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i wouldn't say no one but perhaps a whole lot less than do. i know quite a few who got themselves in financial trouble buying when they knew their marriage was headed south or they had major expensive health issues.
I am likely a lifelong renter. I strongly disagree that owning is more logical. Historically, a residential property has returned about 1% above inflation, after factoring in all the costs of home ownership (homeowners rarely do). Equities return 7-9% above inflation. A renter who has the discipline to invest in the markets will likely acquire greater net worth than a similarly situated homeowner. In my own case, that has definitely proven to be the case.
It's not quite that bad - the imputed rental 'dividend' yield, net of non-capital expenses, is about 3 or 4% a year, and the price keeps up with inflation. Still not as good as inflation + 8% from stocks, though.
ownership of a home eventually has little to do with net worth and everything to do with cost cutting.
comment after comment from folks who finally reached retirement have stated what let them retire is not the fact their home was worth a 100k ,500k or a million.
if you are living in it the value really means little. many folks do not downsize if they are happy, many have no interest in reverse mortgages , the NAME OF THE GAME FOR RETIREES IS COST CUTTING SINCE INCOME IS LIMITED.
just about every comment about ownership is that it cut their cost of housing low enough so they can make do with a whole lot less income.
while renters like myself can invest elswhere, get better returns and have an eventual higher income to cover the higher costs of renting few actually have the knowledge or discipline to do so.
paying off a home for most of america would be the best route.
i am also the biggest defender on city data of the fact renting may not be about throwing away money. in fact it may be the best way to grow money ,but the fact is few americans are capable of pulling it off long term.
The cost cutting is the same thing as the value - if the market is sensible, the price should be close to the present value of all future rents, net of non-capital expenses (tax, ins, maint, etc.)
You are comparing the investment rate of the delta between renting and owning, and are ignoring the cost of renting all together. The home will still be worth a certain amount of money when you die and leave it to your kids, the renting will not. Also its hard to compare the delta between renting and owning as some apartments can cost more than a home, and some homes can be lemons where others rarely have problems.
while we see eye to eye on that the truth is the majority of renters neither have the skill or long term discipline to invest the money not put in the house elsewhere.
soooo they end up with a reduced income at retirement from lack of what should have been substantial assets in investments and are faced with the potential for higher housing costs.
while the homeowner had a huge sum tied up in the house they can generally make due with less income from less investments and lower housing costs.
like i said every single retiree discussion about the effect of a paid off house on their ability to retire says the same thing.
the fact their homes are paid for enabled them to retire and make their level of income work so they could retire.
think about it.
That doesn't mean, of course, that those who DO have the discipline and the know how on the investments should actually see 'lower housing costs after retirement' as an "advantage" of buying a house over renting and investing the difference. Rather, the retirees that say the paid off house helps are either ignorant of the math or are openly confessing a lack of investment discipline or know-how (and yet don't feel embarrased to make that confession).
whatever the reason , you will hear 90% of retirees say they retired because the home is paid for and their income now fits the budget they need to make it work..
it could be many reasons for the way it plays out but you will see it it in every forum that pertains to retiring.
The cost cutting is the same thing as the value - if the market is sensible, the price should be close to the present value of all future rents, net of non-capital expenses (tax, ins, maint, etc.)
it never works out so clean. it is no different than saying a stock should be worth its current BOOK VALUE plus future income.
The future value of anything trades more on perception of the future than anything else. since no one knows the future the value just floats.
I have been reading this thread and does your argument hinge on renting being significantly cheaper than buying? If they are equal are you saying you can invest money differently (instead of dumping it into a mortgage payment) because of the added costs of home ownership (maintenance etc...)?
I just am a bit lost. If it costs $1000/month to rent or $1000/month to pay a mortgage plus all other fees (taxes, insurance etc...) then where is the extra money coming from that you are earning a greater return off of? Wouldn't you still be able to invest the same (income - expenses which includes $1000 for living expenses in either scenario)?
Perhaps I'm missing something?
Renter could have been investing monthly earlier instead of saving for a down payment. In other words, rent and invest, VS rent and save and then pay mortgage, taxes, ins, maint, etc.
The renter starts the compounding much sooner. The prospective owner would be keeping the down payment savings in cash and earning zilch on it in the bank. The long-term renter can be earning more on it in the stock market.
whatever the reason , you will hear 90% of retirees say they retired because the home is paid for and their income now fits the budget they need to make it work..
it could be many reasons for the way it plays out but you will see it it in every forum that pertains to retiring.
Those are the same 90% of people that would spend the difference while renting rather than investing it, I'd venture to say...
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