5 ms·

"Still" renting, heavily implies that purchasing a home is some sort of inevitable conclusion that if you haven't done yet then something is wrong with you. A)

"Still" renting, heavily implies that purchasing a home is some sort of inevitable conclusion that if you haven't done yet then something is wrong with you. A) Not true but also B) 150k is not enough money to purchase homes in several major metro areas.

dnadler 4y ago
That's because home ownership in the US is (was?) really the primary path for the middle class to accumulate wealth. The US home mortgage as a financial instrument is phenomenal for this. So, it was generally expected that most people would rent until they can afford to buy on their path to accumulating wealth. There are certainly reasons for people not to buy, but not being able to afford a home is more of a problem now than it has been historically (obviously). This has significant knock-on effects for individuals and the broader economy.
karmakurtisaani 4y ago
Owning a home is preferable though. "You're either paying your own or someone else's mortgage." Edit: clearly one quote cannot capture the complexity of life. However, should I ever own a home, I'd be happy to let you guys pay for my mortgage.
- cudgy 4y ago
  I might pay your mortgage if comparable rents will cover it. There’s no guarantee that will be the case, and you could be stuck with a house you can’t sell or rent for more than the mortgage, taxes, insurance, hoa fees, hoa assessments, lawncare, gutter cleanings, pesticide, termite service and bond, replacement hvacs and appliances, roof replacements, exterior paint, interior paint, carpet, wall repairs, toilet issues, plumbing leaks, frozen pipes, squirrel and rodent damage, damage from tenants, vacant months, legal fees for evictions, and the risk of eviction moratoriums, earthquake damage, fires, etc.
- swatcoder 4y ago
  "You're either rooted with high inertia and volatile maintenance costs or you're buying personal flexibility and medium-term expense stability." Owning is a smart place to park money when you're sure you're settling down for a long while and can be a good investment at other times, but renting is "preferable" quite often too. People get very caught up in black and white thinking about this and it leads to a lot of counterproductive decisions and frustration.
- it_citizen 4y ago
  That sentence really fail to capture the complexity of the situation. « you’re either paying for your own plus more than a third in interests, plus strata, plus local taxes, plus maintenance or someone else’s mortgage which let you put your money elsewhere, live debt free, without the hassle of maintaining the place and the ability to move easily when new opportunities knock on your door » I am not saying renting is better, but there is a different answer for everyone’s situation.
- pwinnski 4y ago
  "You're either paying your own repair and maintenance expenses or someone else is." As someone who has been hit by a perfect storm of expensive repairs, I wish I were still renting.
  - karmakurtisaani 4y ago
    Consider it like this: if you paid on average $2000 per month for 10 years, you'd have paid $240,000 to the landlord and never see any of that money ever again. That should cover a couple of expensive repairs, no? Besides, repairs directly increase the value of your property, so there's that.
    - jedberg 4y ago
      If you wanted to buy that same house, your mortgage would be about $2200/mo, PLUS property taxes. And in the first ten years of the mortgage, it's almost all interest. So instead of a landlord you're paying the bank to rent your property from them, but now you have to maintain it. And repairs almost never increase the value of your property -- usually they just return it to expected value. When you sell a house, it's assumed that the plumbing and electrical work, and that's baked into the price. If they don't work, you have to make them work. The only upside is that you get to keep the appreciation in the land value. Check this out: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... Basically, in the most expensive markets, financially it almost always makes sense to rent instead of own, assuming you invest the money you save by renting. Owning makes sense for non-financial reasons, like having more control over your living environment and a sense of place.
      - karmakurtisaani 4y ago
        Good point. One of my assumptions is that the rent would not be much cheaper than the mortgage payments (plus maintenance). Of course that might not be true, and in that case you'd indeed end up paying much more than you pay when renting. However, when renting, you have to cover the same maintenance cost + interest that the actual owner is paying - why else would they rent the place out? (Ok, maybe you can time the market or have another kind of fluke, but can you really count on that?) Thanks for the link! I need to give this a deeper look, as I'm currently considering my options.
Decabytes 4y ago
As someone who is a recent homeowner I think it's unfortunate that homeownership has become a long term investment plan, and a hedge against rising rent. The reality is that I know a lot of people for which the responsibility of homeownership is not for them. There are a lot of things an old house needs to keep from falling into disrepair, and that's not including snow removal, leaf removal, and lawn care. By all extensions it should be a depreciating asset like any other but due to economic forces it's not. I wish there were more affordable housing solutions for people for who didn't want to own a home, but at least where I live that is not the case.
- jedberg 4y ago
  > By all extensions it should be a depreciating asset like any other but due to economic forces it's not. Technically it is. The house itself depreciates, it's just that the land underneath appreciates so much faster that it masks the depreciation of the structure.
- rco8786 4y ago
  Fwiw it’s not terribly accurate to say it “has become” that. The situation you describe has been true basically since right after WW2.
daveguy 4y ago
A) Not inevitable (obviously, 3 million counter examples). But likely, considering when you rent you are giving 100% of that money to someone else, but if you have a mortgage at least some of that (with more over time) is your own. And the monthly payments generally aren't much different. B) No, 150k is not enough in most markets these days, but it's 150k/year income and that definitely is enough to finance a house.
- pwinnski 4y ago
  This thinking, about who ends up with the money, feels right, but the math doesn't always work like it seems it should. My counter-argument would be that when you rent, 100% of expenses for repairs and maintenance are borne by someone else, but if you have a mortgage all of those expenses are your own. Different cites have different ratios between rent and mortgage, with some similar, some higher rents, some higher mortgages. I don't know any cites in which rents require a 20% down payment, though. Finally, when comparing potential returns, and remember that neither the stock market nor future home equity are guaranteed, don't forget that down payment! Many people focus on the month-to-month after closing, and forget that if they put that lump sum into an index fund rather than into a down payment, they'd be able to (after 12 months) sell shares over time and take income from the index fund in a way they wouldn't from the house without selling it or taking out a HELOC loan.
  - daveguy 4y ago
    Repair costs, local relative cost housing vs rent costs are both excellent points. Regarding down payment, that is still something you could likely recoup, and putting it in an index fund isn't necessarily more stable (especially over a 12 month period). Except for the very expensive markets like downtown NY or Silicon Valley, making 150k/year should be enough to finance a house (especially considering in those expensive markets rent is also very expensive). When you rent you're essentially paying someone else's mortgage with repairs priced in (mortgage is often less than renting). Repair, relative local markets, and interest rates are all very relevant reasons that renting may be better.
    - 4y ago
Overtonwindow 4y ago
On the contrary, with an FHA backed 30-year fixed mortgage, all you need to do is pay closing costs. Maybe not California because of many reasons, but take Atlanta. A $300k house would see closing costs of $10,326. Someone making $150k+ in Atlanta should reasonably be expected to come up with $10,326 without much difficulty. Owning a home is a better investment, least of which is that the landlord won't double your rent because someone wants to pay more. I think the renting is more of a desire to not be tied down to one location because of uncertainty in the job market, and social needs.
- rco8786 4y ago
  Yes, someone in Atlanta...that makes perfect sense. But that's a MCOL area. Places like NYC, SF, LA, etc homeownership is effectively unattainable at 150k/yr.

dnadler 4y ago

That's because home ownership in the US is (was?) really the primary path for the middle class to accumulate wealth. The US home mortgage as a financial instrument is phenomenal for this. So, it was generally expected that most people would rent until they can afford to buy on their path to accumulating wealth. There are certainly reasons for people not to buy, but not being able to afford a home is more of a problem now than it has been historically (obviously). This has significant knock-on effects for individuals and the broader economy.

karmakurtisaani 4y ago

Owning a home is preferable though. "You're either paying your own or someone else's mortgage." Edit: clearly one quote cannot capture the complexity of life. However, should I ever own a home, I'd be happy to let you guys pay for my mortgage.

cudgy 4y ago
I might pay your mortgage if comparable rents will cover it. There’s no guarantee that will be the case, and you could be stuck with a house you can’t sell or rent for more than the mortgage, taxes, insurance, hoa fees, hoa assessments, lawncare, gutter cleanings, pesticide, termite service and bond, replacement hvacs and appliances, roof replacements, exterior paint, interior paint, carpet, wall repairs, toilet issues, plumbing leaks, frozen pipes, squirrel and rodent damage, damage from tenants, vacant months, legal fees for evictions, and the risk of eviction moratoriums, earthquake damage, fires, etc.
swatcoder 4y ago
"You're either rooted with high inertia and volatile maintenance costs or you're buying personal flexibility and medium-term expense stability." Owning is a smart place to park money when you're sure you're settling down for a long while and can be a good investment at other times, but renting is "preferable" quite often too. People get very caught up in black and white thinking about this and it leads to a lot of counterproductive decisions and frustration.
it_citizen 4y ago
That sentence really fail to capture the complexity of the situation. « you’re either paying for your own plus more than a third in interests, plus strata, plus local taxes, plus maintenance or someone else’s mortgage which let you put your money elsewhere, live debt free, without the hassle of maintaining the place and the ability to move easily when new opportunities knock on your door » I am not saying renting is better, but there is a different answer for everyone’s situation.
pwinnski 4y ago
"You're either paying your own repair and maintenance expenses or someone else is." As someone who has been hit by a perfect storm of expensive repairs, I wish I were still renting.
- karmakurtisaani 4y ago
  Consider it like this: if you paid on average $2000 per month for 10 years, you'd have paid $240,000 to the landlord and never see any of that money ever again. That should cover a couple of expensive repairs, no? Besides, repairs directly increase the value of your property, so there's that.
  - jedberg 4y ago
    If you wanted to buy that same house, your mortgage would be about $2200/mo, PLUS property taxes. And in the first ten years of the mortgage, it's almost all interest. So instead of a landlord you're paying the bank to rent your property from them, but now you have to maintain it. And repairs almost never increase the value of your property -- usually they just return it to expected value. When you sell a house, it's assumed that the plumbing and electrical work, and that's baked into the price. If they don't work, you have to make them work. The only upside is that you get to keep the appreciation in the land value. Check this out: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... Basically, in the most expensive markets, financially it almost always makes sense to rent instead of own, assuming you invest the money you save by renting. Owning makes sense for non-financial reasons, like having more control over your living environment and a sense of place.
    - karmakurtisaani 4y ago
      Good point. One of my assumptions is that the rent would not be much cheaper than the mortgage payments (plus maintenance). Of course that might not be true, and in that case you'd indeed end up paying much more than you pay when renting. However, when renting, you have to cover the same maintenance cost + interest that the actual owner is paying - why else would they rent the place out? (Ok, maybe you can time the market or have another kind of fluke, but can you really count on that?) Thanks for the link! I need to give this a deeper look, as I'm currently considering my options.

Decabytes 4y ago

As someone who is a recent homeowner I think it's unfortunate that homeownership has become a long term investment plan, and a hedge against rising rent. The reality is that I know a lot of people for which the responsibility of homeownership is not for them. There are a lot of things an old house needs to keep from falling into disrepair, and that's not including snow removal, leaf removal, and lawn care. By all extensions it should be a depreciating asset like any other but due to economic forces it's not. I wish there were more affordable housing solutions for people for who didn't want to own a home, but at least where I live that is not the case.

jedberg 4y ago
> By all extensions it should be a depreciating asset like any other but due to economic forces it's not. Technically it is. The house itself depreciates, it's just that the land underneath appreciates so much faster that it masks the depreciation of the structure.
rco8786 4y ago
Fwiw it’s not terribly accurate to say it “has become” that. The situation you describe has been true basically since right after WW2.

daveguy 4y ago

A) Not inevitable (obviously, 3 million counter examples). But likely, considering when you rent you are giving 100% of that money to someone else, but if you have a mortgage at least some of that (with more over time) is your own. And the monthly payments generally aren't much different. B) No, 150k is not enough in most markets these days, but it's 150k/year income and that definitely is enough to finance a house.

pwinnski 4y ago
This thinking, about who ends up with the money, feels right, but the math doesn't always work like it seems it should. My counter-argument would be that when you rent, 100% of expenses for repairs and maintenance are borne by someone else, but if you have a mortgage all of those expenses are your own. Different cites have different ratios between rent and mortgage, with some similar, some higher rents, some higher mortgages. I don't know any cites in which rents require a 20% down payment, though. Finally, when comparing potential returns, and remember that neither the stock market nor future home equity are guaranteed, don't forget that down payment! Many people focus on the month-to-month after closing, and forget that if they put that lump sum into an index fund rather than into a down payment, they'd be able to (after 12 months) sell shares over time and take income from the index fund in a way they wouldn't from the house without selling it or taking out a HELOC loan.
- daveguy 4y ago
  Repair costs, local relative cost housing vs rent costs are both excellent points. Regarding down payment, that is still something you could likely recoup, and putting it in an index fund isn't necessarily more stable (especially over a 12 month period). Except for the very expensive markets like downtown NY or Silicon Valley, making 150k/year should be enough to finance a house (especially considering in those expensive markets rent is also very expensive). When you rent you're essentially paying someone else's mortgage with repairs priced in (mortgage is often less than renting). Repair, relative local markets, and interest rates are all very relevant reasons that renting may be better.
  - 4y ago

Overtonwindow 4y ago

On the contrary, with an FHA backed 30-year fixed mortgage, all you need to do is pay closing costs. Maybe not California because of many reasons, but take Atlanta. A $300k house would see closing costs of $10,326. Someone making $150k+ in Atlanta should reasonably be expected to come up with $10,326 without much difficulty. Owning a home is a better investment, least of which is that the landlord won't double your rent because someone wants to pay more. I think the renting is more of a desire to not be tied down to one location because of uncertainty in the job market, and social needs.

rco8786 4y ago
Yes, someone in Atlanta...that makes perfect sense. But that's a MCOL area. Places like NYC, SF, LA, etc homeownership is effectively unattainable at 150k/yr.