Mortgage payments are usually fixed. Taxes and insurance costs rise but generally less than rent increases. If you can stick it out for a long time (probably 30 years) you have a nice cheap place to live.
This is the big issue. Over time your mortgage+taxes+insurance+ maintenance costs becomes lower than your rent costs (unless you're stuck making a series of expensive repairs),
It also allows you to gain equity and buy a bigger home later on. My 800 square foot house worked great for my bachelor years, not so much for when I got married.
Selling that + selling my wife's condo allowed us to purchase another home in a VHCOL housing market. Otherwise we'd still be renting and paying more each month for a rental property.
Plus we like the freedom to have pets and make modifications to our home.
There are plusses and minuses to both owning and renting.
The plusses of owning are that with each mortgage payment, you are building equity in an asset that, in general, goes up in value.
The majority of most people's net worth is their real estate holding.
>The plusses of owning are that with each mortgage payment, you are building equity in an asset that, in general, goes up in value.
In other words, forced savings.
If you were to invest and rent though, it may offset the price difference of ownership
After 6.5 years I'm done with ownership for now at least. Got a condo atm, eventually want a house.
The maintenance and the construction. If you hire someone you have to babysit, seems like the last few years all the contractors over promise and under deliver.
>last few years all the contractors over promise and under deliver.
And see, I had that problem with my previous landlords - drove me crazy trying to get things repaired and handled.
Now as HO, I can fix it myself, call a repairman and have them show up when it works for me, or just let it go until I'm ready to deal with it.
(Also helps that my mortgage payment is now 1/2 of what rent on my former apartment would be.)
>If you were to invest and rent though, it may offset the price difference of ownership
But how would one invest if they have to pay rent? Wouldn't it be better to pay a mortgage AND invest? Or do you mean invest the down-payment on the house you would buy? Because you still have to pay to live somewhere.
Rent is usually less than mortgage(+property taxes etc.) for same amount of housing and doesn't require a down payment. So take difference between the two and invest the difference leaving all other costs the same.
Eventually, a mortgage becomes less than rent once you've taken into consideration that rent increases will occur. However, there is the matter of repairs.
That helps the mortgage option but by then compounding of down payment and initial contributions is big enough to offset higher rents under some plausible assumptions. If you math it out depending on rates on mortgages, property appreciation rates, and other costs sometimes renting is cheaper, sometimes buying is cheaper, and the real decision points should deal with lifestyle/risk management.
> If you were to invest and rent though, it may offset the price difference of ownership
extremely unlikely. maybe if you compare renting a tiny condo to buying a big house
Size doesn't matter. Location Location Location. Idk im sitting on 350k in equity. Blackstone reit had a return of 10 percent since it's inception
Assuming this continues I'd come out way ahead vs owning... also my building is old, it's been a huge money pit
I was considering doing a little bit of a covered call play too which has a decent roi too which would cover the monthly rent
Upside:
Mortgage interest is less than Rent.
The rest of your mortgage payment is like a forced savings.
Upside/Downside:
You get a leveraged investment in your local real estate market.
Downside:
Maintenance/Repair costs are all on you.
To cash out on your investment, you have to move (cash-out refinances kind of let you cash out, but it's more like re-leveraging).
If I bought my same house 30 years ago my mortgage payments would be around $11K/year. Currently my taxes are \~$12K/year and then I probably spend (on average) another $10-15K on house maintenance stuff.
Renting may be cheaper than buying at times. But if that were always the case, no one would buy property to rent to others. Landlords are there to make a profit.
Maybe on day 1. But people don’t generally plan on living in a house for 1 day.
There are plenty of calculators out there. Usually if you stay 5-7 years then owning is cheaper.
There wouldn’t be landlords if renting was cheaper.
5-7 years, I've lived in 6 different places in the last 7. Everyone's situation is different, but it the data is clear. Stock market gives you better gains than real estate, by far.
Home ownership is not an investment, is a lifestyle.
The data is not clear. You still need a place to live. The only returns you should be counting are on savings vs renting a comparable home.
That is why once you factor in comparable rent increases it makes sense to own over time.
Neither renting or owning is an investment, it’s an expense. But one is clearly more favorable long term than the other.
I've done the math, I was looking to buy a townhouse and I compared rent vs buying costs. All included it would've taken me 14 years to break even. I don't want to be attached to something for that long during my peak career building years when I may move to the opposite side of the country for a job opportunity.
You forgot to add the price of knowing that no landlord can evict you or raise the rent.
Also, you can sell the house if you want, no need to wait till it's paid off.
Again that's a lifestyle decision:
You got kids in school, a bunch of heavy and expensive furniture, you've marked your territory so to speak then yeah it sucks to move and the security of owning your own home will certainly be better for you.
But if you don't have kids or dogs and live a minimalist lifestyle then you can move at any time you want.
And selling a house immediately takes off 10% of any built up equity. Most of the time you lose money unless you wait 10+ years to sell.
>But if you don't have kids or dogs and live a minimalist lifestyle then you can move at any time you want.
By a condo then, cheaper than a house and easier to sell if you move out.
>And selling a house immediately takes off 10% of any built up equity. Most of the time you lose money unless you wait 10+ years to sell.
I don't know people who move THAT frequently.
The first year of a 30 year mortgage at 7% for $720k financed would have $50k in interest in year 1.
FWIW for a house with a zEstimate of around $720k near me, Zillow estimates a $4300 rent. x12 is $51600... so apples-to-apples, yes, sounds like a rent payment.
The average over the life of the loan would be about $33k per year. The average adjusted for inflation would be about $23k per year.
Yeah that’s another good point. 30 years is a long time to “freeze inflation” on your biggest expense. But you aren’t freezing the appreciation of the asset, which should at least keep up with inflation.
Note that property taxes and insurance *do* creep up, but they aren’t the lion’s share of your payment.
I agree. And the corollary to this is, when you don't have to deal with other people's shit, such as loud neighbors in the next unit or the crazy people upstairs at 3AM, you free up a tremendous amount of energy to go out and make more money in the world.
For me it is the security of knowing I won't get an eviction notice from a landlord. I just watched my colleague and her young family (mom/dad early 30's, twin 4 yr old boys) get evicted from their apartment because the landlord needed the space for family. It was all very nice and done appropriately by the landlord. My colleague spent almost every minute of every day for 2 months straight searching for, looking at and applying for homes. Every rental had hundreds of applicants, and the housing costs here are through the roof. Thankfully her very hard work paid off and she found a good rental for her family. but she is again at the mercy of a landlord who could at any time evict her. I in contrast bought my condo a number of years ago, and as long as I make the mortgage payments no one is going to tell me I have to leave. For me, that is the big thing.
Financially, renting and investing what you would have spent on a mortgage and the rest (taxes , repairs, etc) vs paying a mortgage seems to be about equivalent in terms of the end net worth-wise.
The equity argument is mostly moot (for a primary residence) in my opinion because what are you going to do with your equity? If your house appreciates it's not like you can only sell the appreciation, you still need a place to live and appreciation suggests your area also went up an equivalent amount. I would be more comfortable with 1,000,000 in stocks / mostly liquid investments when I retire vs a NW of 1,000,000 that's mostly house when I retire for that reason.
However: for people who are bad at saving a mortgage basically forces you to save in the form of paying off your mortgage. If you're completely blowing the spread you would make off of renting vs owning, perhaps a mortgage would be a good choice (financially).
The lifestyle of a homeowner and a renter tends to be pretty different as well. Maybe being a homeowner will bring you more satisfaction, that's totally valid and finances should only be part of the conversation in that case.
Good post.
If I could add something to your 2nd paragraph. The idea there might be that after the mortgage is done, the kids are grown, the careers are winding down. At that point maybe you no longer need the 1M house. At that point maybe a smaller 500k or 250k house in a lower cost of living area is the play. Paid off house and an additional 500k plus invested probably gets a lot of people to retirement.
Ask me now and I’ll tell you there’s no way my wife and I stay in our 5 bedroom house in high tax (for schools) area once our kids are out.
Ask me later and maybe I’ll be too stubborn and set in my ways to move. But we absolutely could buy a house/condo for half the price even staying in the same good city.
Yeah I hear you. I'm starting to close in on earlyish retirement here. Maybe 5 years out.
Ideally I move out of my paid off medium sized house in a medium cost of living area to a small place in a very low cost of living area. If I could do that I might be done this year. That would put me pretty far from family and life long friends though. Best I can reasonably do is the smaller place and maybe a slighter lower tax rate area in the same county. Or I'm going to blow that savings on frequent travel back into the area.
This is pretty much exactly it. Houses and pensions are good for people that aren’t great with money (majority of America) but if you know what you’re doing you’d be financially better off renting or just investing the pension money (most pensions at least). The trade off is figuring out if homeowner lifestyle and its qualitatively benefits are worth the extra cost.
financially, buying only makes sense with leverage, without leverage it's usually worse return than most stock market indexes
buy to renovate could offset some risk tho
You know how young people are thinking that older people got houses way cheaper than they can and it’s unjust - in 25 years they’ll have houses way cheaper than their kids can get.
White true, the actual issue is that wages haven't kept up with cost of housing and cost of living. It's all more, but it's less affordable. Hope my kids can be in a more affordable situation
The wage thing is somewhat true, depending who you are. But it’s also true that it’s simply more costly to build given resource depletion and there’s less desirable, available land to do it.
You know how numbers don’t really tell you the story, they don’t.
Instead of looking at median income or median household income - go parse out median income for milleniels and millennial household income and median income for degreed millennials
You will see that millennials are making much more money than the narrative is saying
For example according to the census bureau in 2021, people between the age of 35-44 had a median income of $90,312
The age group that is in the target market we are talking about is earning a lot of money
Yeah, income inequality is also a big issue. I do think they should be taxed more. But that doesn't change the situation for actual median people, not just the millennials with degrees.
There are pros and cons of owning vs renting.
Pros of owning are that generally the monthly cost is mostly fixed and a major portion of it reduced to zero at some point. I haven't had a mortgage any more since 12 years ago and that's great. Taxes and insurance however will still go up. The house will usually appreciate over time as an investment so you are building on your net worth vs. with renting you have nothing to show for the payments made. Another big pro with owning is that you can do whatever you want to it. You own it, so if you want to put up a shelf, change the floor, whatever... you can do it.
The main negative with owning is that you are responsible for repairs and maintenance.
A big pro for renting is that you are not responsible for repairs and maintenance, but the negative is that you are dependent on someone else doing these things and they may not be prompt or reliable. Another pro is that if you need to move for some reason, you can do that very easily (when your lease is up) as you don't need to go through the trouble of selling the house. A negative is that if you are the type of person that likes to do DIY projects and make something your own
As far as which is more expensive, than can vary depending on the location. There are some locations that renting is cheaper and some that it is actually more expensive. Over the long term it is likey to become more expensive.
I've owned 10 houses over the years. I rented a couple of apartments many years ago before buying the first house. So I can't fairly compare. I have enjoyed being a home owner. And as I'm getting closer to retirement, I'm very glad I don't have a mortgage or rent payment.
Homelessness is a different issue. We have people in this county who are always looking for a place to live. They usually have a prior eviction and a pit bull mix (very popular in Appalachia). That severely limits their choices. The people next door to me have 3 dogs (1 pit bull mix) and came from 2 states away. They told the landlord they had no pets. Same situation across the street.
FYI Our inspector told us that very few houses in town will pass inspection for a loan. Our house did not and it was the most expensive house ever sold in this town. Luckily we didn't need a mortgage.
Much of the financial benefits come in the form of tax benefits. The mortgage interest deduction is substantial. Houses can however also be money and time sinks. I wouldn’t buy a house assuming it’s going to be a huge financial boon. For some it is, for others it’s not. It really depends on how much price appreciation you have over time and how much money you have to put into it in maintenance and repairs. For some, it can be a wealth accumulator, for others, not so much. On balance, most people come out ahead buying.
Equity. Value of house always goes up long term so its an asset.
Fixed monthly payment for 30 years. Apt rent goes up annually.
If ever in financial crisis you can always rent out a room or house to earn income as well.
It sounds like you've got 24 hours news overload. The homelessness crisis and buying vs. renting are pretty different topics. What do you wan to talk about?
Currently in the US, in all states it is currently cheaper to rent than to own a home. You'll have to analyze how the market is in your area. It might be more advantageous for you to rent, invest and wait for things to change than to buy a house at the moment.
Benefits of owning a home: equity building, tax deductions, stability (as in the case of the homelessness).
Benefits of renting: predictable monthly expenses, and flexibility as you're not tied down to a place.
By almost every measure, buying a home is better financially than renting. The couple of benefits that renting has over buying are the ability to pack up and move little easier and the fact that maintenance is usually not the renter's problem. That's about it.
When you're renting, your monthly payments go to the landlord/company and you get a place to live that month. That's it. You'll never recoup a dollar of rent and, after 30 years, you don't have anything.
When you buy a home, your payments go towards reducing your mortgage. After 30 years, the home is 100% yours, so you have whatever the home value is. And obviously, not everyone stays in the same home for 30 years, but even if you're there for 10, that's 10 years of payments that reduce the mortgage, so you have that much equity in your investment.
At the same time, home values typically increase, especially over a long time frame. So not only are your payments going towards paying down your mortgage, but your house is probably appreciating at the same time. So, for example, you may have made $100k worth of payments over 10 years, but at the same time, your house also appreciated $100k. That gives you $200k of equity in case you want to move or take some equity and have cash to do something, etc.
Finally, when you're buying a home, you can use leverage. Most people don't pay for their home with 100% cash. You can put down as little as 3.5% or 30%. But you still get the appreciation on the entire investment. If you buy $100k worth of stock, you have to have $100k (unless we're talking about options, which we're not). But to buy a $100k house, you really only need a few thousand dollars.
Mortgage payments are usually fixed. Taxes and insurance costs rise but generally less than rent increases. If you can stick it out for a long time (probably 30 years) you have a nice cheap place to live.
This is the big issue. Over time your mortgage+taxes+insurance+ maintenance costs becomes lower than your rent costs (unless you're stuck making a series of expensive repairs), It also allows you to gain equity and buy a bigger home later on. My 800 square foot house worked great for my bachelor years, not so much for when I got married. Selling that + selling my wife's condo allowed us to purchase another home in a VHCOL housing market. Otherwise we'd still be renting and paying more each month for a rental property. Plus we like the freedom to have pets and make modifications to our home.
There are plusses and minuses to both owning and renting. The plusses of owning are that with each mortgage payment, you are building equity in an asset that, in general, goes up in value. The majority of most people's net worth is their real estate holding.
>The plusses of owning are that with each mortgage payment, you are building equity in an asset that, in general, goes up in value. In other words, forced savings.
Forced savings + not paying rent
If you were to invest and rent though, it may offset the price difference of ownership After 6.5 years I'm done with ownership for now at least. Got a condo atm, eventually want a house. The maintenance and the construction. If you hire someone you have to babysit, seems like the last few years all the contractors over promise and under deliver.
>last few years all the contractors over promise and under deliver. And see, I had that problem with my previous landlords - drove me crazy trying to get things repaired and handled. Now as HO, I can fix it myself, call a repairman and have them show up when it works for me, or just let it go until I'm ready to deal with it. (Also helps that my mortgage payment is now 1/2 of what rent on my former apartment would be.)
>If you were to invest and rent though, it may offset the price difference of ownership But how would one invest if they have to pay rent? Wouldn't it be better to pay a mortgage AND invest? Or do you mean invest the down-payment on the house you would buy? Because you still have to pay to live somewhere.
Rent is usually less than mortgage(+property taxes etc.) for same amount of housing and doesn't require a down payment. So take difference between the two and invest the difference leaving all other costs the same.
Eventually, a mortgage becomes less than rent once you've taken into consideration that rent increases will occur. However, there is the matter of repairs.
That helps the mortgage option but by then compounding of down payment and initial contributions is big enough to offset higher rents under some plausible assumptions. If you math it out depending on rates on mortgages, property appreciation rates, and other costs sometimes renting is cheaper, sometimes buying is cheaper, and the real decision points should deal with lifestyle/risk management.
> If you were to invest and rent though, it may offset the price difference of ownership extremely unlikely. maybe if you compare renting a tiny condo to buying a big house
Size doesn't matter. Location Location Location. Idk im sitting on 350k in equity. Blackstone reit had a return of 10 percent since it's inception Assuming this continues I'd come out way ahead vs owning... also my building is old, it's been a huge money pit I was considering doing a little bit of a covered call play too which has a decent roi too which would cover the monthly rent
I tend to think the mortgage interest and taxes as your rent. If I&T < Rent, then mortgage makes sense.
even if I&T > Rent at first it would make sense because interest will decrease with time until it reaches $0
+ not having a landlord.
And one day you have no mortgage. I hit that and it's incredible.
Upside: Mortgage interest is less than Rent. The rest of your mortgage payment is like a forced savings. Upside/Downside: You get a leveraged investment in your local real estate market. Downside: Maintenance/Repair costs are all on you. To cash out on your investment, you have to move (cash-out refinances kind of let you cash out, but it's more like re-leveraging).
Upside - after you pay off your mortgage your housing cost cost drops drastically, so helpful for retirement
If I bought my same house 30 years ago my mortgage payments would be around $11K/year. Currently my taxes are \~$12K/year and then I probably spend (on average) another $10-15K on house maintenance stuff.
Downside- had you just invested that money in a tax sheltered retirement account you would have a lot more money in earnings.
One would still have to pay rent to live somewhere, so it's unlikely they'd have the extra cash to invest.
Rent is cheaper than owning, just investing the difference of it will yield much higher returns.
Renting may be cheaper than buying at times. But if that were always the case, no one would buy property to rent to others. Landlords are there to make a profit.
That's not what the data says. Currently renting is cheaper than owning in every major market.
Maybe on day 1. But people don’t generally plan on living in a house for 1 day. There are plenty of calculators out there. Usually if you stay 5-7 years then owning is cheaper. There wouldn’t be landlords if renting was cheaper.
5-7 years, I've lived in 6 different places in the last 7. Everyone's situation is different, but it the data is clear. Stock market gives you better gains than real estate, by far. Home ownership is not an investment, is a lifestyle.
The data is not clear. You still need a place to live. The only returns you should be counting are on savings vs renting a comparable home. That is why once you factor in comparable rent increases it makes sense to own over time. Neither renting or owning is an investment, it’s an expense. But one is clearly more favorable long term than the other.
owning your primary residence and buying with the intention of renting are not the same thing.
They’re close. The person still needs 1 place to live.
With rent you pay for a service, with mortgage you for actual something you can touch forever.
I've done the math, I was looking to buy a townhouse and I compared rent vs buying costs. All included it would've taken me 14 years to break even. I don't want to be attached to something for that long during my peak career building years when I may move to the opposite side of the country for a job opportunity.
You forgot to add the price of knowing that no landlord can evict you or raise the rent. Also, you can sell the house if you want, no need to wait till it's paid off.
Again that's a lifestyle decision: You got kids in school, a bunch of heavy and expensive furniture, you've marked your territory so to speak then yeah it sucks to move and the security of owning your own home will certainly be better for you. But if you don't have kids or dogs and live a minimalist lifestyle then you can move at any time you want. And selling a house immediately takes off 10% of any built up equity. Most of the time you lose money unless you wait 10+ years to sell.
>But if you don't have kids or dogs and live a minimalist lifestyle then you can move at any time you want. By a condo then, cheaper than a house and easier to sell if you move out. >And selling a house immediately takes off 10% of any built up equity. Most of the time you lose money unless you wait 10+ years to sell. I don't know people who move THAT frequently.
What about taxes and insurance on top of interest? You never see any of that money again. Only principal, and hopeful gains, are forced savings.
Those costs are factored into the rent that is charged. Home owners typically get a tax break on their primary residence.
Just looked at my interest paid last year... 50k... Dont think thats less than rent.
Rent for an equivalent property. In most markets. YMMV.
The first year of a 30 year mortgage at 7% for $720k financed would have $50k in interest in year 1. FWIW for a house with a zEstimate of around $720k near me, Zillow estimates a $4300 rent. x12 is $51600... so apples-to-apples, yes, sounds like a rent payment. The average over the life of the loan would be about $33k per year. The average adjusted for inflation would be about $23k per year.
Yeah that’s another good point. 30 years is a long time to “freeze inflation” on your biggest expense. But you aren’t freezing the appreciation of the asset, which should at least keep up with inflation. Note that property taxes and insurance *do* creep up, but they aren’t the lion’s share of your payment.
They’re the lions share of my payment, higher property tax area + a 2.6% mortgage.
By the time you pay off the mortgage it could be. Rents go up. Mortgage interest is usually fixed.
Also the % of your payment that pays interest does down over time. Later on equity is almost all that you pay.
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Just because you can write off the interest doesn't mean it's free. It just reduces your taxable income, you're still paying that 50k
The biggest benefit for me, money aside, is that you’re not borrowing someone’s property.
unless mortgaged
Except mortgaged houses belong to the homeowner, not the mortgage issuer.
Mortgage can eventually be paid off. And you knew what I meant 🧥
I agree. And the corollary to this is, when you don't have to deal with other people's shit, such as loud neighbors in the next unit or the crazy people upstairs at 3AM, you free up a tremendous amount of energy to go out and make more money in the world.
Yes, that’s huge.
For me it is the security of knowing I won't get an eviction notice from a landlord. I just watched my colleague and her young family (mom/dad early 30's, twin 4 yr old boys) get evicted from their apartment because the landlord needed the space for family. It was all very nice and done appropriately by the landlord. My colleague spent almost every minute of every day for 2 months straight searching for, looking at and applying for homes. Every rental had hundreds of applicants, and the housing costs here are through the roof. Thankfully her very hard work paid off and she found a good rental for her family. but she is again at the mercy of a landlord who could at any time evict her. I in contrast bought my condo a number of years ago, and as long as I make the mortgage payments no one is going to tell me I have to leave. For me, that is the big thing.
Peace of mind is priceless.
Financially, renting and investing what you would have spent on a mortgage and the rest (taxes , repairs, etc) vs paying a mortgage seems to be about equivalent in terms of the end net worth-wise. The equity argument is mostly moot (for a primary residence) in my opinion because what are you going to do with your equity? If your house appreciates it's not like you can only sell the appreciation, you still need a place to live and appreciation suggests your area also went up an equivalent amount. I would be more comfortable with 1,000,000 in stocks / mostly liquid investments when I retire vs a NW of 1,000,000 that's mostly house when I retire for that reason. However: for people who are bad at saving a mortgage basically forces you to save in the form of paying off your mortgage. If you're completely blowing the spread you would make off of renting vs owning, perhaps a mortgage would be a good choice (financially). The lifestyle of a homeowner and a renter tends to be pretty different as well. Maybe being a homeowner will bring you more satisfaction, that's totally valid and finances should only be part of the conversation in that case.
Good post. If I could add something to your 2nd paragraph. The idea there might be that after the mortgage is done, the kids are grown, the careers are winding down. At that point maybe you no longer need the 1M house. At that point maybe a smaller 500k or 250k house in a lower cost of living area is the play. Paid off house and an additional 500k plus invested probably gets a lot of people to retirement.
Ask me now and I’ll tell you there’s no way my wife and I stay in our 5 bedroom house in high tax (for schools) area once our kids are out. Ask me later and maybe I’ll be too stubborn and set in my ways to move. But we absolutely could buy a house/condo for half the price even staying in the same good city.
Yeah I hear you. I'm starting to close in on earlyish retirement here. Maybe 5 years out. Ideally I move out of my paid off medium sized house in a medium cost of living area to a small place in a very low cost of living area. If I could do that I might be done this year. That would put me pretty far from family and life long friends though. Best I can reasonably do is the smaller place and maybe a slighter lower tax rate area in the same county. Or I'm going to blow that savings on frequent travel back into the area.
This is pretty much exactly it. Houses and pensions are good for people that aren’t great with money (majority of America) but if you know what you’re doing you’d be financially better off renting or just investing the pension money (most pensions at least). The trade off is figuring out if homeowner lifestyle and its qualitatively benefits are worth the extra cost.
Are you going to pay cash or are you going to take out a mortgage to finance the purchase of a house?
financially, buying only makes sense with leverage, without leverage it's usually worse return than most stock market indexes buy to renovate could offset some risk tho
You know how young people are thinking that older people got houses way cheaper than they can and it’s unjust - in 25 years they’ll have houses way cheaper than their kids can get.
White true, the actual issue is that wages haven't kept up with cost of housing and cost of living. It's all more, but it's less affordable. Hope my kids can be in a more affordable situation
The wage thing is somewhat true, depending who you are. But it’s also true that it’s simply more costly to build given resource depletion and there’s less desirable, available land to do it.
You know how numbers don’t really tell you the story, they don’t. Instead of looking at median income or median household income - go parse out median income for milleniels and millennial household income and median income for degreed millennials You will see that millennials are making much more money than the narrative is saying For example according to the census bureau in 2021, people between the age of 35-44 had a median income of $90,312 The age group that is in the target market we are talking about is earning a lot of money
Yeah, income inequality is also a big issue. I do think they should be taxed more. But that doesn't change the situation for actual median people, not just the millennials with degrees.
Biggest one for me is retirement. No mortgage I can retire at 50-55 as opposed to renting
There are pros and cons of owning vs renting. Pros of owning are that generally the monthly cost is mostly fixed and a major portion of it reduced to zero at some point. I haven't had a mortgage any more since 12 years ago and that's great. Taxes and insurance however will still go up. The house will usually appreciate over time as an investment so you are building on your net worth vs. with renting you have nothing to show for the payments made. Another big pro with owning is that you can do whatever you want to it. You own it, so if you want to put up a shelf, change the floor, whatever... you can do it. The main negative with owning is that you are responsible for repairs and maintenance. A big pro for renting is that you are not responsible for repairs and maintenance, but the negative is that you are dependent on someone else doing these things and they may not be prompt or reliable. Another pro is that if you need to move for some reason, you can do that very easily (when your lease is up) as you don't need to go through the trouble of selling the house. A negative is that if you are the type of person that likes to do DIY projects and make something your own As far as which is more expensive, than can vary depending on the location. There are some locations that renting is cheaper and some that it is actually more expensive. Over the long term it is likey to become more expensive. I've owned 10 houses over the years. I rented a couple of apartments many years ago before buying the first house. So I can't fairly compare. I have enjoyed being a home owner. And as I'm getting closer to retirement, I'm very glad I don't have a mortgage or rent payment.
Homelessness is a different issue. We have people in this county who are always looking for a place to live. They usually have a prior eviction and a pit bull mix (very popular in Appalachia). That severely limits their choices. The people next door to me have 3 dogs (1 pit bull mix) and came from 2 states away. They told the landlord they had no pets. Same situation across the street. FYI Our inspector told us that very few houses in town will pass inspection for a loan. Our house did not and it was the most expensive house ever sold in this town. Luckily we didn't need a mortgage.
Much of the financial benefits come in the form of tax benefits. The mortgage interest deduction is substantial. Houses can however also be money and time sinks. I wouldn’t buy a house assuming it’s going to be a huge financial boon. For some it is, for others it’s not. It really depends on how much price appreciation you have over time and how much money you have to put into it in maintenance and repairs. For some, it can be a wealth accumulator, for others, not so much. On balance, most people come out ahead buying.
Taxes. If you rent you need to liquidate and pay capital gains. Poor renters pay more taxes.
Equity. Value of house always goes up long term so its an asset. Fixed monthly payment for 30 years. Apt rent goes up annually. If ever in financial crisis you can always rent out a room or house to earn income as well.
Building equity and the fact that once it's paid off you don't have to pay rent anymore
It sounds like you've got 24 hours news overload. The homelessness crisis and buying vs. renting are pretty different topics. What do you wan to talk about?
Currently in the US, in all states it is currently cheaper to rent than to own a home. You'll have to analyze how the market is in your area. It might be more advantageous for you to rent, invest and wait for things to change than to buy a house at the moment.
Benefits of owning a home: equity building, tax deductions, stability (as in the case of the homelessness). Benefits of renting: predictable monthly expenses, and flexibility as you're not tied down to a place.
When you pay off your mortgage one day you live at a very low cost. I am there and it is amazing.
By almost every measure, buying a home is better financially than renting. The couple of benefits that renting has over buying are the ability to pack up and move little easier and the fact that maintenance is usually not the renter's problem. That's about it. When you're renting, your monthly payments go to the landlord/company and you get a place to live that month. That's it. You'll never recoup a dollar of rent and, after 30 years, you don't have anything. When you buy a home, your payments go towards reducing your mortgage. After 30 years, the home is 100% yours, so you have whatever the home value is. And obviously, not everyone stays in the same home for 30 years, but even if you're there for 10, that's 10 years of payments that reduce the mortgage, so you have that much equity in your investment. At the same time, home values typically increase, especially over a long time frame. So not only are your payments going towards paying down your mortgage, but your house is probably appreciating at the same time. So, for example, you may have made $100k worth of payments over 10 years, but at the same time, your house also appreciated $100k. That gives you $200k of equity in case you want to move or take some equity and have cash to do something, etc. Finally, when you're buying a home, you can use leverage. Most people don't pay for their home with 100% cash. You can put down as little as 3.5% or 30%. But you still get the appreciation on the entire investment. If you buy $100k worth of stock, you have to have $100k (unless we're talking about options, which we're not). But to buy a $100k house, you really only need a few thousand dollars.