That's all i've ever thought about with them.
Then skip to the bottom:
> I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k. I've put a lot of money into it catching up on maintenance, repairs, and improvements, but the appreciation will definitely exceed whatever I've put into it when I decide to sell it.
There you go.
The only counterexample is one that's a truism: author bought at $321k and sold at $333 a few years later. Real estate is a long term investment, same as the funds you'd choose for a retirement account. In both cases if you're buying/selling short term you missed a very important implied premise in the conversation.
you can rent for multiple years at a favorable rate - then save some money into the stock market.
however in america - people have been fed the propaganda you need to live in a single family home.
Landlords do whatever the hell they like with zero consequences. Thats not a game I’d like to play with a 40 year horizon of unknowns.
With a mortgage the risk is interest rates. And on that I’m confident I can carry far more exposure than my peers. So if that blows up in my face then the entire country’s financial system is cooked anyway
A few things I’d note to add more data points to the pile:
* Property tax caps like the OP discusses are likely to go away in the near future. Having been artificially capped for so long with so much uncaptured asset appreciation, communities are having to face either serious cuts in services or to seek permission in raising property taxes. If you’re buying a “forever home”, ask yourself if you could still afford it with 2x or 3x the property tax bill; if not, you might not be ready to weather the disruptions ahead
* Rent has skyrocketed alongside home prices, making both untenable (local housing jumped 50% in home prices during COVID, while rent has appreciated about the same over the past ten years; wages have not kept pace with either). Some states have tried forcing higher density housing near mass transit, but those have been blocked or lawyered around; now tenants are pushing to rent caps, terrifying landlords. The point is that pricing in the near future is going to be incredibly volatile as asset prices and rents adjust to meet what workers can afford instead of what financial models spit out, and that’s going to impact your own home prices accordingly
* The primary benefit of home ownership going forward isn’t likely to be asset appreciation so much as stability. For those of us who want to put down roots, owning our homes is critical; for folks happy to move around and explore, renting is far preferable. I would strongly caution against the old adage of “buy if you’re living there for 4+ years”, as there’s no guarantee you’ll come out ahead anymore and may be better off renting
* Most “affordable” housing stock will require repairs anywhere from 20 to 50% of its purchase price, especially in older regions of the country. Do not waive inspections when buying a home or you’re likely to miss a five or six-figure repair - like an oil tank that’s leaked into the foundation, for instance.
This isn't something you get renting and it effectively lowers your monthly payment.
Renting is definitely the better option for certain people, if you intend to move often, or want to live in an apartment your overall costs are likely to be lower. If you want a single-family home and don't want to move often (or be moved out) Buying is worth it. Even setting aside the satisfaction of home ownership if you can mange to pay off your property you pretty much can't live cheaper at the same scale.
that said I've rented, I've owned, and I've been a landlord and I'd take home ownership in a heartbeat. It's not all rosy, and being responsible for maintenance is no joke but not being subject to the affairs or whimsy of someone else's finances along with the pride and sense of actual ownership is is wonderful.
The person counts the 12 month escrow prepayment during closing as "cost to get a loan" It's not. It's the cost of 12 months of taxes and insurance on your property.
Also notable is the "1 year insurance premium" either they're double counting the escrow, or this 1 year insurance premium is mortgage insurance where the bank makes you take out insurance to protect them. This can be prepaid, split paid, paid monthly, or you could put down 20%.
The lender makes you purchase title insurance for them, but this person also purchased title insurance for themselves. This is mostly just pure profit for the title company. The cost for the insurance is for the company to do the research, if they found an issue, they wouldn't insure the bank. Buying it for yourself is mostly just lighting money on fire.
A lot of those closing costs are shoppable, you can find better lenders. Before closing, you're given a truth in lending disclosure with all this carefully spelled out. If you don't do even basic due diligence, I question if you have the financial literacy to own a home.
I'll also note, they didn't mention in their closing costs paying for a home inspection (beyond termites). This is likely why they had to pay for real repairs on the house.
One of their "repairs" is new water pipes. There's no reason listed for this, but this is often pushed by door to door salesmen telling you need to do it to protect your property/health and is mostly, like all door to door sales, a scam.
That note about counting the cost of heating and cooling is similarly nonsense. They claim "apartments are almost always smaller than houses" which isn't true, and count electricity rate increases as cost of ownership, rentals have to pay that too. They also assert, with clearly no evidence that heating and cooling is half their electric bill. There's easy ways to figure this out, an emporia can do it easily.
The whole premise is flawed. They note that in the beginning only 20% of their payment goes to principle and A) you can control that (bigger downpayment so no PMI, less interest), bigger more frequent payments or a shorter loan, and B) exactly 0% of your rent payment goes to your principle.
This might better be an examination of "can I afford a mortgage with the same rent payment as I make today" and the answer, not surprisingly, is no, if your rent payments are a the top end of what you can afford.
More importantly, this neglects that buying a home is locking in the price for the long term for the majority of your housing cost. Buying usually is similar all in the first year, but after 5 years your mortage payment is the same while rent has probably gone up significantly.
In particular, the title part sounds horrible (and expensive). As far as I know, over here it's all handled by the state, no insurance required. I don't know if it's because of different laws regarding future claims (the registry is the truth, too late to change it?) or just better records?
Same with tax/insurance escrow, you just pay directly as it comes, but since we have essentially no property taxes, it's probably not required?
On the other hand, here mortgages only have a closing fee (and quite often even none at all, with all the small fees being invisible and rolled into the margin), so that transparency is welcome.
> Same with tax/insurance escrow
You can do this, but only for jumbo loans (>400k). Property tax and home insurance is usually paid once per year, and especially for first time home owners, not being prepared for one of these could be significant financial hardship. So the bank mandates an escrow to make sure a regular yearly charge isn't going to make you miss payments to make. They don't make money on this escrow and there's no interest or fees involved.
> On the other hand, here mortgages only have a closing fee (and quite often even none at all, with all the small fees being invisible and rolled into the margin), so that transparency is welcome.
Yeah, it's super nice. Spells out all the fees, the interest rate, the APR and everything. It clearly delineates fees that can be negotiated/shopped for and which are set by the government and which are set by the bank that you can't shop for (unless you change banks who might charge differently). It's also required to be provided to you in advance with a minimum time window to allow you to read, understand and come prepared.
> I bought this house new, and didn't live there very long
End of story.
>I bought my home in Auburn, WA for $321k, and sold it a few years later for $333k. After all the costs to buy and sell it, I probably lost more money on it than I would have spent renting an apartment.
Home ownership isn't a net positive from day one. Otherwise, everyone would always do it. Home ownership is net positive in the long run. It's a long term position. You don't day trade houses.
How can anyone (financially) justify the cost of owning your own compute?
How can anyone (ideologically) justify the cost of not owning your own means of compute?
1. Your landlord is losing money
Or
2. The rental market is dominated by landlords who own outright, or bought long enough ago that their cost is much lower than the cost of owning is now.
I’ve never seen #1 happen, and the only place i’ve lived where #2 was the case the market has now adjusted and it’s very much not true anymore.
Buildings last 60-100 years. It does not take that much over building in a previous era to decimate the bargaining position of landlords of a future era. We have been using the law to prevent this horrible no good outcome /s for the last 100 years or so. We can stop anytime.
True. But even if you have the physical ability, skills, tools, and equipment handy - you can spend a lot of time on maintenance & repairs. Just ask anyone who's done yard work for a few years, or has repainted a house, or ...
That said a layperson probably won't know the new code requirements in their jurisdiction and if you sell your house you'll have the inspector tut-tutting the work for one reason or another.
"Surely it wouldn't be too hard to undo/redo piping etc." But yeah, different refrigerant, different code requirements for vents and exhausts and drains. 4 people working for 16 hours, I saw where the money went.
How much time does it take to acquire & refresh the skills and code knowledge, and how many water heaters can you amortize that over during your life?
The building code stuff is more of a bugbear.
Admitting that one of my grandfathers was a blacksmith and the other a farmer, that my own father could have built a house from the ground down (I helped him dig and pour a foundation once) and then up, etc. - most modern Americans just don't have the backgrounds/aptitudes/comfort levels needed to try and succeed at such tasks.
I built a custom shelf for my closet. It'd have costed me an arm and a leg to have someone else do that, even with a tech worker's salary.
I also built a custom walk-in closet. It took me a day, saved me over 2k and I got a better quality closet out of it. (You find find built yourself a walk-in-closet kits that are easy to assemble, it really isn't that hard, just don't get the home depot level quality ones.)
For example, to mow your lawn, you have to find a time to do it every couple of weeks when the weather cooperates, be at home at that time, store and maintain the equipment, have a pair of "grass shoes", clean up afterwards, etc.
This might be worth the effort if you don't have much disposable income. But if you have money to blow, hiring someone to mow your lawn can give you more time to do something else you'd rather do.
I don't plan to sell. I'm not "investing" in the house. I'm living in it. Essentially, my home eliminates the biggest portion of my monthly expenses. I hope my home value goes down, a lot. Then I pay less on the one expense I do have associated with it: property taxes.
When you buy, you will pay a certain amount for 15-30 years, and then you only have to pay for the continuing maintenance. When you rent, you will pay a certain amount every month forever regardless of whether the property is paid off or needs any maintenance.
Is it common in US?? In France the current rates are about 3,5% fixed rate, meaning in your first payment on a 25 years loan you pay about 55% interests. Which I think is pretty high already!
What kind of rate do you have to end up paying 80% of interests in your first payment?
Always negotiate repairs into the offer price.
Too much reliance on the permanent number-go-up hypothesis in home prices
Probably the biggest factor of considering the rent/buy question is how long to do you expect to be there. We paid off our mortgage after 16 years, so now it's 'free', except for ongoing maintenance and taxes. And we're looking at some nontrivial reno in the future: the kitchen is quite beat, and someday we'll need to deal with the asbestos siding (one of four layers on the house!). But it least it's our choice.
It's a higher interest rate, but then you only get charged on the amount you have actually borrowed which ideally would be get lower and lower.
If anyone has any feedback on it I'd love to hear it
Also, condominium does not automatically imply apartment, because there are condo townhouses and condo detached houses.
A condominium is a legal structure that prescribes which parts are owned jointly and which parts are owned individually. https://en.wikipedia.org/wiki/Condominium
It was our first home after getting married. The condo HOA will probably go down as the most disfunctional HOA in California history - not exaggerating. It has/will cost an obscene amount of time/money that I will never get back.
This isn't to say that there are not emotional aspects to owning, but that is a separate discussion.
Maybe home ownership is becoming a luxury, but humans don't exist in financial spreadsheets. The intagibles of SFH ownership are worth literally everything to me after a lifetime of renting.
It's also absolutely a class differentiator in the US. If you're behind on your rent and getting evicted, that's seen as a personal moral failure. If you're behind on your mortgage and getting foreclosed, it's considered a tragedy, and there are many options for support like forebearance. Just look at what happened during COVID; red state renters were getting knocked on by the sheriff within 90 days, while it can take years for someone to lose their house.
Whatever you do don't read your local zoning code.
If you really want motivation to browse large bulldozers on Facebook Marketplace look into the legal doctrines that underpin these codes. It's pretty mind boggling.
If you take literally anything away from this article, this opening line is it. People who say this bought their house decades ago and have no clue what the present situation is.
I pay as much as I did for rent in 2019 for my house now (and until 2050). And my house is over 3x larger.
I can move on a whim, and the worst-case costs will be a modest lease termination fee and literal moving costs.
While it may not be well known to many, there are mid-sized cities all across the middle of the country where you can buy houses as cheaply as $150k in this year of our lord 2026, but rent generally will be no less than $1000/mo. Private equity and software like RealPage have had a nationwide impact of driving up rental costs, but this hasn't necessarily caused housing prices to skyrocket in places in middle America where there aren't a lot of natural reasons to want to move there.
So sure, owning a home might cost more than renting on paper in California, but that's not true in a lot of parts of the country. Even then, the financial aspects aren't the only parts that matter.
> My 1983 home had been used as a rental for years, so much of the maintenance had been neglected.
The author is acknowledging a reality without acknowledging it, also. Rentals are not well cared for. Most landlords do not keep up with repairs, maintenance, and improvements, and you are going to get to deal with the poor quality of living situation as a renter as a consequence. You get to control this when you own your home, and while it is an expense, it's a fair expense you can manage yourself.
Author is correct that if you don’t live in the house long, the overheads such as transfer duties and legal fees make it somewhat expensive.
But over here we have a pretty high interest rate of around 10% and comparatively high inflation rate, which makes the initial purchase of a house be a bit challenging, but if you start paying more than the minimum as soon as possible you can find yourself in a financially more comfortable position.
My bank allows me to have something they call an access facility on my bond account (the account for the debt on my house). With this I can transfer extra money into my bond at any time and I can draw this extra money out at any time too, this extra money counts as extra paid on the principal.
This essentially means that any extra money I put in it is worth about 10% p/a in terms of the interest it saves me.
They calculate interest per day so even if extra money sits in there for only a few days, depending on the amount the interest saved could be worth a coffee or possibly a meal.
Although I settle my credit card every month, everything I route through it and don’t have to pay back interest free for the next 30-45 days is essentially saving me that portion of interest on my bond, so easily over a percent. And that’s before credit card rewards.
And while I don’t recommend this except for the most financially disciplined as it is a little precarious feeling, I have a second credit card which I’m able to settle using my first credit card, this adds yet another 30 days of essentially interest saving to me.
It’s a great way to save for something big over say a year or two, even if you draw everything you deposited out again two years later, it’s saved you from the interest in the meantime, so you’re still better off.
Then there is the effect of inflation. If you’ve been able to put a good amount extra into your bond each month, you will find that after 5 years or so it’s probably less financially burdensome than renting.
This is because since you bought the place, property prices have gone up, so has rent and so has your salary, but your principle debt has not increased with it, meaning you’re paying no more than you were 5 years ago for the monthly instalments, but due to inflation it is comparatively less expensive.
Anyway, that’s the financials aspect, but on the quality of life aspect, a few years ago we finally bought a house that should be very nice for our family for the next 20-30 years, in terms of size, comforts and security.
We also bought a house with an old interior and renovated it, making the bathrooms and kitchens modern and how we wanted them. Was also able to chase conduits into all the walls (brick and mortar houses are the norm here) so that every room has CAT6 going to it.
Owning my own home is the only way to go.
The person also discounts the impact of horrible neighbors, stomping and barking at all hours of the day. That can happen in houses but they are not right next to you
The author also seems to assume you'll be paying more to heat and cool your house because if you're renting you're in an apartment? Just down the road from him, four of the five homes I rented before buying in 2021 are larger than the home we bought.
"Less than 21% of my monthly payment is going towards paying off the loan" - well, yes, because it is front-loaded with interest. And as you get through the loan, 80%+ will be paying off the loan.
Maybe different loans are different, but generally your home insurance and property taxes are rolled into the mortgage (and often paid on your behalf by the servicer) - indeed, it seems like there's a double dipping of breaking down his mortgage payment and the component that is tax and then saying below "I currently pay $515 in taxes monthly".
There absolutely are additional costs to owning a home, to be very clear.
But there's definitely a contingent (and this post isn't the "worst" of them) that likes to paint home ownership as nothing more than opening your check or pulling out a credit card every month for "the next four digit expense".
Especially in Western Washington where the property market 2010-2020 was "a good one". (I put down 10% and at the contractual "year-and-one-day" on my loan for the soonest I could remove PMI I was able to because I'd hit 20% equity on value increase - only making my regular payment), something that he benefits from, too:
> I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k. I've put a lot of money into it catching up on maintenance, repairs, and improvements, but the appreciation will definitely exceed whatever I've put into it when I decide to sell it.
I tend to abhor buying vs rent calculators. I always have. Why? Because of inelastic demand. You can't opt out of the housing market. Well you can. It's called being homeless. If you rent, you have in effect taken a short position on the housing market. If house prices go down, rents tend to follow and you're better off than those that bought. If house prices go up, you're worse off. That's a short position.
So, by buying a house, all you're doing is closing out a short position. You might argue "but you still win or lose depending on the housing market's movement" but that's not actually true. Why? Because if all houses double in value, you still own 1 housing unit's worth of wealth. You're actually no better off. Who is? Corporate landlords and those that own swathes of houses. But your "investment" in tdhe housing market is used to buy your vote. You have a tendency to become a NIMBY. You tend to think of rising house prices as "good" despite the ultimately destructive effect on society.
Once again, China has been proven to be correct. Xi Jinping said back in the 2010s "houses are for living, not for speculation" [3]. Remember the trillion-dollar Evergrande default? Have you seen Western coverage of Chinese "ghost cities" or how the Chinese real estate market has been in turmoil like it's a bad thing?
All that happened was that Xi quietly popped the real estate bubble and made it more difficult and expensive to own more than one home. Prior to Xi's reforms, property speculation was rampant. It's going to take years for that correction to work itself out but it is ultimately a good for China as a whole.
Oh and one nitpick about the "costs" of home ownership from this post. A lot of the things like the repairs are cash outlays but they also tend to improve the value so that's more of an ivnestment than an expense.
[1]: https://worksinprogress.co/issue/the-housing-theory-of-every...
[2]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6571818
[3]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...
Article did sum all the inputs/outputs, and came out at loss. I'm just wondering if there is some other trends over 10 or 20 years that make the house better.
Based on the nytimes version from 20 years ago but updated since then.
Actual rent vs. buy outcomes vary by location, but the general rule is that in most desirable urban areas, it's financially better to rent.
Everything is so fucking expensive.
What a meaningless slop article.
yep, it is.
i bought my home and went from paying 650 euros/month for a single room and sharing the rest of the flat with a roommate (in his own room) to paying 430 euros/month for my whole flat (in the same city, btw).
fast forward a few years and:
- the same room now goes for around 700-900 euros/month (post covid inflation)
- my mortgage price would have stayed the same (fixed interest rate)...
- ... except i paid it in full before time (and saved a ton on interest)
- my flat is now worth a lot more than i paid id (again: post-covid inflation)
nowadays i'll be kinda braggy, i'm leaving the dream: i work in tech, i have a very good salary and all of my fat paycheck stays in my pockets.
having a mortgage with a fixed interest rate meant i could plan around the payments i had to make.
and don't get me wrong: i'm 34, i'm not a boomer.
they say that renting gives you optionality. well... i can still easily sell my flat and move elsewhere OR, hear me out... i can rent it.
I also despise the culture around owning a home and the insane things that we do to prop it up. Zoning restrictions, absurd mortgage terms (what other country does 30-year fixed rates?), overbearing building codes all so we can live up to this arbitrary life goal of Owning A Home.
Rent (because I'm a college student or in my 20s)
Buy (because American Dream and FOMO)
Buy a few rental properties (diversify income)
Buy a vacation home (seemed like a good idea at the time)
Sell everything and rent a house (move to an area better for my kids) <--- I am here
Buy one primary home and stay there forever <-- the plan next year
Renting a house is a great financial decision for my current market but the landlord is erratic (will he raise the rent? sell the house? move in?), I still have to deal with a HOA, and there are several big upgrades/changes I want to make and I can't: double the solar/battery, add some covered storage, put in wired cameras, put in a high quality RO water filter, devote most of the backyard to an orchard/garden, etc. And the rent will keep going up, whereas insurance/property tax will go up much slower because I plan to buy in cash.