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In most areas of the country, homeownership costs more than renting. Many economists with calculators claim the opposite, but the calculations and conclusions are often highly misleading. As is often the case, the devil is in the details. We recently reviewed one highly publicized calculation that owning was cheaper than renting in almost all markets.
That calculation had a number of outdated assumptions, including:
Outdated assumption #1: Buyers put down 20%. In reality, own versus rent is a first-time buyer decision, and the vast majority of first-time buyers today make down payments of 10% or less.
Outdated assumption #2: Buyers are in a 25% tax bracket and thus save 25% of their interest payment in taxes. Today, half of all home buyers obtain a mortgage less than the median resale price of $236K, and 100% of the annual interest on that mortgage is less than the standard itemized deduction of $12K per couple, so many entry-level buyers actually save ZERO dollars in taxes. Those that itemize likely only save a small percentage of the interest payment in taxes.
Outdated assumption #3: Future home price appreciation should be included in the own-versus-rent decision. Most indices show that home prices have historically appreciated 1%–2% faster than incomes, but over a 30-year period of falling mortgage rates. Assuming you believe rates will rise or at least stay flat, price appreciation might be an aggressive assumption.
Where I want to move it will cost less to buy a home than rent a similar sized one or even an apartment.
Where my father lives the mortgage (including tax and insurance) to a new buyer on his 3/1 home is cheaper than what people are paying to rent similar places.
Home ownership costs are always less if you buy new construction as opposed to an existing older home. Everything is new and will not have associated on going repair costs over the time you live there.
Home ownership costs are always less if you buy new construction as opposed to an existing older home. Everything is new and will not have associated on going repair costs over the time you live there.
I know plenty of people who don't repair anything. And others that simply repair everything themselves which only costs them materials. Cheap!
I also know people with new homes that have on going issues. New homes tend to have more issues, because everything isnt settled yet and unknown nature factors.
Home ownership costs are always less if you buy new construction as opposed to an existing older home. Everything is new and will not have associated on going repair costs over the time you live there.
1. Window coverings $6K
2. Patios and landscaping, front and rear, $10K
3. Water table, sump pump issues, $4K
4. Water from master shower into living room, $0.5K
5. Film for window wall, $0.8K
6. Stain the fence, twice, $1K
Home ownership costs are always less if you buy new construction as opposed to an existing older home. Everything is new and will not have associated on going repair costs over the time you live there.
Right. Because after 20 years, you won't need a new roof or appliances or landscaping or..... Well, you get the picture.
If renting were cheaper the landlord wouldnt rent it to you. Over a long enough time owning is always cheaper hence why landlords can profit off of renting out a house.
Short term, renting may be cheaper. But over a long term buying is always cheaper.
1. Rent goes up every year. Mortgage payment doesn't.
2. PMI eventually goes away even if it means refinancing.
3. Eventually, the house is paid off.
4. Equity is a safety net in case you need cash. Rent is getting evicted right after a missed payment.
Right. Because after 20 years, you won't need a new roof or appliances or landscaping or..... Well, you get the picture.
You shouldn't NEED to spend that money for those items for half the term of your mortgage. Maintenance is an expense for ANY house, but starting with everything new ensures you know age and condition of everything, no surprises.
I disagree with this completely. We bought our current house brand new 7 years ago. We couldn't sell it right now for what we paid for it, partly because of the market in our area and partly because they are building new homes and people would rather have new. On top of that, we did a $50k backyard remodel that we'll assume for these purposes that we won't recoup a penny of. Plus upgrades, window treatments, routine maintenance and minor repairs, let's assume we've put $80k into this home since we bought it. Let's further assume that we could sell it tomorrow at a $100k loss after repairs (which is conservative based on comps) plus 6% to the realtors and some cash towards new carpet or whatever to get it sold.
Okay, so if I take that total loss... Meaning every single penny that we put into this house since the day we bought it (excluding utilities), but including property taxes and mortgage interest less the value of the tax savings on these two, after the sale... it has cost us less than $1,900 per month to live here. To rent our house (again, I looked up similar houses for rent in our neighborhood) it would cost about $2,000 per month. And almost all houses our size that are rentals require the renters to cover all landscape maintenance and routine repairs (but we're ignoring this for simplicity, even though I added them back above).
So even with taking a substantial loss on selling our house, we still are out of pocket less per month than it would have cost us to rent the house for the exact same period of time. Meanwhile we got to do whatever we wanted with the house. There were no restrictions on paint colors or pets or having an in-ground pool installed for great parties.
Yes, eventually we will need a new HVAC and a new roof and whatever other repairs, but our home value will also increase a little bit each year and rent prices will increase too. Plus as long as we don't have any other major issues, our monthly "rent" to ourselves should be more than enough to cover these system replacements by the time they are needed without changing the math to make it better financially for us to have rented instead. Plus, again, we get to enjoy our home our way on our terms.
So while I would never ever look at my home as an investment, it is a great place to live and raise my kids without being out of pocket any more than I would have been if I rented and had to live by someone else's rules.
You shouldn't NEED to spend that money for those items for half the term of your mortgage. Maintenance is an expense for ANY house, but starting with everything new ensures you know age and condition of everything, no surprises.
In some markets a new house is hundreds of thousands of dollars more expensive for even a starter home. In these cases, buying new is more expensive than used even with considerable repair.
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I call BOGUS
