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The problem with that assumption is that most people do not keep their mortgages for 30 years. I haven't checked in a while, but I believe it is somewhere around seven years. Anecdotally, I've owned seven homes since 1985 and I've never even kept the same home for 10 years, much less kept a mortgage that long. And on four of those property sales, I've made 100% or more. (Two of the other three were small gains and one was about a 12% loss.)
There's one other thing that you haven't factored in: capital gains taxes (or the lack thereof). If you've lived in high cost-of-living areas as I have, you can get up to $500k tax free when you sell your home, and you can do it multiple times over the course of your life. With stocks and other investments, the Feds are going to take 15% or 20% or more of your investment gains starting from dollar one. And then, depending upon where you live, your state and local government may want a piece of that as well. So you need to factor that in as well when comparing renting and investing the difference vs. buying a home.
The number in recent years has pushed to about 8 years before a person sold or refinanced but your point is right most don’t stay close to 30 years. I’d wonder though with rates going up will that will be a hesitation keeping some in their current mortgage longer
There's one other thing that you haven't factored in: capital gains taxes (or the lack thereof). If you've lived in high cost-of-living areas as I have, you can get up to $500k tax free when you sell your home, and you can do it multiple times over the course of your life. With stocks and other investments, the Feds are going to take 15% or 20% or more of your investment gains starting from dollar one.
Well, maybe yes, but maybe no. It all depends on personal circumstances...
There's a zero percent bracket for long-term capital gains that applies to stocks. Someone who is living on only Social Security and their stocks will likely make good use of this bracket. Some states tax capital gains, but others do not.
Also, stocks can be put into a Roth account, but a personal residence cannot.
I've lived in a rent stabilized apartment since 1994 and because of renting I've been able to invest in the stock market and experience spectacular returns on my money as opposed to having it tied up in a house where it would require constant upkeep and tax payments.
I have no desire or need for a "3000 square foot house"
you sound like the quintessential internet blowhard
You're in the 1% of people who live in rent stabilized apartments
The avg renter is getting raked over the coals right now
And you need a big place if you plan to have multiple kids and dogs. I plan to have 2 3 kids and I have 2 big pitbulls. I can't put this all into a 800 sqr foot dump
The number in recent years has pushed to about 8 years before a person sold or refinanced but your point is right most don’t stay close to 30 years. I’d wonder though with rates going up will that will be a hesitation keeping some in their current mortgage longer
It's gonna be lots of people staying in their current mortgages. I have a 2.75. I'm not gonna be paying 6 or 7%. I'll stay in my current place until I can upgrade to a bigger house cash
You're in the 1% of people who live in rent stabilized apartments
The avg renter is getting raked over the coals right now
And you need a big place if you plan to have multiple kids and dogs. I plan to have 2 3 kids and I have 2 big pitbulls. I can't put this all into a 800 sqr foot dump
You don’t need 3k sqft for 3 kids either so maybe there’s wiggle room on both sides
The avg renter is getting raked over the coals right now
At this moment, yes I agree. However, rents can stagnate for long periods of time and even drop.
People tend to get blind sided by recency bias. The experience of the past few years, with both rents and home prices rising much faster than the long-term averages, is unlikely to be the experience of the next 10-20 years.
It's gonna be lots of people staying in their current mortgages. I have a 2.75. I'm not gonna be paying 6 or 7%. I'll stay in my current place until I can upgrade to a bigger house cash
So no chance you or your wife gets job offers somewhere other than where you are located now? I guess she could be a traveling nurse and make bank
At this moment, yes I agree. However, rents can stagnate for long periods of time and even drop.
People tend to get blind sided by recency bias. The experience of the past few years, with both rents and home prices rising much faster than the long-term averages, is unlikely to be the experience of the next 10-20 years.
The avg person renting a house same size as mine will pay much much higher overall costs in terms of rental payment vs my 2K mortgage over the next 26 years. That's an absolute guarantee. Don't forget my house will likely be worth 1m+ at the end of 30 years. The renter will have nothing
You can argue about my maintenance and repairs and the rising taxes but it's not gonna be even half the difference of my mortgage vs rent scenario or the monster equity I will have at the end
The people who try to justify the rent always use some tiny place vs a big house. That's not a legitimate comparison. You have to compare apples to apples.
If you're OK with a tiny place, you can buy and own a little apartment and it will be cost controlled without rising rents for the next 20 years and still be a much better financial move
I wish I could go back 6 months. I was overly enthusiastic about paying down my newly acquired 15 year 2.49% mortgage that I put a ‘spare’ $##k towards it in the first month.
In hindsight, not only would I NOT put that extra payment in, I would have opted for the 2.89% 30 year mortgage option.
I thought I was doing myself a favor by getting the lowest rate and short term… but the tiny variation in rate between the 2 options now seems laughable, and my payment could be $500 or more less per month if it was 30-year
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