5 ms·

> Based on the neighborhood I live in and my compensation, I am extremely privileged. I don’t have money concerns that my parents had. Most things that I might

by whack 5y ago

> Based on the neighborhood I live in and my compensation, I am extremely privileged. I don’t have money concerns that my parents had. Most things that I might need, I can buy them without having to think too much or without putting a dent in my net worth. > If I have to be a renter my whole damn life and can’t even afford a house, what is the god damn point? People seem to have been taken in by the societal conditioning that you need to buy a house. Housing and shelter is a basic human need. Owning a house is not. As you yourself mentioned, you are extremely privileged and can afford most things you want without having to think twice. So why stress yourself out over piece of paper. I too live in one of the highest-COL places in America. And I'm paying $3k/month in rent for a wonderful 4-bedroom townhouse in a great neighborhood. I've done the math, and I financially come out ahead by paying $3k/month in rent and investing the remainder in worldwide index funds - a strategy which made me a millionaire in my 30s. I spend an hour commuting into the city via public transit, but that's no problem. I include this time as part of my working hours, and specifically chose my home for its accessibility to public transit. You mentioned that you're avoiding lifestyle creep. But your biggest lifestyle creep is your expectation of owning a family-sized home in a prime urban neighborhood. Let go of this societal brainwashing and you'll find yourself far happier.

TeeMassive 5y ago
Raising kids in an apartment is less than ideal.
Clubber 5y ago
Renting is throwing away money. I understand people do it when they only plan on living in a place for a brief period of time, but you'd still be better off buying a house, then selling after a few years in most time spans. There is risk though, but I doubt the risk would ever equal $3000 a month loss you are currently taking. For example, if you bought a house, it would have to lose $72K value in 2 years or $144K in 4 years (minus inflation, taxes, maintenance) to break even with paying $3000/month rent. However, if your house appreciates as most do in highly industrialized areas, you basically get paid to live there.
- gruez 5y ago
  >For example, if you bought a house, it would have to lose $72K value in 2 years or $144K in 4 years (minus inflation, taxes, maintenance) to break even with paying $3000/month rent. You're not factoring in transaction costs, maintenance, property taxes, and cost of capital (ie. the downpayment). Transaction costs (eg. relators) are 2.5% on each side, so after buying/selling you're already down 5%. Property taxes and maintenance are estimated to be 1% each, so over 4 years you're down 8%. The cost of capital is hard to quantify, especially if you also factor in appreciation, but housing has historically under-preformed the stock market, so that should theoretically be a non-zero cost there. Suppose we ignore cost of capital (since that's hard to quantify), let's calculate what that % equates to. According to [1] the price to rent ratios is many cities exceed 30. If we use a price to rent ratio of 30, then a $3000/month rent translates to a house price of $1.08M. Factoring in the % costs from before, that's a cost of $140.4k. That's nearly as big as the $144k loss that you budgeted for, before factoring in drop in home price. The maintenance/property taxes alone is going to eat up more than half of your hypothetical $3000 in rent savings. [1] https://smartasset.com/mortgage/price-to-rent-ratio-in-us-cities https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci... >However, if your house appreciates as most do in highly industrialized areas, you basically get paid to live there. but that's the same force that makes housing unaffordable.
  - lakecresva 5y ago
    > Factoring in the % costs from before, that's a cost of $140.4k. For a married person with a million dollar home, they'll make ~$150k back from the section 121 nonrecognition provision alone if they ever sell, not to mention the salt and mortgage interest tax deductions. The tax code heavily incentivizes home ownership.
    - gruez 5y ago
      >For a married person with a million dollar home, they'll make ~$150k back from the section 121 nonrecognition provision alone if they ever sell 1. that's on capital gains. If they're selling for a loss in OP's scenario, that works out to a tax savings of $0. 2. realistically speaking this can be factored into the cost of cost of capital (ie. opportunity cost of the downpayment/mortgage payment), but I didn't want to get into that because the calculation can get subjective. Housing has historically under-performed the stock market, but if you're a housing permabull, you might argue that the housing bubble will continue and outperform the stock market, making the opportunity cost of buying a house negative. >not to mention the salt and mortgage interest tax deductions that's a savings on mortgage interest, which is a cost that wasn't in my calculations. Including that cost and factoring in that deduction will make the numbers worse, not better. >The tax code heavily incentivizes home ownership. no disagreement there.
lakecresva 5y ago
> So why stress yourself out over piece of paper. You sound like a propaganda billboard from "They Live"; it's pretty incredible to call a property deed a "piece of paper". Setting aside the financial and psychological benefits that come with home ownership, the United States is a society that has made a lot of sacrifices in the name of preserving choice. You made yours, you chose to rent; the choice to own a home should remain a realistic alternative for those who want it. If your argument is that houses in absolutely prime real estate areas are always going to be out of reach of most buyers fair enough, but treating the idea of home ownership like a diamond ring is absurd.

by whack 5y ago

TeeMassive 5y ago

Raising kids in an apartment is less than ideal.

Clubber 5y ago

Renting is throwing away money. I understand people do it when they only plan on living in a place for a brief period of time, but you'd still be better off buying a house, then selling after a few years in most time spans. There is risk though, but I doubt the risk would ever equal $3000 a month loss you are currently taking. For example, if you bought a house, it would have to lose $72K value in 2 years or $144K in 4 years (minus inflation, taxes, maintenance) to break even with paying $3000/month rent. However, if your house appreciates as most do in highly industrialized areas, you basically get paid to live there.

gruez 5y ago
>For example, if you bought a house, it would have to lose $72K value in 2 years or $144K in 4 years (minus inflation, taxes, maintenance) to break even with paying $3000/month rent. You're not factoring in transaction costs, maintenance, property taxes, and cost of capital (ie. the downpayment). Transaction costs (eg. relators) are 2.5% on each side, so after buying/selling you're already down 5%. Property taxes and maintenance are estimated to be 1% each, so over 4 years you're down 8%. The cost of capital is hard to quantify, especially if you also factor in appreciation, but housing has historically under-preformed the stock market, so that should theoretically be a non-zero cost there. Suppose we ignore cost of capital (since that's hard to quantify), let's calculate what that % equates to. According to [1] the price to rent ratios is many cities exceed 30. If we use a price to rent ratio of 30, then a $3000/month rent translates to a house price of $1.08M. Factoring in the % costs from before, that's a cost of $140.4k. That's nearly as big as the $144k loss that you budgeted for, before factoring in drop in home price. The maintenance/property taxes alone is going to eat up more than half of your hypothetical $3000 in rent savings. [1] https://smartasset.com/mortgage/price-to-rent-ratio-in-us-cities https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci... >However, if your house appreciates as most do in highly industrialized areas, you basically get paid to live there. but that's the same force that makes housing unaffordable.
- lakecresva 5y ago
  > Factoring in the % costs from before, that's a cost of $140.4k. For a married person with a million dollar home, they'll make ~$150k back from the section 121 nonrecognition provision alone if they ever sell, not to mention the salt and mortgage interest tax deductions. The tax code heavily incentivizes home ownership.
  - gruez 5y ago
    >For a married person with a million dollar home, they'll make ~$150k back from the section 121 nonrecognition provision alone if they ever sell 1. that's on capital gains. If they're selling for a loss in OP's scenario, that works out to a tax savings of $0. 2. realistically speaking this can be factored into the cost of cost of capital (ie. opportunity cost of the downpayment/mortgage payment), but I didn't want to get into that because the calculation can get subjective. Housing has historically under-performed the stock market, but if you're a housing permabull, you might argue that the housing bubble will continue and outperform the stock market, making the opportunity cost of buying a house negative. >not to mention the salt and mortgage interest tax deductions that's a savings on mortgage interest, which is a cost that wasn't in my calculations. Including that cost and factoring in that deduction will make the numbers worse, not better. >The tax code heavily incentivizes home ownership. no disagreement there.

lakecresva 5y ago

> So why stress yourself out over piece of paper. You sound like a propaganda billboard from "They Live"; it's pretty incredible to call a property deed a "piece of paper". Setting aside the financial and psychological benefits that come with home ownership, the United States is a society that has made a lot of sacrifices in the name of preserving choice. You made yours, you chose to rent; the choice to own a home should remain a realistic alternative for those who want it. If your argument is that houses in absolutely prime real estate areas are always going to be out of reach of most buyers fair enough, but treating the idea of home ownership like a diamond ring is absurd.