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My point was that depending on local housing market conditions a smart stock/bond market investor can beat yoy rent increases and with enough capital actually c

My point was that depending on local housing market conditions a smart stock/bond market investor can beat yoy rent increases and with enough capital actually cover their rent. Your statement of averages doesn't seem related to parents point, and does not contradict my point. In terms of your first statement, it seems true. However, I also think it's true that most people are unreasonably scared of the stock market while being unreasonably comfortable with investing 500% of their life savings into one property. And I think that for many people owning a house is similar to having a child, is not up for debate. You can't tell them they can't afford it. They will go deep into debt because they want to experience that aspect of life. Unlike, say, buying S&P 500 which is usually done purely for investing reasons. > buying is under most normal circumstances returned, usually at a profit, sometimes at a small loss, and almost never a complete loss comparable to rent. I would like to see numbers to back it up. It's very easy to lose track of how much money you spent on your house that you wouldn't have spent if you were renting: buying fees, longer commute, repairs, bigger-than-otherwise utility bills, property tax, mortgage interest, PMI, possible HOA fees, etc. It's also easy to lose track of how much money you didn't make on the market by not investing. This is obviously cherry picking (even though this very often happens when people discuss their housing returns) but over the last 10 years S&P 500 nearly 4x-ed. In terms of housing vs stock market as an investment, check out this calculator [1]. You might not be able to get a good mortgage for the duration of your home ownership. The housing growth rate can stall relative to market based on local conditions. Property taxes and home-ownership fees can add up. The cost of buying and selling your home can be high. There are many variables that can tilt things one way or another. And lastly, housing is a market just like the stock market and they are interconnected. I just don't believe in free money. I believe in the 'efficient-enough market hypothesis.' For a given amount of risk you should expect the same return. If you are looking at an unreasonably good investment you are likely just underestimating the risk. Gains are made via relative price differences. The better an investment seems the more pressure there is to buy it thus raising its absolute price thus reducing growth opportunities for subsequent buyers. When does the buying pressure stop? It stops when the investment doesn't seem better than others. Thus the markets settle on maximum uncertainty. To me housing is an investment, one of many. It's not automatically the best one in all circumstances. [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

dahart 8y ago
> Your statement of averages doesn't seem related to parents point, and does not contradict my point. FWIW, I'm not trying to contradict you, I'm trying to understand you. But, above you said "Here you imply that renters are people who cannot afford to buy a house." I was responding directly to that. Isn't is actually true that the majority of renters are not smart stock/bond market investors, and that the majority of renters cannot afford a down payment on a house, even if they want to, and that's why they're renting? > I would like to see numbers to back it up. It's very easy to lose track of how much money you spent on your house that you wouldn't have spent if you were renting... I was talking about the sale price of a house (getting your money back) compared to paying rent (not getting your money back). You want evidence that most housing sales aren't normally 0 and a total loss for the owner, is that what you mean? It's fairly easy to Google average house return rates, I guess, but I honestly don't think my statement that housing returns aren't normally 0 needs any numbers to back it up. Here's the first hit I see: "Average annual returns in long-term real estate investing vary by the area of concentration in the sector. Average 20-year returns in the commercial real estate slightly outperform the S&P 500 Index, running at around 9.5%. Residential and diversified real estate investments do a bit better, averaging 10.6%. Real estate investment trusts (REITS) perform best, with an average annual return of 11.8%." https://www.investopedia.com/ask/answers/060415/what-average-annual-return-typical-long-term-investment-real-estate-sector.asp https://www.investopedia.com/ask/answers/060415/what-average... > check out this calculator Thank you, this calculator does what I was asking for -- it compares buying and later selling a house to renting for that same duration. To be honest, and just for the sake of discussion, my reaction is that I'm somewhat skeptical about it, and here's specifically why: - It ends up calculating twice the recurring costs of buying vs renting. It's not immediately obvious that any of the variables are wrong, but the sum total doesn't seem very plausible, it doesn't really pass the smell test. A landlord is simply not going to rent for less than maintenance costs. Renting should be assumed by default to cost more than buying in the long term. All things being equal, the maintenance costs are the same, the difference is the landlord's markup. - For everywhere I've ever lived (CA, NY & UT), the price that it calculates for rent as "equivalent" would not be able to get you an equivalent house, not even close. It's one thing to say an equivalent dollar amount exists, but it's another thing entirely to have such options. Generally speaking, the same monthly dollar amount spent on rent vs buy is going to net you a bigger space if you buy than if you rent. - It assumes renters don't pay utilities, which is often not the case. But, again, it needs to be assumed that renters and buyers both pay the same utilities somehow, regardless of whether they're paying the landlord or the utility companies. It almost doesn't make sense to factor utilities into the comparison, especially only on one side of it. Anyway, I totally buy that there's opportunity cost in a down payment, and that someone could use that money to invest in other ways that might outperform rent. I do not buy that there's any other savings possible when renting in a free market, generally speaking. (I'm specifically excluding rent control in my thinking here.) Personally, I can easily say after having rented for a decade and owned two houses for a decade, that the houses were a far and away better deal financially than renting, like not even close. So much so that I very much regret not buying earlier. All in all, including maintenance and remodels on both houses, buying houses has increased my savings considerably, where renting decreased it. My experience makes me wonder whether arguments in favor of renting aren't somewhat designed to make people who don't have a choice about renting feel okay about their situation. That's not necessarily a bad thing in my mind, even if the argument doesn't line up with reality.

dahart 8y ago

> Your statement of averages doesn't seem related to parents point, and does not contradict my point. FWIW, I'm not trying to contradict you, I'm trying to understand you. But, above you said "Here you imply that renters are people who cannot afford to buy a house." I was responding directly to that. Isn't is actually true that the majority of renters are not smart stock/bond market investors, and that the majority of renters cannot afford a down payment on a house, even if they want to, and that's why they're renting? > I would like to see numbers to back it up. It's very easy to lose track of how much money you spent on your house that you wouldn't have spent if you were renting... I was talking about the sale price of a house (getting your money back) compared to paying rent (not getting your money back). You want evidence that most housing sales aren't normally 0 and a total loss for the owner, is that what you mean? It's fairly easy to Google average house return rates, I guess, but I honestly don't think my statement that housing returns aren't normally 0 needs any numbers to back it up. Here's the first hit I see: "Average annual returns in long-term real estate investing vary by the area of concentration in the sector. Average 20-year returns in the commercial real estate slightly outperform the S&P 500 Index, running at around 9.5%. Residential and diversified real estate investments do a bit better, averaging 10.6%. Real estate investment trusts (REITS) perform best, with an average annual return of 11.8%." https://www.investopedia.com/ask/answers/060415/what-average-annual-return-typical-long-term-investment-real-estate-sector.asp https://www.investopedia.com/ask/answers/060415/what-average... > check out this calculator Thank you, this calculator does what I was asking for -- it compares buying and later selling a house to renting for that same duration. To be honest, and just for the sake of discussion, my reaction is that I'm somewhat skeptical about it, and here's specifically why: - It ends up calculating twice the recurring costs of buying vs renting. It's not immediately obvious that any of the variables are wrong, but the sum total doesn't seem very plausible, it doesn't really pass the smell test. A landlord is simply not going to rent for less than maintenance costs. Renting should be assumed by default to cost more than buying in the long term. All things being equal, the maintenance costs are the same, the difference is the landlord's markup. - For everywhere I've ever lived (CA, NY & UT), the price that it calculates for rent as "equivalent" would not be able to get you an equivalent house, not even close. It's one thing to say an equivalent dollar amount exists, but it's another thing entirely to have such options. Generally speaking, the same monthly dollar amount spent on rent vs buy is going to net you a bigger space if you buy than if you rent. - It assumes renters don't pay utilities, which is often not the case. But, again, it needs to be assumed that renters and buyers both pay the same utilities somehow, regardless of whether they're paying the landlord or the utility companies. It almost doesn't make sense to factor utilities into the comparison, especially only on one side of it. Anyway, I totally buy that there's opportunity cost in a down payment, and that someone could use that money to invest in other ways that might outperform rent. I do not buy that there's any other savings possible when renting in a free market, generally speaking. (I'm specifically excluding rent control in my thinking here.) Personally, I can easily say after having rented for a decade and owned two houses for a decade, that the houses were a far and away better deal financially than renting, like not even close. So much so that I very much regret not buying earlier. All in all, including maintenance and remodels on both houses, buying houses has increased my savings considerably, where renting decreased it. My experience makes me wonder whether arguments in favor of renting aren't somewhat designed to make people who don't have a choice about renting feel okay about their situation. That's not necessarily a bad thing in my mind, even if the argument doesn't line up with reality.