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Immunity to rent inflation, plus capturing all appreciation, plus equity through principal reduction are three obvious relevant factors.
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Originally Posted by KathrynAragon
Well, it's not the house that creates this phenomenon. It's an atmosphere that fosters goal setting and reaching, and fiscal responsibility. Families with those beliefs and practices tend to raise kids with similar values.
I have named three components of wealth-building homeowners enjoy that renters do not. So the house certainly has SOMETHING to do with it.
I think one of the biggest problems is the American mindset in general of "give me what I want now!" If you want to be wealthier than you are, you need to make some sacrifices. About 5 years ago, I was living in a townhouse I bought with cash. I could have been living in a million dollar house if I wanted, but why would I do that? Just to keep up with the Joneses? Honestly the stress of having those larger payments, and then of having less money invested (except in my house), would NOT have been worth the temporary satisfaction of a fancier house. Sure, my townhouse was meager, and it wasn't anything much to look at, definitely it had its flaws, but every day I felt so much better thinking wow my entire cost of housing is like $450/month which includes HOA dues and property taxes. That's a great feeling and allowed me to build more wealth, while the rest of my money was then invested in things that since that 5 years have passed are now worth a lot more money.
Renting is the same thing when it comes to some people -- I'm not saying most or all. There are people who rent a nice downtown loft at $2,000/month because it's a beautiful place, it's close to a bunch of fun things like bars and restaurants, and it's "trendy." They can afford to rent that place, based on their income, but they're not getting any wealthier at all each month. Let's call that Person A.
Person B, exactly the same income, decides to tough it out. Sure, his friends may think his situation sucks, and his general quality of life for a few years isn't that great, but Person B rents a two bedroom apartment with a buddy out in the suburbs for $1,200/month, and they split it two ways so he's paying $600/month for his portion. He stays in this situation for about 5 years, after which point he has saved an additional $84,000! He now decides it's time to enjoy life a little bit more, not go crazy, but time to own and enjoy the benefits of home ownership. He plops down $70,000 to buy a $350,000 house. Meanwhile, Person A is still renting, enjoying his trendy lifestyle, spending even more of his money at the bars and fancy restaurants; "they're just so close and good!"
Fast forward ten years, Person A is still sitting there, renting, not partying as much, he's a bit older now, thinking maybe it's about time to get his own place. Gee, sure is too bad it's borderline impossible to afford houses now days! How is anyone supposed to have the money?! What a rigged society!
Meanwhile, Person B's house has appreciated to about $500,000, he's continued to live frugally, and made one extra mortgage payment per year on his house. He's got somewhere around $300,000 in equity or whatever it is in his home now. Person A has no equity in any home, nor any real savings.
This all happened because Person A was tempted by what he COULD afford, at the time, while Person B was focused on what he could afford in the future. Be Person B, not Person A.
Median homeowner income is 2x median renter income - I'm looking at it from the perspective of someone without discretionary income who is already living in a tiny room. When you have no discretionary income, rent inflation is a perpetual drag on your ability to get ahead financially.
Wait. Your excuse has been “impaired” internet access. Now it’s lack of space. Did you give up your $200+ rental space? If not, surely you could bring a few nudey mags home at a time to list on EBay. They don’t take up much space. Time to realize that windfall from EBay sales you keep claiming will happen. Then you’ll have the funds to buy a house. Right???
Not trying to divert this thread - this thread is way too much fun - but people have been asking me and it's easier to make a post or two than to reply to every DM - I was a subtenant at the old place and the tenant's default got us all kicked out. HE was evicted and the landlord had to fix a number of things, plus he remodeled and returned the house to market at 2x the old rent, which the rest of us could not afford. So I ended up in a tiny tiny 8 x 8 room where I got my own internet, an 18" x 18" folding table with room for my laptop and a desk lamp. Not enough space to work with.
Now let's get back to owning, renting, and wealth.
Not trying to divert this thread - this thread is way too much fun - but people have been asking me and it's easier to make a post or two than to reply to every DM - I was a subtenant at the old place and the tenant's default got us all kicked out. HE was evicted and the landlord had to fix a number of things, plus he remodeled and returned the house to market at 2x the old rent, which the rest of us could not afford. So I ended up in a tiny tiny 8 x 8 room where I got my own internet.
Now let's get back to owning, renting, and wealth.
Wealth is primarily based on income unless one inherits money. Wealth cannot exist in the absence of adequate income regardless of whether one rents or owns. There are many house poor folks who fare no better than renters. And in fact, may do considerably worse. Their properties may not appreciate normally due to deferred maintenance and are sometimes lost due to non payment of taxes or mortgages losing whatever down payment and principal paid. How much one makes is always the primary driver of possible wealth.
Not trying to divert this thread - this thread is way too much fun - but people have been asking me and it's easier to make a post or two than to reply to every DM - I was a subtenant at the old place and the tenant's default got us all kicked out. HE was evicted and the landlord had to fix a number of things, plus he remodeled and returned the house to market at 2x the old rent, which the rest of us could not afford. So I ended up in a tiny tiny 8 x 8 room where I got my own internet, an 18" x 18" folding table with room for my laptop and a desk lamp. Not enough space to work with.
Now let's get back to owning, renting, and wealth.
You were missed on CD. Enjoy!
You have not done anything since to improve your situation. Enjoy!
who exactly is we? we are all individuals, if you think home ownership is going to improve your lot in life, then you should focus on achieving it. there is no "we" here.
The people at National Homeownership Month say that the private sector and government should promote homeownership because it is good for people and communities.
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