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Because we've figured out that cars and houses are terrible investments.
On the car front, cars aren't worth more than probably $5000. Anything over that is a waste, IMO. I bought my car for like $4000 back in 2004 (it is a 1994 model). I haven't paid a single penny on it since, aside from filling it up with gas and doing normal maintenance and repairs that any car (new or old) would need. I also laugh at people who whine about their $300/month car payments on their $20,000+ vehicles. Those were terrible investments when they could have paid a fraction of the cost for an equally reliable vehicle - shouldn't have bought such an overpriced item!
Housing too. Houses are not worth 6-figure pricetags. They just aren't. You can find decent living accommodations just about anywhere for under $700 a month, yet the average mortgage is around $1200. If you were going to spend $100k on buying a house (which is a lowball estimate, isn't it?) you would have to live there for at least 12 years to make it a better investment than simply renting at $700/month for the same timespan. Once you get up to $200k houses, you have to live there for at least 24 years to "break even" compared to renting, and $300k is 36 years! And for what? To be stuck in one spot the whole time? What happens if you need or want to move? Then you can't just terminate your lease and move out, you're stuck.
Houses and cars are awful investments. Young people like myself have figured it out, and we're staying away from them. Instead, I rent a place for $680 a month, I pay $0 for my car, and I travel internationally every year (2010 - Gabon and South Africa; 2011 - Panama and Costa Rica; 2012 - Finland and Estonia...). I wouldn't be able to do that if I were paying something like $1500/month for my house/vehicle instead.
Your calculations fail to consider the most important factor which is inflation. Also you claim that your savings from renting are invested in travel, so what is your return on that?
What exactly is your plan to get ahead financially?
Because we've figured out that cars and houses are terrible investments.
On the car front, cars aren't worth more than probably $5000. Anything over that is a waste, IMO. I bought my car for like $4000 back in 2004 (it is a 1994 model). I haven't paid a single penny on it since, aside from filling it up with gas and doing normal maintenance and repairs that any car (new or old) would need. I also laugh at people who whine about their $300/month car payments on their $20,000+ vehicles. Those were terrible investments when they could have paid a fraction of the cost for an equally reliable vehicle - shouldn't have bought such an overpriced item!
Housing too. Houses are not worth 6-figure pricetags. They just aren't. You can find decent living accommodations just about anywhere for under $700 a month, yet the average mortgage is around $1200. If you were going to spend $100k on buying a house (which is a lowball estimate, isn't it?) you would have to live there for at least 12 years to make it a better investment than simply renting at $700/month for the same timespan. Once you get up to $200k houses, you have to live there for at least 24 years to "break even" compared to renting, and $300k is 36 years! And for what? To be stuck in one spot the whole time? What happens if you need or want to move? Then you can't just terminate your lease and move out, you're stuck.
Houses and cars are awful investments. Young people like myself have figured it out, and we're staying away from them. Instead, I rent a place for $680 a month, I pay $0 for my car, and I travel internationally every year (2010 - Gabon and South Africa; 2011 - Panama and Costa Rica; 2012 - Finland and Estonia...). I wouldn't be able to do that if I were paying something like $1500/month for my house/vehicle instead.
I agree with you on the cars but not so much on the houses. There definitely IS math to do to compare renting to buying (which varies strongly in every geographical market), but the math you are presenting is not correct. You have to figure in inflation, equity building when paying for your house vs no equity built in the apartment, interest write-offs, insurance discounts from insuring a home and car (our car insurance was cut nearly in half by bundling it with a home than compared to when we rented), etc. You can't just blanket say that it would take 12 years to break even. Obviously you also have to take into account any repairs you have to do to this house if this applies as well.
We just got a great deal on a house 2 years ago at a very low point in the market in our area. Based on the prices houses near us have sold lately, we would just about break even already 2 years later due to rent being expensive in our area but owning being relatively cheap (and us finding a great deal from someone motivated to sell).
After writing off interest, our mortgage is only $100 more per month than we were renting at but we are building equity.
I also travel every year both internationally and domestically and my wife and I still own a house and have no debt beside the mortgage.
There isn't a blanket rule on one being better than the other so I'm not trying to say you are wrong everywhere. There are plenty of areas of the country where renting is 100% better than owning too.
I agree with you on the cars but not so much on the houses. There definitely IS math to do to compare renting to buying (which varies strongly in every geographical market), but the math you are presenting is not correct. You have to figure in inflation, equity building when paying for your house vs no equity built in the apartment, interest write-offs, insurance discounts from insuring a home and car (our car insurance was cut nearly in half by bundling it with a home than compared to when we rented), etc. You can't just blanket say that it would take 12 years to break even. Obviously you also have to take into account any repairs you have to do to this house if this applies as well.
We just got a great deal on a house 2 years ago at a very low point in the market in our area. Based on the prices houses near us have sold lately, we would just about break even already 2 years later due to rent being expensive in our area but owning being relatively cheap (and us finding a great deal from someone motivated to sell).
After writing off interest, our mortgage is only $100 more per month than we were renting at but we are building equity.
I also travel every year both internationally and domestically and my wife and I still own a house and have no debt beside the mortgage.
There isn't a blanket rule on one being better than the other so I'm not trying to say you are wrong everywhere. There are plenty of areas of the country where renting is 100% better than owning too.
All of your logic aside, housing is still a gamble and a RISK. I had a finance book in college that said housing was historically the safest investment/best investment you could make! It was published in 2006. Your paying $100 extra above renting per month towards your mortgage and into equity. What if I told you that housing prices are going to slide and your home will lose 50K in value in the next 3 years? Do you think buying was a good investment then?
Also, lets say hypothetically, you lose your job. I dont want this to happen to you of course, worst case. You get a job offer in another state, so you need to sell. How much do you think you would get? In today's market, I bet nobody would pay the equivalent of what you paid even if you just bought it a month ago. Your sort of stuck in that home now.
All of your logic aside, housing is still a gamble and a RISK. I had a finance book in college that said housing was historically the safest investment/best investment you could make! It was published in 2006. Your paying $100 extra above renting per month towards your mortgage and into equity. What if I told you that housing prices are going to slide and your home will lose 50K in value in the next 3 years? Do you think buying was a good investment then?
Also, lets say hypothetically, you lose your job. I dont want this to happen to you of course, worst case. You get a job offer in another state, so you need to sell. How much do you think you would get? In today's market, I bet nobody would pay the equivalent of what you paid even if you just bought it a month ago. Your sort of stuck in that home now.
Oh I definitely understand there are risks involved. No doubt there. My wife and I feel comfortable in our jobs but the future is always an unknown variable, no matter how certain one may feel. I certainly wasn't trying to imply that there isn't so I apologize if it came off that why. I was just trying to show that there are lots of factors involved before someone simply says that renting is better than owning and it takes 24 years just to "break even."
Now everyone's situation is different, but we personally would be able to sell our house for more than we bought it for two years ago. Now, granted, we would probably only be able to sell it for about 5% more (which would obviously be eaten by the realtor commissions) but the value in our neighborhood has gone up slightly.
We really didn't buy the house as much of an investment and more because we wanted to own. We wanted a dog and would have had to pay more at our apartment to add a dog to the lease. We wanted to be able to do whatever DIY projects we wanted and not have to be limited by renting because that is one of our hobbies. We wanted space for out of town friends and family to visit frequently (which they now do since we have room for them). I wanted space to build my own custom gym and not have to use crappy apartment gyms or pay monthly gym fees (we are saving about $75 a month now) So a lot of what drove us was there was more than just investing and I was willing to "pay" a little for those things.
We're not talking about living in the country here. People out in exurbia aren't growing their own food. They're driving to a supermarket where the food is trucked in. I have nothing against living in the country or in exurbia if you work there. I just think it's ridiculous for people to live far from their employer just for some extra square footage. But it is their choice to waste a bunch of time, money, and possibly their safety. That's what Gen-Xers do and then whine how bad the traffic is. I think the Gen-Yers are smarter than that and in a lot of cases don't want to make that trade-off.
Yes we are... There are houses there... But I guess you missed that.
As for people not having gardens and fruit trees in the suburbs...my mother does.
In a flat you have fewer options.
Oh I definitely understand there are risks involved. No doubt there. My wife and I feel comfortable in our jobs but the future is always an unknown variable, no matter how certain one may feel. I certainly wasn't trying to imply that there isn't so I apologize if it came off that why. I was just trying to show that there are lots of factors involved before someone simply says that renting is better than owning and it takes 24 years just to "break even."
Now everyone's situation is different, but we personally would be able to sell our house for more than we bought it for two years ago. Now, granted, we would probably only be able to sell it for about 5% more (which would obviously be eaten by the realtor commissions) but the value in our neighborhood has gone up slightly.
We really didn't buy the house as much of an investment and more because we wanted to own. We wanted a dog and would have had to pay more at our apartment to add a dog to the lease. We wanted to be able to do whatever DIY projects we wanted and not have to be limited by renting because that is one of our hobbies. We wanted space for out of town friends and family to visit frequently (which they now do since we have room for them). I wanted space to build my own custom gym and not have to use crappy apartment gyms or pay monthly gym fees (we are saving about $75 a month now) So a lot of what drove us was there was more than just investing and I was willing to "pay" a little for those things.
Indeed - I won't want to live with people above, below and next to me - I like peace and quiet, and having loud neighbors intrudes on that. I like being able to do what I want in my own lawn, or build a patio I can enjoy the evenings on. We've also looked at a few houses with pools - I prefer swimming in my own pool instead of using a community one. I know it's clean and what chemicals are going into it, instead of worrying about a 2 year old peeing in it or worse. I'm willing to pay for that.
When I was a kid my dad worked and my mom stayed home with the kids. we all helped out around the home with chores. If something broke my dad would fix it and we would help. If the car had a problem we helped our dad fix it. By the time I was 12 I was making my own money mowing yards, washing cars and airplanes, cleaning pools and even babysitting. Because I was the 2nd of 8 if i wanted something I had to learn how to make the money to get it. I remember helping someone clean out a garage in exchange for a bike. (Wish I still had that bike.) I took the bike that used to have a rack in the back and a light on the front, but not a light like you are thinking. It had body work where the light fixture was held onto the upper arm of the frame of the bike. I stripped that frame, rebuilt the rims, rebuilt everything else on it and ended up with a cool looking beach crusier. By the time I was 16 I could repair just about anything on my car, a car I paid cash for from money I had earned.
My dad taught me how to repair most anything. He also taught me how to build things. I can build some fine home furnishings even today.
What I am saying is that when I was growing up things were somewhat differant than they are now with 20 somethings. Many I would thing had both parents working and probably never learned how to fix a sandwich not to mention something around the house. It is just a differant world for them than it was for me. I know of friends that bought their kids every last thing and never had them do much. Maybe because the parents felt bad for having to work outside the home while there kids are home alone. Who knows.
Yes we are... There are houses there... But I guess you missed that.
As for people not having gardens and fruit trees in the suburbs...my mother does.
In a flat you have fewer options.
It's all in what you want
99% of people working in DC don't live out in the country. They live in the city, the close in suburbs or the outer suburbs/exurbs. I'll venture to say nearly none of them grow more than 5% of the food they consume. The one in the exurbs are burning a tremendous amount of fossil fuel as well as man-hours. In many cases they're spending a couple thousand a month per worker on transportation costs and uncompensated time in addition to what they're spending to drive locally.
99% of people working in DC don't live out in the country. They live in the city, the close in suburbs or the outer suburbs/exurbs. I'll venture to say nearly none of them grow more than 5% of the food they consume. The one in the exurbs are burning a tremendous amount of fossil fuel as well as man-hours. In many cases they're spending a couple thousand a month per worker on transportation costs and uncompensated time in addition to what they're spending to drive locally.
As I said, don't recall if it was on this thread or on another one... That's what ALWAYS happens.
The people who believe like this are DC (And a few others which are similar) Centric rather than considering that they are a small fraction of the world, and less than 1/300th of the country! Population in the U.S. - Google Public Data Explorer
We're not talking about living in the country here. People out in exurbia aren't growing their own food. They're driving to a supermarket where the food is trucked in. I have nothing against living in the country or in exurbia if you work there. I just think it's ridiculous for people to live far from their employer just for some extra square footage. But it is their choice to waste a bunch of time, money, and possibly their safety. That's what Gen-Xers do and then whine how bad the traffic is. I think the Gen-Yers are smarter than that and in a lot of cases don't want to make that trade-off.
Has very little to do with that. During the siege of Leningrad the starvation problem was eased by 1943 due to urban gardening. We go through enormous amounts of effort to destroy food production. Even then food is in many places despite active efforts to plant toxic ornamentals. It just does not fit into our economic models.
Often "ornamentals" are not toxic but delicious. This is aronia hard cider.
I do a lot of "wining" with wild grapes.
Its something I could learn from a boomer's grand parents, but not from a boomer.
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