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Are you really saving by owning a home vs renting? Your equity could be invested elsewhere plus you are spending money on maintenance, which you don't fully rec

Are you really saving by owning a home vs renting? Your equity could be invested elsewhere plus you are spending money on maintenance, which you don't fully recoup when you sell. You are locking up equity in a non diversified asset. There are non financial benefits of home ownership, but I'm not sure it makes financial sense

paulpauper 10y ago
over the long run (>5 years) the data suggests buying is better than renting
- vasilipupkin 10y ago
  Which data? Do you have a link?
  - bane 10y ago
    here's the classic post on the topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html
    - vasilipupkin 10y ago
      I believe the calculations aren't quite correct. The return on the S&P is higher than the return on housing in a typical market. That's the whole point of the parent article. Consider a typical market like Chicago area. Prices still haven't recovered from the housing bust
      - bane 10y ago
        Remember that the housing burst and the recovery after it aren't representative of a typical market.
        vasilipupkin 10y ago
        Why ? Assets can go up and down in value, depending on the supply/demand dynamics. Actually it's quite representative
        bane 10y ago
        If you look at historic trends, the housing burst and the drop and raise in home prices was specifically atypical -- you can pretty clearly see it on a graph. This abnormal behavior is why we have specifically given a name for it and why you and I both know exactly which housing burst we're talking about, otherwise it would just be the normal background trend. The normal background trend is for home prices to rise at about the rate of inflation. We don't really have a special name for this other than "appreciating asset".
        vasilipupkin 10y ago
        no, you are thinking about it wrong. housing as a whole rises at the rate of inflation. The particular house you purchase can easily rise not at the rate of inflation but less, due to depreciation and idiosyncratic factors. If you want to invest in housing, then buy reits or invest in private real estate funds. That doesn't have to involve buying a house. As to the bust, it is only atypical if you think about housing in isolation. If you think about it as just one of many assets trading in the economy, then you will realize that busts in asset prices occur all the time, so it's not some sort of one off that can never happen.
vonmoltke 10y ago
> Your equity could be invested elsewhere How could I invest the equity elsewhere, other than the down payment? I have a monthly payment for housing either way, and with rent it will be larger unless the local market is crashing. > plus you are spending money on maintenance, which you don't fully recoup when you sell Owners and renters both pay maintenance and taxes. The difference is that owners pay those bills directly and renters pay them indirectly. The idea that owners pay things renters don't is a fallacy.
- vasilipupkin 10y ago
  The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead.
  - vonmoltke 10y ago
    > The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy. If that was the case the landlord would be taking a loss on the property, since rent is the only appreciable form of revenue the landlord gets for the property. How do you think the landlord can avoid passing on the full cost of maintenance and still make money? Don't forget that the landlord still has to pay some amount of maintenance even when the property is unoccupied. > Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead. So it really depends on how much the down payment is then, and how much the down payment reduces the cost of housing. You can't make a blanket statement either way.
    - vasilipupkin 10y ago
      Landlords fight like hell to avoid doing maintenance. Why do you think that is, if they could simply pass along full cost to the renters? The reality is, maintenance is something they take a partial loss on

paulpauper 10y ago

over the long run (>5 years) the data suggests buying is better than renting

vasilipupkin 10y ago
Which data? Do you have a link?
- bane 10y ago
  here's the classic post on the topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html
  - vasilipupkin 10y ago
    I believe the calculations aren't quite correct. The return on the S&P is higher than the return on housing in a typical market. That's the whole point of the parent article. Consider a typical market like Chicago area. Prices still haven't recovered from the housing bust
    - bane 10y ago
      Remember that the housing burst and the recovery after it aren't representative of a typical market.
      - vasilipupkin 10y ago
        Why ? Assets can go up and down in value, depending on the supply/demand dynamics. Actually it's quite representative
        bane 10y ago
        If you look at historic trends, the housing burst and the drop and raise in home prices was specifically atypical -- you can pretty clearly see it on a graph. This abnormal behavior is why we have specifically given a name for it and why you and I both know exactly which housing burst we're talking about, otherwise it would just be the normal background trend. The normal background trend is for home prices to rise at about the rate of inflation. We don't really have a special name for this other than "appreciating asset".
        vasilipupkin 10y ago
        no, you are thinking about it wrong. housing as a whole rises at the rate of inflation. The particular house you purchase can easily rise not at the rate of inflation but less, due to depreciation and idiosyncratic factors. If you want to invest in housing, then buy reits or invest in private real estate funds. That doesn't have to involve buying a house. As to the bust, it is only atypical if you think about housing in isolation. If you think about it as just one of many assets trading in the economy, then you will realize that busts in asset prices occur all the time, so it's not some sort of one off that can never happen.

vonmoltke 10y ago

> Your equity could be invested elsewhere How could I invest the equity elsewhere, other than the down payment? I have a monthly payment for housing either way, and with rent it will be larger unless the local market is crashing. > plus you are spending money on maintenance, which you don't fully recoup when you sell Owners and renters both pay maintenance and taxes. The difference is that owners pay those bills directly and renters pay them indirectly. The idea that owners pay things renters don't is a fallacy.

vasilipupkin 10y ago
The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead.
- vonmoltke 10y ago
  > The renters often pay less maintenance than the owners. It's true that they pay some of it - but not all. The idea that the owners can pass along full maintenance costs in the form of rent is also a fallacy. If that was the case the landlord would be taking a loss on the property, since rent is the only appreciable form of revenue the landlord gets for the property. How do you think the landlord can avoid passing on the full cost of maintenance and still make money? Don't forget that the landlord still has to pay some amount of maintenance even when the property is unoccupied. > Yes, the downpayment. The downpayment could be invested in a diversified basket of assets instead. So it really depends on how much the down payment is then, and how much the down payment reduces the cost of housing. You can't make a blanket statement either way.
  - vasilipupkin 10y ago
    Landlords fight like hell to avoid doing maintenance. Why do you think that is, if they could simply pass along full cost to the renters? The reality is, maintenance is something they take a partial loss on