5 ms·

In much of the US (read, in the Midwest where I am right now).. mortage monthly payment is indeed cheaper, sometimes a lot. And this is after taxes / repair iss

In much of the US (read, in the Midwest where I am right now).. mortage monthly payment is indeed cheaper, sometimes a lot. And this is after taxes / repair issues. Renting is very much a poverty trap where the poor with bad credit get poorer and worse credit.

boringg 4y ago
Depends on where you live - this "renting is a poverty trap" only applies to certain places and depends on home values constantly increasing. If home values crash where you live then you spent years putting money towards a worthless asset.
- quantified 4y ago
  Renting is always worth 0 as equity, so it's a total loss regardless.
  - notch656a 4y ago
    But renting also guarantees you will never have negative equity.
    - quantified 4y ago
      Negative equity with a roof over your head is better than on the street. Your equity going to zero is still cheaper than raising a family to adulthood in a rented place.
      - notch656a 4y ago
        I agree there are lots of upsides to having a house. I definitely get some used car salesman vibes whenever someone tries to sell up the upsides of negative equity, though. Having no chance to have negative equity is pretty much unequivocally one of the few absolute advantages of renting. The other being (typically) lower transactional costs for short term occupancy.
        quantified 4y ago
        Negative equity means little. So what if it's worth less when you sell than when you buy? Compare the net on that with the loss you take from renting. Only a fool treats their dwelling as an appreciating asset anyway. It's subject to market forces.
  - brianwawok 4y ago
    * It guarantees you do not lose money if the home values around you drop * It gives you a fixed monthly houseing cost. No "10k new roof" or "1k new stove" suprises hit you. * If you are say, saving 50% vs buying, you can put this difference in an index fund. This would over 10 or 20 years potentially give you a LOT of money over buying. Look, buying is mostly great. It's one of the biggest builders of wealth for most Americans. But from a purely numbers game, it's not so clear "rent is just losing money".
    - antisthenes 4y ago
      1. True, but housing prices rarely drop in desirable areas (usually where good jobs and schools are). If, for some reason, you decide to stay in a town with a dying industry, then yes, this is true. 2. So does a fixed-rate mortgage. Even better, refinancing a mortgage during a low-rate period (e.g. 2012, 2020) actually lets you reduce your payment, while contributing more to equity. How often do you have an opportunity to reduce your rent? 3. Saving 50% of what exactly? You can put the down payment into an index fund, yes, but remember than the house is an asset that gives you 5x leverage initially, assuming 20% down. You can't get 5x leverage at your broker, and even if you could, playing with 5x leverage on the stock market is insanely risky compared to real estate. > But from a purely numbers game, it's not so clear "rent is just losing money" It's pretty clear actually. They've compared retirees who rented all their life vs home-buyers. The difference in wealth was striking, a factor of 6x-7x if not more. What's not clear is whether that trend will continue in perpetuity under the conditions of declining population.
      - brianwawok 4y ago
        So say global warming continues. Huge chunks of Cali aren't fit to live in. Salt Lake dries up. What happens to all of those home values? Home values rising historically is good, but I don't think a clear win through all time. There is no instrinsic reason a house value should rise faster than inflation. You can always build a new house for cost X. Buying existing means that new house supply is too low or too costly.
        4y ago
  - 1991g 4y ago
    This is true only if you place zero value on "having a roof over my head".
  - boringg 4y ago
    Absolute statements rarely hold up when you shine a light on them.
    - quantified 4y ago
      That's sometimes true, but there are a lot of nuances to it.
- jaywalk 4y ago
  > If home values crash where you live then you spent years putting money towards a worthless asset. It's still a roof over my head regardless of how much it's worth. And more importantly, how much it's worth is completely irrelevant unless/until you want to sell. And if you do want to sell, and home values have crashed, then the next house you buy will also be cheap!
  - deleted 4y ago
    [deleted]
  - random314 4y ago
    The OP is talking about a situation where it would be cheaper to rent your home in the future, than make mortgage payments on it.
    - BeetleB 4y ago
      Yes, but are we splitting the payments between principle and interest? In most cases, after a number of years, the rental cost easily exceeds interest + insurance + tax for the same size property. Yes, it often seems the rental cost will be less than your monthly payments, but do realize that you lose all the rental cost, but not all your monthly payment.
      - random314 4y ago
        Its simple to demonstrate scenarios where a loss in property value ends up being more expensive for the homeowners than renters in the long run. We had a crisis in 2008 because of this. There are online rent vs buy calculators that you can use to generate these scenarios. https://www.calculator.net/rent-vs-buy-calculator.html https://www.calculator.net/rent-vs-buy-calculator.html Plug in negative appreciation for property values and watch how the comparison tilts.

boringg 4y ago

Depends on where you live - this "renting is a poverty trap" only applies to certain places and depends on home values constantly increasing. If home values crash where you live then you spent years putting money towards a worthless asset.

quantified 4y ago
Renting is always worth 0 as equity, so it's a total loss regardless.
- notch656a 4y ago
  But renting also guarantees you will never have negative equity.
  - quantified 4y ago
    Negative equity with a roof over your head is better than on the street. Your equity going to zero is still cheaper than raising a family to adulthood in a rented place.
    - notch656a 4y ago
      I agree there are lots of upsides to having a house. I definitely get some used car salesman vibes whenever someone tries to sell up the upsides of negative equity, though. Having no chance to have negative equity is pretty much unequivocally one of the few absolute advantages of renting. The other being (typically) lower transactional costs for short term occupancy.
      - quantified 4y ago
        Negative equity means little. So what if it's worth less when you sell than when you buy? Compare the net on that with the loss you take from renting. Only a fool treats their dwelling as an appreciating asset anyway. It's subject to market forces.
- brianwawok 4y ago
  * It guarantees you do not lose money if the home values around you drop * It gives you a fixed monthly houseing cost. No "10k new roof" or "1k new stove" suprises hit you. * If you are say, saving 50% vs buying, you can put this difference in an index fund. This would over 10 or 20 years potentially give you a LOT of money over buying. Look, buying is mostly great. It's one of the biggest builders of wealth for most Americans. But from a purely numbers game, it's not so clear "rent is just losing money".
  - antisthenes 4y ago
    1. True, but housing prices rarely drop in desirable areas (usually where good jobs and schools are). If, for some reason, you decide to stay in a town with a dying industry, then yes, this is true. 2. So does a fixed-rate mortgage. Even better, refinancing a mortgage during a low-rate period (e.g. 2012, 2020) actually lets you reduce your payment, while contributing more to equity. How often do you have an opportunity to reduce your rent? 3. Saving 50% of what exactly? You can put the down payment into an index fund, yes, but remember than the house is an asset that gives you 5x leverage initially, assuming 20% down. You can't get 5x leverage at your broker, and even if you could, playing with 5x leverage on the stock market is insanely risky compared to real estate. > But from a purely numbers game, it's not so clear "rent is just losing money" It's pretty clear actually. They've compared retirees who rented all their life vs home-buyers. The difference in wealth was striking, a factor of 6x-7x if not more. What's not clear is whether that trend will continue in perpetuity under the conditions of declining population.
    - brianwawok 4y ago
      So say global warming continues. Huge chunks of Cali aren't fit to live in. Salt Lake dries up. What happens to all of those home values? Home values rising historically is good, but I don't think a clear win through all time. There is no instrinsic reason a house value should rise faster than inflation. You can always build a new house for cost X. Buying existing means that new house supply is too low or too costly.
      - 4y ago
- 1991g 4y ago
  This is true only if you place zero value on "having a roof over my head".
- boringg 4y ago
  Absolute statements rarely hold up when you shine a light on them.
  - quantified 4y ago
    That's sometimes true, but there are a lot of nuances to it.
jaywalk 4y ago
> If home values crash where you live then you spent years putting money towards a worthless asset. It's still a roof over my head regardless of how much it's worth. And more importantly, how much it's worth is completely irrelevant unless/until you want to sell. And if you do want to sell, and home values have crashed, then the next house you buy will also be cheap!
- deleted 4y ago
  [deleted]
- random314 4y ago
  The OP is talking about a situation where it would be cheaper to rent your home in the future, than make mortgage payments on it.
  - BeetleB 4y ago
    Yes, but are we splitting the payments between principle and interest? In most cases, after a number of years, the rental cost easily exceeds interest + insurance + tax for the same size property. Yes, it often seems the rental cost will be less than your monthly payments, but do realize that you lose all the rental cost, but not all your monthly payment.
    - random314 4y ago
      Its simple to demonstrate scenarios where a loss in property value ends up being more expensive for the homeowners than renters in the long run. We had a crisis in 2008 because of this. There are online rent vs buy calculators that you can use to generate these scenarios. https://www.calculator.net/rent-vs-buy-calculator.html https://www.calculator.net/rent-vs-buy-calculator.html Plug in negative appreciation for property values and watch how the comparison tilts.