An illustration of labor force growth in the Pittsburgh MSA (a.k.a. what a "dying" MSA does not look like) (apartment, to rent)

[ML North]

Originally Posted by Moby Hick

I certainly agree about the cost of ownership being lower than renting. That's the reason to buy here.

I think it varies from person to person. A major, although mostly overlooked, cost of ownership is opportunity cost, or what else you could have done with your money instead of buying a home. That cost is unique and will depend on things like income, family size, benefits, geographic area, career changes, etc., so it's possible that two people earning the same income and considering the purchase of the same property should take different courses of action.

[Katarina Witt]

Originally Posted by ML North

Birth rates in the US -- and in nearly every other developed country in the world -- have been falling for hundreds of years, with the brief exception of the baby boom. It's a sign of prosperity; people no longer need fifteen children to help with the farm.



Boo.



I don't see that as necessarily a bad thing. Homeownership is generally a mediocre financial investment, but it's one of the only asset classes in which our parents' generation has any significant wealth. Baby Boomers have very little amounts of cash and securities. Perhaps primary residences will comprise a slightly smaller portion of our generation's wealth, and I think that may be a good thing.

What great wads of cash do you millennials plan to amass and how? Home ownership is probably as safe an investment as a lot of other things, plus you get a tax deduction on your mortgage and taxes. My parents and in-laws both sold their houses to pay for their living expenses in their very old age.

Originally Posted by Moby Hick

Because it costs nothing to own a house after you've paid off the note. Completely free. Especially houses where you can pay off the loan in 10 years at $700/month. Those are the houses with the lowest maintenance costs.

You sound like my mother, and I'm only partly kidding. She used to go on about how owning a home still cost money after it was paid for b/c you had to pay taxes, upkeep, yada, yada. Well, yeah. You're paying that while you pay off the mortgage, too. As SCR says, rent goes up, every year, or at least every other year. In many states, the renter does not get the benefit of the property tax deduction.

[Katarina Witt]

Originally Posted by ML North

I think it varies from person to person. A major, although mostly overlooked, cost of ownership is opportunity cost, or what else you could have done with your money instead of buying a home. That cost is unique and will depend on things like income, family size, benefits, geographic area, career changes, etc., so it's possible that two people earning the same income and considering the purchase of the same property should take different courses of action.

Unless you're going to pitch a tent somewhere, you'd rent a home instead. Next question.

[ML North]

Originally Posted by Katiana

Unless you're going to pitch a tent somewhere, you'd rent a home instead. Next question.

Rent + invest in stocks, rent + invest in other real estate, etc. Or rent a 2 bedroom for 5 years and then a 1 bedroom for 10 years, or rent in one neighborhood and then move to another to facilitate a change in family situation. There are countless possibilities and combinations of possibilities.

[Katarina Witt]

Originally Posted by ML North

Rent + invest in stocks, rent + invest in other real estate, etc. Or rent a 2 bedroom for 5 years and then a 1 bedroom for 10 years, or rent in one neighborhood and then move to another to facilitate a change in family situation. There are countless possibilities and combinations of possibilities.

You still have to pay for housing. In some cases, first and last months rent plus security deposit can come close to a down payment. I agree renting gives you more flexibility in housing, but you still have to pay to live somewhere! Most people do not invest their money, they spend it. I am always shocked when I hear these stories, usually on NPR, about how the "average" person has less than a certain amount of money (often a few thousand) saved, or couldn't come up with a couple thousand in 30 days.

[ML North]

Originally Posted by Katiana

What great wads of cash do you millennials plan to amass and how?

Well hopefully by making careful decisions based on known facts, analysis, and objectives as opposed to relying on vague, possibly outdated dogma (i.e. "always better to buy than rent"). But I can't really speak for anyone other than myself.

Originally Posted by Katiana

Home ownership is probably as safe an investment as a lot of other things, plus you get a tax deduction on your mortgage and taxes.

If by "safe" you mean that probability of losing a non-inflation adjusted principal than maybe. By any other definition it's going to depend on individual financial and lifestyle circumstances. But simplified, general rules of thumb aren't any more reliable than chance.

Originally Posted by Katiana

My parents and in-laws both sold their houses to pay for their living expenses in their very old age.

That's great, and I'm happy for them, but they could have probably done the same thing and perhaps had even more money if they held a different mix of investments. Or maybe not, but again, it depends on where they lived, how much they earned, what type of property they owned, and so on.

[ML North]

Originally Posted by Katiana

You still have to pay for housing.

In most cases, yes, but the relative amounts and relative performance of different combinations of investments is not just a binary thing. Anyway, we shouldn't even be debating this -- opportunity cost is a pretty well documented concept that is accepted by like every economist in the world.

[Katarina Witt]

Originally Posted by ML North

Well hopefully by making careful decisions based on known facts, analysis, and objectives as opposed to relying on vague, possibly outdated dogma (i.e. "always better to buy than rent"). But I can't really speak for anyone other than myself.



If by "safe" you mean that probability of losing a non-inflation adjusted principal than maybe. By any other definition it's going to depend on individual financial and lifestyle circumstances. But simplified, general rules of thumb aren't any more reliable than chance.



That's great, and I'm happy for them, but they could have probably done the same thing and perhaps had even more money if they held a different mix of investments. Or maybe not, but again, it depends on where the lived, how much they earned, what type of property they owned, and so on.

I don't want to get into my parents' personal finances, even though both are long gone, but suffice it to say they did both. It is doable.

You seem very sure of yourself. Get back to us in 30 years.

[ML North]

Originally Posted by Katiana

You seem very sure of yourself. Get back to us in 30 years.

I'm not sure of anything, all we can do is try our best and hope that luck is on our side. But seriously what alternative are you suggesting, that we should all just listen to you?

[sealie]

I think one thing supporting what ML North is saying is that people are willing to rent small apartments at $700 but as soon as they buy, on average, people want a freestanding house with a yard and a garden and a dog and they want updated interiors. Easily their housing costs double as soon as they buy rather than rent. This never shows up in the calculations. They could keep renting and invest the remaining $700/mo.