>>I'd love the city I'm sure, but after glancing around I've come to the conclusion that home ownership is unthinkable to anyone who hasn't had a cash-out event.
I've never understood this crazy, if not outright insane obsession with home ownership. Why does everyone want to tie significant amounts of their lifetime earnings into physical property that historically has had very low appreciation in value? It's like people have forgotten about the housing bubble popping just five years ago, causing large portions of the population to take big hits financially. (And what is the current real estate craziness in SF, if not another bubble that will inevitably pop?)
Even seemingly rational reasons for home ownership, such as being able to raise a family in good school districts, fail to stand up to critical scrutiny. There are many stable renter neighborhoods with great schools.
There are number of reasons why I would prefer a home over rented property most important reason being almost infinite scope to personalize my living space.
The original origin of the "obsession with home ownership" was the idea of escaping the need to pay fealty to the rentier class by owning your own home. I completely agree that "house as investment" and house flipping bubblemania is insane, and is partly responsible for ruining the real estate market.
Actual ownership is now impossible for ordinary middle to upper middle class people in markets like the Bay Area, and in fact renting is more rational there. But there are plenty of other markets where it's not impossible.
>There are many stable renter neighborhoods with great schools.
You forgot "...in other parts of the country." The "great" schools in the Bay Area are pretty much exclusively in places with $1m+ house prices, and with few places to rent for a reasonable amount.
Also consider that the bubble primarily affected the distant 'burbs. House prices in San Francisco, and close in to the city, didn't really drop appreciably at all, and have now regained any losses. So either the "pop" was delayed (and another one is still coming, as you suggest), or there wasn't a "bubble" in SF at all. Not to say that I think it's sane to pay those prices, but I don't live the Bay Area any more for that exact reason.
There are those of us who really want to own a house just so that we can change it however we like. There's something smothering about living in a rental when you've previously been free to do what you want. I know, first world problems, but still, home ownership means that I can't be kicked out (or priced out) on the whim of a landlord.
And leaving the Bay Area is one way to achieve both. I've got better (for some measures of "better") public schools near me now than even exist in California any more, and yet I own my home (and paid only about $320k for it -- still not cheap, but much more reasonable). In my case (having bought and sold at good times in the Bay Area), I own the house outright, so living expenses are even lower than if I were renting, giving me the ability to pursue my own dream projects for more of the time.
I think if you are going to work for most of your life for someone else, than it is probably safe to buy a home, and at least recuperate some of the monthly payments you've made when you leave.
If you make decent money, and most likely will for the remainder of your life (aka used car dealer), then it is probably a better option to not own because you can always pay for rent.
But again - why would you choose to rent if you can own? Rent is thousands of dollars thrown out the window each year. Mortgage (or buying with cash) is the same, with the exception that at the end 1) you own a property that you could, if need be, sell for roughly the same amount you threw out and 2) you stop paying for housing for the rest of your life (minus repairs, yes, but that's insignificatn compared to paying rent every month - or otherwise landlords wouldn't be profitable).
Maintaining a home can cost more than you might imagine. The reason it is profitable for landlords (at least for apartments) is due to the fact there many are paying rent within the same building (economy of scale).
Second, taxes are significant. Where I live (Fargo, ND) property taxes equal a rent payment alone. So it almost makes more sense (monetarily) to pay rent and invest the extra money into something more lucrative than a home.
Not everyone likes living in apartments.
Not everyone thinks it's a wise choice to spend as much as a used house on a new condo where it's hard to find parking.
Not everyone likes living in a cement jungle.
Not everyone likes to have to turn down the volume of a good movie because or their neighbors.
If you want to buy an all electric car, you think you can plug it in on the street?
There are many reason why owning a home is a good idea. The best option is owning an inexpensive home in a market with reasonable prices and a decent income.
What, exactly, is "crazy" about it? As a renter, you don't control your own destiny. You're at the whim of your landlord. As a home-owner, or better yet, a property-owner, you have much more control over your living situation. Don't like the paint color? Change it. Don't like your stove? Get a new one. Want to plant some new flowers? Go for it.
As a renter, you're going to be dealing with rents rising year over year. Those with fixed mortgages will see the same payments for decades.
If you have kids, you want some more stability, most likely. If the building you rent in is sold, or the rent is raised too much, you have to move. You want to install anything permanent for the kids? Have to ask permission from the landlord.
Not to mention the fact that, if you're paying $1,000/mo for rent, at the end of the year, you have almost nothing to show for your $12,000. In a house/home, you have equity in said house.
And since when did the housing bubble have anything to do with "obsession with home ownership"? I was under the impression it was a combination of unsound investments ("home prices always go up, so it's OK to spend more than you can afford!") and shady mortgage companies dishing out loans with no regard as to whether a person could pay for them.
I've always considered rent as an expensive form of insurance.
Something major happens like the furnace going out mid winter, or a huge roof leak developing, or some other catastrophic event, or heck, even basic maintenance, It's not my problem, and my actual (dirt cheap) renter's insurance will take care of any damage.
$12,000 a year buys a lot of peace of mind. And honestly, unless I'm actually using my house as an investment rather than a place to live, equity is mostly meaningless to me.
>>What, exactly, is "crazy" about it? As a renter, you don't control your own destiny. You're at the whim of your landlord. As a home-owner, or better yet, a property-owner, you have much more control over your living situation. Don't like the paint color? Change it. Don't like your stove? Get a new one. Want to plant some new flowers? Go for it.
This is hilarious.
As a home-owner, you have control over your own home, but you have no control over your neighbors or your neighborhood in general. If things go badly, your house depreciates in value and there isn't much you can do to change it. Therefore, when you buy a home you are buying control of your immediate living situation while simultaneously surrendering yourself to the whims of those around you.
If you don't like your stove, you can get a new one. But what if you don't like your neighbors? That's a much bigger problem than not liking your stove, and there isn't a single thing you can do about it. They aren't going away anytime soon, and neither are you.
As someone who recently (this past year) went from being a renter to a homeowner, and had previously been a home owner for several years, it's not all rational... but here are some of the reasons.
I don't have to worry about the rent going up every year / six-months. If I plan to own the house for multiple years, a large chunk of my money goes to equity: I'm banking away value for later that you will get back when you sell the house. (Assuming the market doesn't go pear-shape: a big assumption.) In contrast, money you spend on rent is a pure cost, and irrevocably lost.
There are several "rent vs buy" calculators that can visualize (based on interest rates and rent vs mortgage costs) the crossover point where it's cheaper than it is to rent for X years, and what it does for your net worth. For me, it appears that about 2-3 years of owning will be a break-even point, and less if my rent would have increased.
In my case, the mortgage on a house (3 bedroom) + yard + garage, with a nice kitchen, was about $100 more per month than a cramped, 2 bedroom apartment with a miniscule (and poorly designed) kitchen, no space for the kids to run around, and not enough space to even unpack our stuff.
I OWN IT. Until you've owned one, it's possible you might not fully comprehend this double-edged sword.
I can paint the walls, break the walls, rip up the floor, put in a new mailbox, take out the trees I don't like. There's nearly nothing that keeps me from renting out a bedroom to a friend, or letting the in-laws stay for a week. If I want to mount a swamp cooler outside my window, I can, or turn my garage into an archery range.
There are downsides, too. As an owner, you risk that the market will fall out from under you. It's harder to move, as you have this limbo of not being able to buy a house until you've sold the previous one. (I haven't figured out how to make this not suck. Same goes from transitioning from a lease to ownership.) I have to mow the lawn, make sure the garden is watered. The utilities are a bit more expensive.
Also, as a homeowner, you tend to accumulate More Crap, since you have more space to fill.
All of this is worth it, though, as I do not worry about whether it's OK to paint my kids' rooms, or tear out a ceiling fan that I hate, or stain the deck a different color, or completely redo the landscaping. When someone (me, or the kids) busts a hole in a wall by accident, I think "Dangit, I have to fix that..." rather than "well, there goes my security deposit".
I'm sure that a big part of the appeal of home ownership is that our parents valued it, but I feel like there's a real intrinsic value to it as well. Consider surveying your friends who have owned + also rented, and ask them about the things they like or dislike about it.
Both renting and owning have risks. There is no such thing as a risk-free world. You can decide which kinds of risks you can more tolerate, though.
> I've never understood this crazy, if not outright insane obsession with home ownership.
And, I don't understand why so many people on HN seem to think it's insane. I'd like to be more in control of my environment. I don't want to be at the whims of a landlord, particularly in the future, when I have children.
I want a place that is mine to customize as I see fit. I don't want to have to ask if I can paint, I want to be able to pick my own appliances, I want to be able to tear down walls if I want.
Some people are homebodies, and some are not. I don't understand why people get so worked up and insist that their personal tastes are correct. To me, renting is insane. To you, owning is insane. Let's just agree to disagree.
Probably because we came of age when Fight Club, American Beauty, and AdBusters were popular and questioning the American dream. Home ownership usually implies suburbs and crushed dreams to people born in the 1980s.
It's a reaction against the "home ownership is doable and always a better idea than renting" sentiment that the previous generations knew to be true. The answer is probably a bit more nuanced in that sometimes ownership is great and sometimes it's a terrible idea, but I think it's just a case of the pendulum swinging the other way.
It is insane when you pay sky high prices for a house. Otherwise, it may be a good decision.
I'm guessing that there's nearly a 100% correlation between the people accusing prospective homeowners of having an "insane obsession" and people who live in apartments in SF. SF is one of my favorite cities in the world, but there are a LOT of downsides to it. I find that a lot of the people I know who live there adopt a borderline Stockholm Syndrome attitude about those downsides.
If you live in SF, you have easy access to all sorts of great things, but the downside is that unless you are fabulously wealthy, you are most likely renting an old and not necessarily well-maintained apartment with one (or two or three or more...) roommates, in a neighborhood with a disturbing number of homeless people and/or occasional violent crime, and you have to take the bus (or ride a bike) everywhere you go because it's just too much of an expensive hassle to drive anywhere. I'm not describing the living standards for college students or blue collar people, these are living standards for people who are probably in the top 5% income bracket in the entire country.
Those same people will tell you stuff like, why would you want to own a home? Why would you want to live by yourself? What do you have against homeless people? Why would you want a car in the first place? What's wrong with you, you barbarian!
There's something to be said for those perspectives, and I appreciate the value of living in a really dense and culturally rich city with great public transportation. But so many of the SF residents that I know go way beyond looking on the bright side, to the point of fetishizing the very things that can make SF an unpleasant place to live.
Maybe if I lived there I'd be like that too. It's natural to always want to look on the bright side of whatever your living situation is, it's just annoying when people get super militant about it, to the point of accusing you of being a bad or stupid person if you don't want to live there too.
Good luck finding a house for rent in a good neighborhood for under 5k a month. Especially if you have a dog.
Good rental (i.e., well-maintained, good neighbors, long-term, non-crazy owner, etc.) may be harder to find than a comparable house to buy, and you still don't own it meaning there are many things that you can not do there.
>>>> It's like people have forgotten about the housing bubble popping just five years ago
Not everybody did. Some found it a pretty good opportunity to finally get into the market while it temporarily became a bit less insane than usual. Home ownership doesn't have to be with a goal to strike it rich on a bubble, it may be to minimize housing expenses too.
Communities are built by people that are in for the long haul. How many renters show up at city council meetings? The age of renting is the age of "bowling alone".
I completely agree with your point, but that's not a problem of renters, per se.
If the city of San Francisco (where my wife and I live) made a committed effort to build a stable stock of rental property that allowed families of 3-5 to rent for less than $3k a month, I guarantee you'd see more families sticking around instead of fleeing to points north or east. Instead, you get mostly young, single (your "bowling alone" category, less likely to show up at those city council meetings) splitting 3 bedrooms four ways and paying $4k for the privilege of all sharing one kitchen and one bathroom.
I'm optimistic that all of the new housing being put up in SOMA will help alleviate this but there needs to be some complementary regulatory structure to help keep those community types (which are often what the young singles become in 5-10 years) around. Otherwise, SF is quickly on a path towards being a place where only the rich, the young, the single, and the poor (via subsidized housing) can afford to live. The middle gets squeezed.
"physical property that historically has had very low appreciation in value?"
Only over a longer scale. Over a short scale, say 1980-2010, interest rates have gone from 20% to practically zero. So Joe 6 Pack who is going to pay $1500 no matter what interest rate exists, has caused the previous owners selling price to explode. And once prices start exploding, the bubbly pile on begins.
Its also a fad. Post 1950 no $ should be spared on education. Post 1990-ish no $ should be spared on real estate. When the fickle public changes their mind, look out below!
"Why does everyone want to tie significant amounts of their lifetime earnings into physical property that historically has had very low appreciation in value?"
Because for most, it's not an investment, it's a hedge. Your demand for housing will not be going down as you get older, but it will become increasingly harder to manage.
I think there are many reasons, some more rational than others.
1 - everyone is long housing, and sfbay has had major price swings. Buying a house caps what you'll pay. I lived in a neighborhood in sf where market rents for my apartment went from $2200 to at least $2700/mo in a little over a year and a half.
2 - the US, via mortgage interest deduction, privileges home ownership
3 - california in particular privileges home ownership by basically freezing property taxes
4 - rental stock in california is often complete shit. If you don't want to hear your neighbors walking or running the bathroom fan or etc... you probably need to buy a home.
5 - good luck finding a 3 bedroom rental, which is highly desirable if you have 2 kids
6 - if you have good credit, a $1mm house in the peninsula costs roughly (within $700/mo) what rent does on a similar apartment
7 - want to have a dog? Good luck with that in a rental.
8 - want to not have to ask permission for X, Y, or Z while paying $3500+/mo? Don't live in a rental.
Renting has also become unbearable, unless you are ready to shack up with roommates to bear the $3-4K monthly rent.
Some of us value permanence. I own my house, and I have zero intention of ever selling it. It's mine, mine, mine, mine.
There is an incredible feeling in owning a home that you love and plan to spend your life in. We get to plan the changes we'll make over the next decade. We can plant a tree and watch it grow. We can truly unpack our stuff AND our lives… which it's hard to ever do when you rent; most people I know move every 1 to 3 years. At that rate, a lot of things feel like they're never worth it. You don't hang curtains because you think "I won't be here that long" then you wake up and it's been 4 years and you never had curtains and you wasted all that time. (Actual curtains… and metaphorical curtains, too.)
Granted, you don't get that feeling if you just buy whatever's available. (And probably nigh impossible to manage in a place like SF.)
Our house is a special place. It's historic; we feel obliged to take good care of it, because it will outlast us. It's an indescribable source of joy. And yes, there's angst, too -- that always comes with loving anything, be they people, animals, organizations, or things. It's worth it.
The money is the absolutely last concern.
Completely agree on all points.
Also, community. My wife was sick in bed for 3 months, our neighbors came and watched our kids every morning from 8:00am-12:00pm so I could work and continue to support my family. You only get that from a neighborhood of homeowners.
Wow, thanks for this post Amy.
The next decade. Heh. Would be nice to have that kind of job security.
Well said!
>I've never understood this crazy, if not outright insane obsession with home ownership.
Where many people live you can buy a house that would cost well over a mil in SFO and have it paid off in 3-4 years. Imagine you could live in a very nice house and only pay 2-4k in property taxes a year-
Owning a home makes the post-work, part of your life much more economical too. I would argue that obsession with home ownership is only crazy if you live in many parts of CA, to apply that to the whole country is grossly wrong.
> Why does everyone want to tie significant amounts of their lifetime earnings into physical property that historically has had very low appreciation in value?
I've tied a significant amount of my lifetime earnings into dining out and purchasing music and I can assure you that neither of those has much of a resale value, especially the former.
I've never understood this crazy, if not outright insane obsession with maximizing appreciation value. It's like people have forgotten that we make money so that we can spend it making ourselves happy.