4 ms·

Well you still own the house after 25 years....

by drb91 8y ago

statguy 8y ago
Obviously the comparison accounts for that. The rental owns the equivalent of the value of the house in other assests.
- e4ad93ca07 8y ago
  That’s assuming people purchase assets that increase in value over time. And that most people are fiscally responsible and manage their debt properly. Which isn’t the case for probably 90%+ of Americans. It’s very easily to live a paycheck-to-paycheck lifestyle (even in higher incomes, people adapt to expensive lifestyles very quickly) and spend a lot of money on vacations, cars, eating out etc... and only consider your living costs as a passive constant that you pay no attention to. I imagine most people think of spending and budget allocation in this way, so for them having a mortgage makes more sense. Rather if you think of every purchase in terms of your total net worth and you spend a significant amount of your income towards saving, investments, and assets that don’t depreciate, then sure, maybe renting is your better option.
  - statguy 8y ago
    OTOH it can also be argued that fiscally irresponsible people should not be taking on mortgages as they are the more likely to end up with a foreclosure.
- drb91 8y ago
  Hmm, that relies on reasoning that necessarily pegs mortgage above rent by a large margin. That’s a difficult sell.
  - citrablue 8y ago
    The down payment on a house is a pretty large opportunity cost. (In the case of a small down payment, then the PMI is the relevant cost.)
Broken_Hippo 8y ago
Sure. And you also have to replace the roof when it leaks, the heating if it fails, and the water heater when it goes. You may or may not have had to mow the lawn and other such things. Owning isn't always a benefit nor is renting always a curse. Either one can be a solid choice for an individual and/or their family.
- drb91 8y ago
  I totally agree, but you at least need a clear fermi approximation to compare. I don't agree off the cuff that renting and buying have equivalent value.
  - agilebyte 8y ago
    Here is one such app (mine) running said approximations and plotting the results: https://github.com/radekstepan/buy-vs-rent#buy-vs-rent https://github.com/radekstepan/buy-vs-rent#buy-vs-rent

Well you still own the house after 25 years....

by drb91 8y ago

Well you still own the house after 25 years....

statguy 8y ago

Obviously the comparison accounts for that. The rental owns the equivalent of the value of the house in other assests.

e4ad93ca07 8y ago
That’s assuming people purchase assets that increase in value over time. And that most people are fiscally responsible and manage their debt properly. Which isn’t the case for probably 90%+ of Americans. It’s very easily to live a paycheck-to-paycheck lifestyle (even in higher incomes, people adapt to expensive lifestyles very quickly) and spend a lot of money on vacations, cars, eating out etc... and only consider your living costs as a passive constant that you pay no attention to. I imagine most people think of spending and budget allocation in this way, so for them having a mortgage makes more sense. Rather if you think of every purchase in terms of your total net worth and you spend a significant amount of your income towards saving, investments, and assets that don’t depreciate, then sure, maybe renting is your better option.
- statguy 8y ago
  OTOH it can also be argued that fiscally irresponsible people should not be taking on mortgages as they are the more likely to end up with a foreclosure.
drb91 8y ago
Hmm, that relies on reasoning that necessarily pegs mortgage above rent by a large margin. That’s a difficult sell.
- citrablue 8y ago
  The down payment on a house is a pretty large opportunity cost. (In the case of a small down payment, then the PMI is the relevant cost.)

Broken_Hippo 8y ago

Sure. And you also have to replace the roof when it leaks, the heating if it fails, and the water heater when it goes. You may or may not have had to mow the lawn and other such things. Owning isn't always a benefit nor is renting always a curse. Either one can be a solid choice for an individual and/or their family.

drb91 8y ago
I totally agree, but you at least need a clear fermi approximation to compare. I don't agree off the cuff that renting and buying have equivalent value.
- agilebyte 8y ago
  Here is one such app (mine) running said approximations and plotting the results: https://github.com/radekstepan/buy-vs-rent#buy-vs-rent https://github.com/radekstepan/buy-vs-rent#buy-vs-rent