11 ms·

I've never understood why people believe/feel that buying land and/or a house is the pinnacle of... something. Sure, it gives the person a feeling of control an

I've never understood why people believe/feel that buying land and/or a house is the pinnacle of... something. Sure, it gives the person a feeling of control and stability. But rooting oneself in one labor market (vs. being mobile) decreases one's employment options and therefore their salary. It's also very risky, as it's the equivalent of putting one's eggs in one basket and leaves their financial wellbeing in the hands of the real estate market. Renting is, unfortunately and quite inaccurately, viewed as "throwing money away." The real estate industry does a great job brainwashing people that they should buy, buy, buy, that buying a house is a great investment and a very good way to build wealth. İt's probably one of the greatest lies perpetuated in modern times.

mathgeek 10y ago
In reality, the truth lies somewhere in the middle between "rent in throwing money away" and "it's a great lie that buying a house is a very good way to build wealth."
riprowan 10y ago
I've heard it said that real estate is a risky investment. On the other hand, it's really hard to raise a family of four in a mutual fund.
- enraged_camel 10y ago
  I don't understand what you mean. Raise a family of four on a mutual fund? Why do you feel that you need a mortgage in order to raise a family of four? Why not rent?
  - reitanqild 10y ago
    It's kind of a joke or a proverb I guess since both houses and funds are investments with a certain risk but houses also double as a place where you and your family can live ;-)
  - tptacek 10y ago
    Because moving a family of four is extremely disruptive for everyone, and it's very rare to have more than a year's security with a lease, even with a good relationship with the landlord. Not only that, but if your kids are school age, there's serious pressure to find a new rental in the same school area, which makes shopping for a new home that much harder.
    - enraged_camel 10y ago
      >>and it's very rare to have more than a year's security with a lease, even with a good relationship with the landlord. Huh? Landlords prefer stability as much as tenants. Very rarely will they say no to a multi-year lease. They may want to add the option of rent re-evaluation after the first year, but from a landlord's perspective it is very difficult to find good tenants, therefore the longer those tenants stay the better.
      - tptacek 10y ago
        No landlord I have ever had has ever agreed to a 2-year lease. There's no "huh" about this point: if you rent, your tenancy continues at the pleasure of the landlord. That's not a fun place to be if it's important to you to provide a stable address for your kids for the next 10 years --- and that is usually pretty important.
massysett 10y ago
People don't necessarily buy then suffer the consequences of being rooted. Rather, one may be rooted because of family, preference, or because their job market is one place. Then they want to buy because if you are rooted, you might as well have greater control over your dwelling. If I rented my occupancy would be at the whim of my landlord, which is OK for apartments in the US, as apartment landlords generally have no reason to kick out tenants summarily (except in unstable markets, like perhaps the Bay Area.) But most single family home landlords are small time operators who can't be counted on to provide long term occupancy. I would find such an arrangement untenable. For those who want to be mobile I completely agree that renting makes sense, but for many folks being rooted leads to ownership, rather than ownership leading to being rooted.
AJ007 10y ago
Perhaps it is the result of choosing to take a historical price chart and say, "look the value goes up" rather than any sort of analysis. It is amazing to me so many people take out huge loans (mortgage, car, college) without doing the math on the final price after compounding. If the economy is growing faster than your interest rate and the population is increasing as well and its really hard to build new housing, then by all means buy your house and maybe even take out a loan to do so! If not, maybe still buy, but there is little urgency.
backtoyoujim 10y ago
The American Dream was narrated by banks in the USA as a way of fighting "the Red terra" and to make the populace wear the yolk of a mortgage. People with mortgages generally don't protest or strike. As American hegemony spun the globe so did the "own your acres".
- rs999gti 10y ago
  > to make the populace wear the yolk of a mortgage. People with mortgages generally don't protest or strike. You know when I mention this to my co-workers they grimace. We call mortgages and a family the 15-30 year jail sentence.
- etatoby 10y ago
  This is ridiculous. Here in Europe we have been taking mortgages to buy property long before the USA was born, in fact since the Renaissance. It certainly is a long-term contract, but nobody really considers it a "yolk." After a number of years your debt is paid and you can keep living in your place without paying anything else. The alternative is to keep paying rent forever, well into retirement. Which one do you think is smarter?
  - ryandrake 10y ago
    I don't know, I find the "yolk" of a mortgage to be eggcellent!
- PantaloonFlames 10y ago
  yoke http://www.merriam-webster.com/dictionary/yoke http://www.merriam-webster.com/dictionary/yoke
akerro 10y ago
And on the opposite, I never understood how people can not own a house and waste money on renting for decades. Where market for houses in western countries is very limited due to stupid regulations and every year a few millions of people move to that country causing renting prices to increase by XX% each year. It decreases my financial stability. Losing a job for less than a month is a financial disaster, I still to have to pay for car-fuel, insurance, life insurance, pay bills. On the other hand, having a house without mortgage, yes, keeps me in one place, but value of my house due to the same reasons is increasing for my benefit, not for my landlords benefits.
- ajkjk 10y ago
  If losing a job for less than a month is a financial disaster, you're probably not in the market for a house anyway. It's perfectly possible to rent for decades and have years of runway in savings. Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Also, at least in my case as a relatively young American, living in a house is pretty much to opposite of the lifestyle I see myself wanting for at least the next decade.
  - akerro 10y ago
    >Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. All changes must be agreed and made by agency. Current faults in the flat include: leaking water from toilet flush since seal is broken, reported 2 weeks ago, reminded 3 times. Water bill is on me. I would be happy if I could fix it myself, I would save money on water, calls made to the agency and not have the noise of leaking water, it's annoying. Aver salary in my city is ~£22k, and average rent just hit £720 per month, if we add bills and council tax, it's ~£850 which is more than halt of average salary. Hopefully I work in IT-financial sector and my salary is higher. I would be much happier to buy a house and be rooted to this city than to depend on renting agencies and increasing population which pushes renting prices a lot. I'm making savings now to save for a house, if I get a mortgage for 20 years, my average cost of it will be £440 which is 2/3 of my rent...
opendomain 10y ago
In the US, we get a tax savings for owning rather than renting. Also renting includes a required profit for the owner. When you rent, your monthly bill includes everything the owner has to pay (mortgage, taxes, utilities), plus their profit. When you buy, you pay mortgage, taxes, and utilities, but no extra for profit. Also, you get to deduce the local taxes you pay on your national taxes, so overall you pay less. Also, when you own, you can do what you want without having to ask permission. on top of that - no noisy neighbors that are too close!
- jeffdavis 10y ago
  Just because someone else is profiting from you doesn't mean you are wasting money. Let's say you save $100k. You can either buy a house, or put the money in the stock market. If you put it in the stock market, you get a return but that return ends up going to your landlord's profit. If you but the house you get no return but don't pay the landlord's profit. In other words, it's an investment. If you believe that the RE market has better ROI, and don't mind being rooted, then go for it. If you believe the stock market has better ROI and you prefer to be mobile, do the stock market.
  - HillaryBriss 10y ago
    Also consider that dividend income from the stock market gets taxed each year before it can be reinvested. So, it does not compound as rapidly as the untaxed "yearly dividend" (aka price appreciation) of the house. OTOH, as you say, the easy mobility associated with renting can be quite valuable to some workers. It's like, "what opportunities and profits am I foregoing by being tethered to a house here in this job market?" etc. I think it's all very complicated and situation-dependent, as you point out. We need to predict the housing market, interest rates, the job market for our particular specialty, changes in tax laws etc in order to make an optimal decision. We're all forced into the role of economic forecaster just to make the most fundamental decisions about life.
0xfaded 10y ago
Pilot's who pour everything into their planes have a staying: you can sleep in your plane but you can't fly your house! I guess people have different aspirations in life.
Xcelerate 10y ago
While I feel neutral about your post, I upvoted it to counter the downvotes. It seems to follow the HN guidelines and merely presents your side of the issue, so I can't see any reason for it being downvoted other than people not liking your opinion, which doesn't seem fair to me.
bikamonki 10y ago
While I agree with you financially, when you have kids, buying property is a safer vehicle to leave something behind for them. Sure, if the rent is low enough and you invest the difference of what you'd be paying for a mortgage, you may grow a much bigger capital in 25-35 years. However, most people are risk averse or simply do no understand how investing works, hence: they buy real estate.
lunchables 10y ago
Because if you look over a 20-30 year period of home ownership you build equity in your home and get a pretty significant tax benefit as well (mortgage interest deduction).
_nedR 10y ago
If you were to have kids, think about the financial security owning a home provides them.
- enraged_camel 10y ago
  What financial security? I take it you have completely forgotten about the 2009 crash?
  - _nedR 10y ago
    I was thinking that one would have paid off all mortgages by the time the children inherit the house.
simonswords82 10y ago
I own and rent. I own a house worth about £300k with a mortgage of £140k. The mortgage repayments are £500 per month. I wanted to upgrade my house to somewhere larger in a nicer area but didn't want to wipe out my savings to raise a deposit. So I made the decision to rent somewhere instead. It feels like the best of both worlds. I get all the upside of a big house without any liability for something going wrong (boilers, high end kitchen equipment, etc). I've rented the house I own to some tenants and the profit from the rent I make goes towards my rented house. Best case scenario - one day I'll own my old house outright and continue to rent. I might even buy another house to rent out at some point. Worst case - the market goes tits up I stop renting and return to the house I own where my mortgage is very affordable.
lazyjones 10y ago
> But rooting oneself in one labor market (vs. being mobile) decreases one's employment options and therefore their salary. True, but in most places outside the US (at least certainly in mainland Europe) moving great distances for a better job opportunity is unusual. The main appeal of owning real estate vs. renting is the long-term and intergenerational perspective. At some point it'll be paid off and the housing cost will be extremely low - and the children will inherit something of value.
mahyarm 10y ago
It's a financial calculation like everything else. Don't assume they do it for purely emotional reasons. I chose to buy because: 1. It's significantly cheaper after tax deductions compared to renting in my area. 2. This is the highest paying area for the software labor market in the world, and I've looked compared to last 10 years. I don't really see anywhere else that would get better than the SF bay area. 3. It solidifies your housing costs. When prices are rising relatively rapidly, it can be a money saver, and over the long term, it's definitely a very large money saver because it locks your price in. That is a risky bet to make for sure. You can end up with a housing bubble and being underwater for 5 years, or you could end up in somewhere like london or vancouver, where it goes up and stays up and by the time that 'bubble' pops, your 50 years old. But that is the same risk you take when you chose whatever profession you have as a career or by leaving your down payment savings in stock & bonds. 4. You have to compare against what your down payment would make in the stock market comparatively. 5. When you move away to better opportunities, you can just rent it, especially if rental prices have gone up a %5-%10+ since you bought and would cover the management fees. Maybe life will bring you back again, especially if you left from a pretty good market already. 6. If you save a lot of money, trading a fraction of your savings in down payment for a discounted housing cost for the rest of your life can be a good one time investment.
somethingsimple 10y ago
> Renting is, unfortunately and quite inaccurately, viewed as "throwing money away." I hate this mentality, and it seems pervasive worldwide. As I said in another comment in this thread, I like to see rent as paying for a housing service: I pay a monthly amount in exchange for a roof plus a lot of annoying things I'd have to take care of myself (and spend money on) if I were a homeowner: broken appliances, water heater issues, heating issues, etc. It's quite a list. "Service" is sort of key in the way I see it, and is the reason why I only rent from apartment companies and not from landlords. There are so many stories about downright insane landlords out there that I don't want to take my chances dealing having to deal with those.
herbst 10y ago
"You just pay about 70% you would pay for the rent and the house is yours in 30 years! But you need to fix all issues yourself and comply a lot of third party rules how everything has to look and work". I dont get it ether, this sounds like the worst deal not even including the fact that i might do not want to live there in 30 years.

mathgeek 10y ago

In reality, the truth lies somewhere in the middle between "rent in throwing money away" and "it's a great lie that buying a house is a very good way to build wealth."

riprowan 10y ago

I've heard it said that real estate is a risky investment. On the other hand, it's really hard to raise a family of four in a mutual fund.

enraged_camel 10y ago
I don't understand what you mean. Raise a family of four on a mutual fund? Why do you feel that you need a mortgage in order to raise a family of four? Why not rent?
- reitanqild 10y ago
  It's kind of a joke or a proverb I guess since both houses and funds are investments with a certain risk but houses also double as a place where you and your family can live ;-)
- tptacek 10y ago
  Because moving a family of four is extremely disruptive for everyone, and it's very rare to have more than a year's security with a lease, even with a good relationship with the landlord. Not only that, but if your kids are school age, there's serious pressure to find a new rental in the same school area, which makes shopping for a new home that much harder.
  - enraged_camel 10y ago
    >>and it's very rare to have more than a year's security with a lease, even with a good relationship with the landlord. Huh? Landlords prefer stability as much as tenants. Very rarely will they say no to a multi-year lease. They may want to add the option of rent re-evaluation after the first year, but from a landlord's perspective it is very difficult to find good tenants, therefore the longer those tenants stay the better.
    - tptacek 10y ago
      No landlord I have ever had has ever agreed to a 2-year lease. There's no "huh" about this point: if you rent, your tenancy continues at the pleasure of the landlord. That's not a fun place to be if it's important to you to provide a stable address for your kids for the next 10 years --- and that is usually pretty important.

massysett 10y ago

People don't necessarily buy then suffer the consequences of being rooted. Rather, one may be rooted because of family, preference, or because their job market is one place. Then they want to buy because if you are rooted, you might as well have greater control over your dwelling. If I rented my occupancy would be at the whim of my landlord, which is OK for apartments in the US, as apartment landlords generally have no reason to kick out tenants summarily (except in unstable markets, like perhaps the Bay Area.) But most single family home landlords are small time operators who can't be counted on to provide long term occupancy. I would find such an arrangement untenable. For those who want to be mobile I completely agree that renting makes sense, but for many folks being rooted leads to ownership, rather than ownership leading to being rooted.

AJ007 10y ago

Perhaps it is the result of choosing to take a historical price chart and say, "look the value goes up" rather than any sort of analysis. It is amazing to me so many people take out huge loans (mortgage, car, college) without doing the math on the final price after compounding. If the economy is growing faster than your interest rate and the population is increasing as well and its really hard to build new housing, then by all means buy your house and maybe even take out a loan to do so! If not, maybe still buy, but there is little urgency.

backtoyoujim 10y ago

The American Dream was narrated by banks in the USA as a way of fighting "the Red terra" and to make the populace wear the yolk of a mortgage. People with mortgages generally don't protest or strike. As American hegemony spun the globe so did the "own your acres".

rs999gti 10y ago
> to make the populace wear the yolk of a mortgage. People with mortgages generally don't protest or strike. You know when I mention this to my co-workers they grimace. We call mortgages and a family the 15-30 year jail sentence.
etatoby 10y ago
This is ridiculous. Here in Europe we have been taking mortgages to buy property long before the USA was born, in fact since the Renaissance. It certainly is a long-term contract, but nobody really considers it a "yolk." After a number of years your debt is paid and you can keep living in your place without paying anything else. The alternative is to keep paying rent forever, well into retirement. Which one do you think is smarter?
- ryandrake 10y ago
  I don't know, I find the "yolk" of a mortgage to be eggcellent!
PantaloonFlames 10y ago
yoke http://www.merriam-webster.com/dictionary/yoke http://www.merriam-webster.com/dictionary/yoke

akerro 10y ago

And on the opposite, I never understood how people can not own a house and waste money on renting for decades. Where market for houses in western countries is very limited due to stupid regulations and every year a few millions of people move to that country causing renting prices to increase by XX% each year. It decreases my financial stability. Losing a job for less than a month is a financial disaster, I still to have to pay for car-fuel, insurance, life insurance, pay bills. On the other hand, having a house without mortgage, yes, keeps me in one place, but value of my house due to the same reasons is increasing for my benefit, not for my landlords benefits.

ajkjk 10y ago
If losing a job for less than a month is a financial disaster, you're probably not in the market for a house anyway. It's perfectly possible to rent for decades and have years of runway in savings. Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Also, at least in my case as a relatively young American, living in a house is pretty much to opposite of the lifestyle I see myself wanting for at least the next decade.
- akerro 10y ago
  >Also, the burden of being rooted, and of having to maintain a house, could be such a significant detraction to quality of life that it totally makes up the difference. Yea, so I'm renting a house where my agreement states that I am not allowed to fix or improve the flat myself. All changes must be agreed and made by agency. Current faults in the flat include: leaking water from toilet flush since seal is broken, reported 2 weeks ago, reminded 3 times. Water bill is on me. I would be happy if I could fix it myself, I would save money on water, calls made to the agency and not have the noise of leaking water, it's annoying. Aver salary in my city is ~£22k, and average rent just hit £720 per month, if we add bills and council tax, it's ~£850 which is more than halt of average salary. Hopefully I work in IT-financial sector and my salary is higher. I would be much happier to buy a house and be rooted to this city than to depend on renting agencies and increasing population which pushes renting prices a lot. I'm making savings now to save for a house, if I get a mortgage for 20 years, my average cost of it will be £440 which is 2/3 of my rent...

opendomain 10y ago

In the US, we get a tax savings for owning rather than renting. Also renting includes a required profit for the owner. When you rent, your monthly bill includes everything the owner has to pay (mortgage, taxes, utilities), plus their profit. When you buy, you pay mortgage, taxes, and utilities, but no extra for profit. Also, you get to deduce the local taxes you pay on your national taxes, so overall you pay less. Also, when you own, you can do what you want without having to ask permission. on top of that - no noisy neighbors that are too close!

jeffdavis 10y ago
Just because someone else is profiting from you doesn't mean you are wasting money. Let's say you save $100k. You can either buy a house, or put the money in the stock market. If you put it in the stock market, you get a return but that return ends up going to your landlord's profit. If you but the house you get no return but don't pay the landlord's profit. In other words, it's an investment. If you believe that the RE market has better ROI, and don't mind being rooted, then go for it. If you believe the stock market has better ROI and you prefer to be mobile, do the stock market.
- HillaryBriss 10y ago
  Also consider that dividend income from the stock market gets taxed each year before it can be reinvested. So, it does not compound as rapidly as the untaxed "yearly dividend" (aka price appreciation) of the house. OTOH, as you say, the easy mobility associated with renting can be quite valuable to some workers. It's like, "what opportunities and profits am I foregoing by being tethered to a house here in this job market?" etc. I think it's all very complicated and situation-dependent, as you point out. We need to predict the housing market, interest rates, the job market for our particular specialty, changes in tax laws etc in order to make an optimal decision. We're all forced into the role of economic forecaster just to make the most fundamental decisions about life.

0xfaded 10y ago

Pilot's who pour everything into their planes have a staying: you can sleep in your plane but you can't fly your house! I guess people have different aspirations in life.

Xcelerate 10y ago

While I feel neutral about your post, I upvoted it to counter the downvotes. It seems to follow the HN guidelines and merely presents your side of the issue, so I can't see any reason for it being downvoted other than people not liking your opinion, which doesn't seem fair to me.

bikamonki 10y ago

While I agree with you financially, when you have kids, buying property is a safer vehicle to leave something behind for them. Sure, if the rent is low enough and you invest the difference of what you'd be paying for a mortgage, you may grow a much bigger capital in 25-35 years. However, most people are risk averse or simply do no understand how investing works, hence: they buy real estate.

lunchables 10y ago

Because if you look over a 20-30 year period of home ownership you build equity in your home and get a pretty significant tax benefit as well (mortgage interest deduction).

_nedR 10y ago

If you were to have kids, think about the financial security owning a home provides them.

enraged_camel 10y ago
What financial security? I take it you have completely forgotten about the 2009 crash?
- _nedR 10y ago
  I was thinking that one would have paid off all mortgages by the time the children inherit the house.

simonswords82 10y ago

I own and rent. I own a house worth about £300k with a mortgage of £140k. The mortgage repayments are £500 per month. I wanted to upgrade my house to somewhere larger in a nicer area but didn't want to wipe out my savings to raise a deposit. So I made the decision to rent somewhere instead. It feels like the best of both worlds. I get all the upside of a big house without any liability for something going wrong (boilers, high end kitchen equipment, etc). I've rented the house I own to some tenants and the profit from the rent I make goes towards my rented house. Best case scenario - one day I'll own my old house outright and continue to rent. I might even buy another house to rent out at some point. Worst case - the market goes tits up I stop renting and return to the house I own where my mortgage is very affordable.

lazyjones 10y ago

> But rooting oneself in one labor market (vs. being mobile) decreases one's employment options and therefore their salary. True, but in most places outside the US (at least certainly in mainland Europe) moving great distances for a better job opportunity is unusual. The main appeal of owning real estate vs. renting is the long-term and intergenerational perspective. At some point it'll be paid off and the housing cost will be extremely low - and the children will inherit something of value.

mahyarm 10y ago

It's a financial calculation like everything else. Don't assume they do it for purely emotional reasons. I chose to buy because: 1. It's significantly cheaper after tax deductions compared to renting in my area. 2. This is the highest paying area for the software labor market in the world, and I've looked compared to last 10 years. I don't really see anywhere else that would get better than the SF bay area. 3. It solidifies your housing costs. When prices are rising relatively rapidly, it can be a money saver, and over the long term, it's definitely a very large money saver because it locks your price in. That is a risky bet to make for sure. You can end up with a housing bubble and being underwater for 5 years, or you could end up in somewhere like london or vancouver, where it goes up and stays up and by the time that 'bubble' pops, your 50 years old. But that is the same risk you take when you chose whatever profession you have as a career or by leaving your down payment savings in stock & bonds. 4. You have to compare against what your down payment would make in the stock market comparatively. 5. When you move away to better opportunities, you can just rent it, especially if rental prices have gone up a %5-%10+ since you bought and would cover the management fees. Maybe life will bring you back again, especially if you left from a pretty good market already. 6. If you save a lot of money, trading a fraction of your savings in down payment for a discounted housing cost for the rest of your life can be a good one time investment.

somethingsimple 10y ago

> Renting is, unfortunately and quite inaccurately, viewed as "throwing money away." I hate this mentality, and it seems pervasive worldwide. As I said in another comment in this thread, I like to see rent as paying for a housing service: I pay a monthly amount in exchange for a roof plus a lot of annoying things I'd have to take care of myself (and spend money on) if I were a homeowner: broken appliances, water heater issues, heating issues, etc. It's quite a list. "Service" is sort of key in the way I see it, and is the reason why I only rent from apartment companies and not from landlords. There are so many stories about downright insane landlords out there that I don't want to take my chances dealing having to deal with those.

herbst 10y ago

"You just pay about 70% you would pay for the rent and the house is yours in 30 years! But you need to fix all issues yourself and comply a lot of third party rules how everything has to look and work". I dont get it ether, this sounds like the worst deal not even including the fact that i might do not want to live there in 30 years.