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Every market is different. People need to sit down and do the math. What worked for Grandmaw, might not work for you. Renting can be a better financial move in a lot of situations.
Don't buy a house because you're ___ years old or because "it's time to settle down" or because "I have a kid, so..." Signing up for a 30 year mortgage doesn't mean you've 'made it' or finally 'grown up'. All it means is that you've agreed to take on a monumental amount of debt.
repeat after me children: single family homes are not investment vehicles.
PERIOD.
home prices don't actually appreciate over the long term (averaging only 0.3%). values are merely a function of unemployment, interest rates, etc. they're an atrocious return on investment.
at the end of the day, who wants to be tied up in an illiquid asset that generates zero cash, wasn't purpose-built to make money, has ongoing maintenence costs, large acquisition/transaction fees, etc? plus you have very few entry/exit points since you're at the mercy of the market. it's laughable.
in the long term, renting is a FAR better option if you didn't flunk out of economics 101.
i'd rather pay a tiny fraction of ownership costs out of pocket in rent, let someone else worry about fixing things, and invest my capital elsewhere and get a real return: in a business, stocks, commercial real estate, etc.
Thats exactly why we got into a mess. People thought they could make quick bucks off of home investment.
I think home prices should at least equal the note and appreciate over time.
However, no matter what one does to the house, other outside forces can actually determine the price of the home. I think a better investment is getting with a financial advisor and investing into a balanced portofilio.
We could never rent a space as nice as our paid off home for the little amount it costs us to live here.
My house isn't paid for and I'm still living more cheaply by owning than by renting. Renting a house this size would cost twice what I pay in my mortgage, 25 percent more when you figure in property taxes and maintenance/repairs.
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Originally Posted by Niceguy17
I don't know why people insist on either thinking it's stupid to rent or stupid to buy.
Those that do cannot see beyond their own noses. Ignore them.
I think where this conversation breaks down comes from the different meanings people ascribe to the word “investment.”
The first thing most people think of when they hear that word is straight-up buying something so that you can sell it when it is worth more money. For example, if I buy a stove for $200 from an appliance company that is going out of business and then turn around and sell that stove to someone else for $500, that means I invested the $200 in a very small-scale appliance resale venture. This is the main function of the stock market: if I think google will be worth more tomorrow than today, I go out and invest in the stock today.
Another form of investing is related to minimizing losses. Imagine that I have no kitchen in my place of residence. I am then required by circumstance to buy all of my meals at restaurants, say for a hypothetical cost of $20 per day versus a hypothetical cost of $10 a day for home-cooked meals. I could buy that same stove mentioned above at the going rate of $500 as an investment in my ability to feed myself. In this scenario the stove isn’t actually making me money, it is just costing me less than the alternative. I wouldn’t expect to sell the stove for a profit in the future, but that doesn’t mean it was not an investment.
Owner-occupied real estate falls into the second category. Owning your own home is a way to combat rising rents, and after 15/30 years when the home is yours outright, the cost of your housing diminishes significantly. The problems start happening when people view their personal houses as category #1 style investments. They want to buy and then later sell for a huge profit. Sometimes it works out that way, but it is not something to count on.
I bought my house 2 years ago. There is no doubt in my mind that in my own personal circumstances it was a great investment. In 28 years (hopefully sooner), the mortgage will be paid off. At that point I will hope to have another 30 years of housing paying only for taxes and upkeep on the property. If I were to sell it 50 years from now for the exact price I paid—adjusted for inflation—I would consider that a great investment because it covered my housing needs for all those years with less money out of my pocket than other options. Even if the resale value somehow depreciated to zero 50 years from now, I would still consider it to have been a great investment for the exact same reason. I do not and have not ever viewed my house as a cash cow. As chance and market forces have it, I bought during the month that experts later determined was the very bottom of the market. Things have picked up a lot since then, and I realistically believe that I could sell my house today for a profit of at least $30,000. But I would still need somewhere to live. The cash value of my house means very little to me. If I sold today, I would either have to rent different accommodations at a higher monthly rate than what I currently pay, or buy a different house that would also have appreciated similarly to mine, thereby wiping out the “profit.”
Last edited by StPaulGal; 04-23-2014 at 04:29 PM..
This shall always be a perennial controversy. For people who regard their domicile as a "home" – a place to nest and to personalize – the merely financial considerations are moot. Barring pathological distortions in the housing market, they're better off buying. Otherwise they deny themselves the piece of mind and psychological comforts that they crave. For people who regard a house as a box where they lock themselves, in those brief periods of time when not working or traveling, well, the whole home-ownership experience is rather insipid and burdensome.
Fans of the "Breaking Bad" series might recall mention of the place where the protagonist buried his $80M in cash, in barrels in the desert, as his "real home". Well, I don't have $80M, but I actually do think of my investment portfolio as my "home", and my physical house as a box into which I crawl some nights (those nights that I'm not in a hotel). Alternatively, my office is my home… where I find most of my friends, and my books, and a coffee-maker, and my lab, and the gym nearby, and high-speed internet access.
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Originally Posted by glamatomic
ghettoivory: I'm not sure where in the U.S. you are located, but in a lot of areas throughout this country, home ownership is considerably cheaper in the long term than renting all of your life.
...If we stay in this house ... we will spend,... $389,000
...If we were to rent an almost identical house... that's $702,000 down the pan.
Owning a single-family house over the long term, vs. renting the same house, would indeed in most markets give the nod to owning. But this isn't really a fair comparison. The more fair comparison is renting a small apartment in a high-rise, and all of the lifestyle choices and budgeting issues that that entails, vs. buying a large-ish house on a large yard in the suburbs, and the lifestyle choices and budgeting issues thereof.
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Originally Posted by skiffrace
...you enjoy that asset while gradually acquiring it. Do your stocks and bonds certificates provide warmth, comfort, convenience and freedom the way a house does?
Some people might enjoy their houses, but mine is an incessant source of headaches, stress and self-recrimination. But stocks and bonds? They accord me a feeling of accomplishment and satisfaction.
Quote:
Originally Posted by skiffrace
owning a house gives you a stake in the society: your block, neighborhood, city and country.
Yeah. I live where I live, because my job happens to be here. I feel zero kinship with my "community". Owning a house forces me to subsidize the local community through taxes that I would not be paying as a renter. If you enjoy your community and regard yourself as a participatory member thereof, by all means buy a house. But suppose that you're deployed to Afghanistan. Would you buy a house there? I live in Ohio, but to me it feels like Afghanistan.
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Originally Posted by MJ7
Sure, someone can always change the cosmetics and appliances and flooring in a home, but you can't go in and fix the structural integrity of the walls and foundation.
... most invests do not require constant maintenance and could careless about style/deterioration of the "asset".
Exactly! Due to leaks, the structural integrity of my house is failing. That means $$$ in repairs, just to return to the original sales-price. That's typically not a problem with an S&P-500 index fund!
Quote:
Originally Posted by skiffrace
...
Based on your post, I also assume that you not only don't own a house, but don't hold any financial investments, either. If you did, you'd know that
A) Financial investments require constant care and attention to be successful.
B) They can deteriorate very, very badly, sometimes all the way down to $0.
I disagree. Bovine-oblivious buy-and-hold does fairly well. And sufficiently broad equity investments will deteriorate sharply only over brief periods, whereupon they quickly recover. If you sold your stocks in 1932, 1974, 2003 or 2009, you probably should not be investing. If you bought an index-fund in 1970 (assuming that such a thing was available back then) and completely forgot about it, you would have done very well indeed.
In fact, the beauty of equity investing is precisely that according "constant care and attention", for most people, tends to REDUCE their rate of return! The more one neglects his investments, the better they perform. Now try that with a house….
Owning a single-family house over the long term, vs. renting the same house, would indeed in most markets give the nod to owning. But this isn't really a fair comparison. The more fair comparison is renting a small apartment in a high-rise, and all of the lifestyle choices and budgeting issues that that entails, vs. buying a large-ish house on a large yard in the suburbs, and the lifestyle choices and budgeting issues thereof.
I'm not sure why you don't view this as a fair comparison. If somebody is at the point in their life where they want/ need a SFH (ie: they have children, or are just sick of apartment/ condo living) then to compare a SFH with an apartment / condo in a highrise is comparing apples to oranges.
I really enjoyed apartment living when I was younger and single, but I choose not to raise my children in an apartment setting. Also, my DH loves having his garage for his cars and projects.
Therefore, I believe that the fairest comparison is renting SFH vs buying SFH... or renting an apartment vs buying a condo.
Yeah. I live where I live, because my job happens to be here. I feel zero kinship with my "community". Owning a house forces me to subsidize the local community through taxes that I would not be paying as a renter. If you enjoy your community and regard yourself as a participatory member thereof, by all means buy a house. But suppose that you're deployed to Afghanistan. Would you buy a house there? I live in Ohio, but to me it feels like Afghanistan.
I have to quibble with the bolded statement above. Wherever you live, you are paying the property tax. Period. Whether that be through a direct payment to the local government or through in intermediary via your landlord, you are paying it. Landlords are not in the business of subsidizing your costs of living--they rent out property because the payout exceeds the input costs.
Location: Winter nightime low 60,summer daytime high 85, sunny 300 days/year, no hablamos ingles aquÃ
700 posts, read 1,500,212 times
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Quote:
Originally Posted by ohio_peasant
.. Well, I don't have $80M, but I actually do think of my investment portfolio as my "home"
What is your investment portfolio composed of? Stocks and bonds. Where do well-performing stocks and bonds come from? From well performing, solid companies. Think GE, not Bernard L. Madoff Investment Securities LLC.
How do those well-performing companies happen? They are created by honest, solid and hard working men (and women) whose strength and inspiration comes from the people around them: their family, friends and their community. That my friend, is the essence of home, not abstract pieces of paper.
The tree-lined, 2-story colonial surrounded by white picket fence is the physical manifestation of the 'home' idea.
Quote:
Originally Posted by ohio_peasant
... Alternatively, my office is my home… where I find most of my friends, and my books, and a coffee-maker, and my lab, and the gym nearby, and high-speed internet access.
Ditto here. You can safely and enjoyably circle between your office, your lab and your gym because someone considers those places as his property, and cares for them. That is again the definition of home.
Quote:
Originally Posted by ohio_peasant
... I feel zero kinship with my "community". Owning a house forces me to subsidize the local community through taxes that I would not be paying as a renter
... I live in Ohio, but to me it feels like Afghanistan.
This is the essence of your problem! I know nothing about Ohio, but if it's so bad as you claim, then no wonder you haven't developed any kinship there. Perhaps it's time to move...
Home ownership is great if u stay out of debt unfortunately equity borrowing for stuff u don't need or useless college degrees is
the new American pastime
Last edited by Huckleberry3911948; 04-23-2014 at 08:36 PM..
Yes, homes are great long term investments. Short term? Sometimes yes, sometimes no. But land will always increase in value over time -- compare homes every, say, twenty years... I'm sure you'll find they were always more expensive in the later time.
This isn't always the case. It's fairly easy to find homes that haven't appreciated in 20 or more years if you know what you're looking for. Specifically large exurban or rural homes far from job and population centers. In these properties depreciation of the structure can mitigate any gains in underlying land value.
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