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I guess I wasn't clear. Why is it a net good for the individual? Society _might_ be better off, but for the individual, deluding him to the long term inherent f

I guess I wasn't clear. Why is it a net good for the individual? Society _might_ be better off, but for the individual, deluding him to the long term inherent fiscal benefits of home ownership to maintain societal stability seems to short change the individual. Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now. And it's not clear that it's a net societal good in other countries. In Berlin, a lot of people are lifetime renters. In Japan, housing is a depreciating asset that becomes worthless after 20-30 years. When you buy a house it's generally for the land and the house is generally demolished by the new owners.

emodendroket 9y ago
> Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now. Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). After all, you not only get the option to sell the home -- you also have the ability to seek HELOCs, reverse mortgages, etc. Those options are not available to renters. Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
- jimmywanger 9y ago
  > Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). There are a few things I'd like to address. First, for a mortgage, most of your money for the first few years goes straight to interest. You're not building equity, and it's only the amount of money you're paying in interest is tax deductible. The amount of equity you're accumulating with mortgage payments in the beginning is laughable. Second, you're also paying for maintenance and property taxes, two things that the renter does not care about. When the water heater breaks, if you're the renter you call your landlord and take a shower at the gym, and the next day things are magically better and you don't have to worry about dry rot and stuff. If you're the owner, you're on the hook. Third, the thing about HELOCs and reverse equity, generally you can only borrow on the equity already in the house. You could easily save that money, especially since with closing costs, agent fees, and the 20% down payment means that if you didn't buy the house, you have options not available to the buyer. Especially as a renter, you can up and move for a new job whenever you want. Would you rather have money sunk in a house and a home equity loan or liquid money in the financial markets? > Or, to put it another way, if renting's such a better deal, why does anyone become a landlord? In most housing markets, rents are above mortgages. I'm sure there are investment reasons, especially if you already have a lot of money and want to diversify. Plus if you're truly wealthy, you would diversify into some real estate, commercial and residential in different housing markets, and pay for property managers. Putting all your eggs in one basket is generally not the winning play. Would you put all your money in Amazon for 30 years? Then why would you invest heavily in land in one particular market with the great majority of your capital for 30 years?
  - emodendroket 9y ago
    I am a home owner so you are not giving me new information here. But the house is an investment and provides utility at a time. I can't live in a bunch of Amazon stock. Generally the advice I see is if you intend to stay in the same place at least five years it makes sense to at least consider buying.
    - jimmywanger 9y ago
      > I can't live in a bunch of Amazon stock. You can certainly sell the stock and rent a house. Also, stocks don't have maintenance fees and ownership taxes, only taxes when you sell. Housing has both those fees and is highly illiquid, you have to pony up a couple of hundred thousand up front, and the transaction fees are not inconsiderable. I'm not sure what your point is. My assertion is that rent and housing prices should be tightly correlated, with rent higher than housing prices because of the maintenance, HOA (if applicable) and property taxes. When rent is lower than an average mortgage of the same type of property, definitely rent. For example, if rent for a two bedroom condo was 500 dollars a month and it was selling for 600k, would you still decide to buy?

emodendroket 9y ago

> Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now. Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). After all, you not only get the option to sell the home -- you also have the ability to seek HELOCs, reverse mortgages, etc. Those options are not available to renters. Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?

jimmywanger 9y ago
> Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). There are a few things I'd like to address. First, for a mortgage, most of your money for the first few years goes straight to interest. You're not building equity, and it's only the amount of money you're paying in interest is tax deductible. The amount of equity you're accumulating with mortgage payments in the beginning is laughable. Second, you're also paying for maintenance and property taxes, two things that the renter does not care about. When the water heater breaks, if you're the renter you call your landlord and take a shower at the gym, and the next day things are magically better and you don't have to worry about dry rot and stuff. If you're the owner, you're on the hook. Third, the thing about HELOCs and reverse equity, generally you can only borrow on the equity already in the house. You could easily save that money, especially since with closing costs, agent fees, and the 20% down payment means that if you didn't buy the house, you have options not available to the buyer. Especially as a renter, you can up and move for a new job whenever you want. Would you rather have money sunk in a house and a home equity loan or liquid money in the financial markets? > Or, to put it another way, if renting's such a better deal, why does anyone become a landlord? In most housing markets, rents are above mortgages. I'm sure there are investment reasons, especially if you already have a lot of money and want to diversify. Plus if you're truly wealthy, you would diversify into some real estate, commercial and residential in different housing markets, and pay for property managers. Putting all your eggs in one basket is generally not the winning play. Would you put all your money in Amazon for 30 years? Then why would you invest heavily in land in one particular market with the great majority of your capital for 30 years?
- emodendroket 9y ago
  I am a home owner so you are not giving me new information here. But the house is an investment and provides utility at a time. I can't live in a bunch of Amazon stock. Generally the advice I see is if you intend to stay in the same place at least five years it makes sense to at least consider buying.
  - jimmywanger 9y ago
    > I can't live in a bunch of Amazon stock. You can certainly sell the stock and rent a house. Also, stocks don't have maintenance fees and ownership taxes, only taxes when you sell. Housing has both those fees and is highly illiquid, you have to pony up a couple of hundred thousand up front, and the transaction fees are not inconsiderable. I'm not sure what your point is. My assertion is that rent and housing prices should be tightly correlated, with rent higher than housing prices because of the maintenance, HOA (if applicable) and property taxes. When rent is lower than an average mortgage of the same type of property, definitely rent. For example, if rent for a two bedroom condo was 500 dollars a month and it was selling for 600k, would you still decide to buy?