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Because in the US we like to sell people on the idea of "ownership", when the reality is that the bank retains all the real value. Only a fraction of so-called

Because in the US we like to sell people on the idea of "ownership", when the reality is that the bank retains all the real value. Only a fraction of so-called "homeowners" actually own more than 50% of their home. Most homeowners just rent from the bank. Many will rent from the bank for life. The way homeownership is sold in the US is nothing more than a way to get people to give up hundreds of thousands of dollars to the banks under the illusion that they are building wealth or equity. And when they finally sell their home 20 years after they bought it for twice the price, they don't even consider that after inflation and mortgage interest they basically broke even.

cryoshon 11y ago
Hm, I've never thought of it this way, but you're entirely right. This explains why many struggling families can "get" "reverse mortgages" in which they sell their earned equity back to the bank that has always owned the majority share. Until they have sold all their shares, and are evicted, that is.
- toomuchtodo 11y ago
  Indeed. Being a mortgagee is simply a renter by another name, with tax breaks.
Grishnakh 11y ago
The problem with your analysis is that you're forgetting that renters have no control over the amount they pay in rent. You can only control your rent price for the first year; after that the landlord is able to jack up your price almost any amount they want (subject to local laws), and you can either pay the jacked-up rent or move out (which is expensive) and find a new place. When you buy a house (err, rent from a bank), your monthly "rent" is now fixed for the next 30 years, and will never go up (unless your property tax goes up, this is subject to local laws). Your principle and interest are fixed for that whole time, so your mortgage payment is stable. That's the big advantage with buying.
- themagician 11y ago
  Your monthly "rent" isn't fixed though. Most people have both HOA and propter taxes, both which increase year over year. Not only do these rates increase over time, but as the value of your home (which you often don't own in any significant way) rises, so too does the assessed value. Do they increase as dramatically as rent? No, but they do still increase. Then you've got the 10% or so of "homeowners" with variable rate mortgages. Even if you own a home in a major city you can easily end up paying $1,500/mo in "rents". Buying a home makes sense for a lot of reasons, but general finances usually aren't among them for most people today. What it DOES do is force people to save who might not save otherwise because they lack the discipline to do so.
  - dragonwriter 11y ago
    > Most people have both HOA and propter taxes, Most people may have property taxes, but while most new-built homes are saddled with HOAs, I don't think most homes are. > both which increase year over year. Not only do these rates increase over time, but as the value of your home (which you often don't own in any significant way) rises, so too does the assessed value. Property tax rates often don't increase year over year (in a number of jurisdictions, including California, the rates are capped, and usually at exactly the cap, so the rates do not rise at all.) Assessed value does increase with value increases (though may jurisdictions, including California, limit this as well -- e.g., in California, this is limited to 2% per year, regardless of how much the actual value increases -- making property taxes far more predictable in worst-case behavior than rents.) > Then you've got the 10% or so of "homeowners" with variable rate mortgages. These are easily avoidable.
  - matwood 11y ago
    >Your monthly "rent" isn't fixed though. Most people have both HOA and propter taxes, both which increase year over year. My taxes and HOA increases are minuscule compared to when I was renting. For the most part I have a fixed payment for a place to live going forward.
  - CamperBob2 11y ago
    When I was shopping for a house, I made it very clear to the realtor that an HOA -- any HOA -- was a dealbreaker. I expected him to be surprised, but he nodded and said he'd been hearing that a lot lately.
alistproducer2 11y ago
Here's a thread you may be interested in. I made a similar point and a pretty good discussion ensued.
- maxwelljoslyn 11y ago
  Can you please post the link?
codingdave 11y ago
And for those 20 years, their monthly payment never goes up. They can make any change they want to the property without asking permission. You end up, 10+ years down the road, with exactly the home you want, at prices that cannot be matched by renting in the same area. And if you pay a little extra each month, in 15 years, it is paid off, and you can keep it forever at the cost of nothing but property taxes. Just because many homeowners do not stick around one home long enough to get the benefits does not mean that it is inherently a bad idea.

cryoshon 11y ago

Hm, I've never thought of it this way, but you're entirely right. This explains why many struggling families can "get" "reverse mortgages" in which they sell their earned equity back to the bank that has always owned the majority share. Until they have sold all their shares, and are evicted, that is.

toomuchtodo 11y ago
Indeed. Being a mortgagee is simply a renter by another name, with tax breaks.

Grishnakh 11y ago

The problem with your analysis is that you're forgetting that renters have no control over the amount they pay in rent. You can only control your rent price for the first year; after that the landlord is able to jack up your price almost any amount they want (subject to local laws), and you can either pay the jacked-up rent or move out (which is expensive) and find a new place. When you buy a house (err, rent from a bank), your monthly "rent" is now fixed for the next 30 years, and will never go up (unless your property tax goes up, this is subject to local laws). Your principle and interest are fixed for that whole time, so your mortgage payment is stable. That's the big advantage with buying.

themagician 11y ago
Your monthly "rent" isn't fixed though. Most people have both HOA and propter taxes, both which increase year over year. Not only do these rates increase over time, but as the value of your home (which you often don't own in any significant way) rises, so too does the assessed value. Do they increase as dramatically as rent? No, but they do still increase. Then you've got the 10% or so of "homeowners" with variable rate mortgages. Even if you own a home in a major city you can easily end up paying $1,500/mo in "rents". Buying a home makes sense for a lot of reasons, but general finances usually aren't among them for most people today. What it DOES do is force people to save who might not save otherwise because they lack the discipline to do so.
- dragonwriter 11y ago
  > Most people have both HOA and propter taxes, Most people may have property taxes, but while most new-built homes are saddled with HOAs, I don't think most homes are. > both which increase year over year. Not only do these rates increase over time, but as the value of your home (which you often don't own in any significant way) rises, so too does the assessed value. Property tax rates often don't increase year over year (in a number of jurisdictions, including California, the rates are capped, and usually at exactly the cap, so the rates do not rise at all.) Assessed value does increase with value increases (though may jurisdictions, including California, limit this as well -- e.g., in California, this is limited to 2% per year, regardless of how much the actual value increases -- making property taxes far more predictable in worst-case behavior than rents.) > Then you've got the 10% or so of "homeowners" with variable rate mortgages. These are easily avoidable.
- matwood 11y ago
  >Your monthly "rent" isn't fixed though. Most people have both HOA and propter taxes, both which increase year over year. My taxes and HOA increases are minuscule compared to when I was renting. For the most part I have a fixed payment for a place to live going forward.
- CamperBob2 11y ago
  When I was shopping for a house, I made it very clear to the realtor that an HOA -- any HOA -- was a dealbreaker. I expected him to be surprised, but he nodded and said he'd been hearing that a lot lately.

alistproducer2 11y ago

Here's a thread you may be interested in. I made a similar point and a pretty good discussion ensued.

maxwelljoslyn 11y ago
Can you please post the link?

codingdave 11y ago

And for those 20 years, their monthly payment never goes up. They can make any change they want to the property without asking permission. You end up, 10+ years down the road, with exactly the home you want, at prices that cannot be matched by renting in the same area. And if you pay a little extra each month, in 15 years, it is paid off, and you can keep it forever at the cost of nothing but property taxes. Just because many homeowners do not stick around one home long enough to get the benefits does not mean that it is inherently a bad idea.