The real cost of owning a home(ericturner.dev) |
The real cost of owning a home(ericturner.dev) |
Renting is definitely the better option for certain people, if you intend to move often, or want to live in an apartment your overall costs are likely to be lower. If you want a single-family home and don't want to move often (or be moved out) Buying is worth it. Even setting aside the satisfaction of home ownership if you can mange to pay off your property you pretty much can't live cheaper at the same scale.
that said I've rented, I've owned, and I've been a landlord and I'd take home ownership in a heartbeat. It's not all rosy, and being responsible for maintenance is no joke but not being subject to the affairs or whimsy of someone else's finances along with the pride and sense of actual ownership is is wonderful.
When you buy, you will pay a certain amount for 15-30 years, and then you only have to pay for the continuing maintenance. When you rent, you will pay a certain amount every month forever regardless of whether the property is paid off or needs any maintenance.
How can anyone (financially) justify the cost of owning your own compute?
How can anyone (ideologically) justify the cost of not owning your own means of compute?
True. But even if you have the physical ability, skills, tools, and equipment handy - you can spend a lot of time on maintenance & repairs. Just ask anyone who's done yard work for a few years, or has repainted a house, or ...
That said a layperson probably won't know the new code requirements in their jurisdiction and if you sell your house you'll have the inspector tut-tutting the work for one reason or another.
How much time does it take to acquire & refresh the skills and code knowledge, and how many water heaters can you amortize that over during your life?
"Surely it wouldn't be too hard to undo/redo piping etc." But yeah, different refrigerant, different code requirements for vents and exhausts and drains. 4 people working for 16 hours, I saw where the money went.
I built a custom shelf for my closet. It'd have costed me an arm and a leg to have someone else do that, even with a tech worker's salary.
I also built a custom walk-in closet. It took me a day, saved me over 2k and I got a better quality closet out of it. (You find find built yourself a walk-in-closet kits that are easy to assemble, it really isn't that hard, just don't get the home depot level quality ones.)
Also, condominium does not automatically imply apartment, because there are condo townhouses and condo detached houses.
A condominium is a legal structure that prescribes which parts are owned jointly and which parts are owned individually. https://en.wikipedia.org/wiki/Condominium
End of story. That's the entire conversation right there.
Note how much money he made on the house he lived in for a decent amount of time... (~330k, minus minor investments on repairs)
Renting is better than buying if you're not going to live in the house for any real duration (real meaning 5+ years).
Otherwise... at least in the US... the financials around 30 year mortgages and a target inflation rate mean buying is going to work in your favor.
Will this blow up at some point? Meh, maybe? But for now, owning is FAR better assuming you actually hold onto the property. The longer you hold, the better it gets.
Yeah, subsidized mortgages (via government insurance and mortgage interest deductibility) tilt the market towards home ownership in most of the USA.
Most of the rest of the world doesn't intervene in its housing market as much and the ROI on owning vs renting can shift. Switzerland will tax your home on the potential rental income of your home, whether you rent it out or not (I think this recently changed, though). The home ownership rate is historically between 30-40%. Basically farmers and the upper quartile of income earners are the majority of owners. The result is that most Swiss have their wealth in more liquid assets and are also highly mobile for work.
> Will this blow up at some point? Meh, maybe?
Owning is also turning into a problem for many Americans. Some people are trapped in their homes because moving means resetting locked in low interest rates. Insurance has made home ownership extremely expensive in much of the states that were fastest growing over the past decade. I'm sure solutions (good and bad) will come, but sometimes it's nice to just be able to hand in notice and walk away.
Landlords do whatever the hell they like with zero consequences. Thats not a game I’d like to play with a 40 year horizon of unknowns.
With a mortgage the risk is interest rates. And on that I’m confident I can carry far more exposure than my peers. So if that blows up in my face then the entire country’s financial system is cooked anyway
This isn't to say that there are not emotional aspects to owning, but that is a separate discussion.
The person counts the 12 month escrow prepayment during closing as "cost to get a loan" It's not. It's the cost of 12 months of taxes and insurance on your property.
Also notable is the "1 year insurance premium" either they're double counting the escrow, or this 1 year insurance premium is mortgage insurance where the bank makes you take out insurance to protect them. This can be prepaid, split paid, paid monthly, or you could put down 20%.
The lender makes you purchase title insurance for them, but this person also purchased title insurance for themselves. This is mostly just pure profit for the title company. The cost for the insurance is for the company to do the research, if they found an issue, they wouldn't insure the bank. Buying it for yourself is mostly just lighting money on fire.
A lot of those closing costs are shoppable, you can find better lenders. Before closing, you're given a truth in lending disclosure with all this carefully spelled out. If you don't do even basic due diligence, I question if you have the financial literacy to own a home.
I'll also note, they didn't mention in their closing costs paying for a home inspection (beyond termites). This is likely why they had to pay for real repairs on the house.
One of their "repairs" is new water pipes. There's no reason listed for this, but this is often pushed by door to door salesmen telling you need to do it to protect your property/health and is mostly, like all door to door sales, a scam.
That note about counting the cost of heating and cooling is similarly nonsense. They claim "apartments are almost always smaller than houses" which isn't true, and count electricity rate increases as cost of ownership, rentals have to pay that too. They also assert, with clearly no evidence that heating and cooling is half their electric bill. There's easy ways to figure this out, an emporia can do it easily.
The whole premise is flawed. They note that in the beginning only 20% of their payment goes to principle and A) you can control that (bigger downpayment so no PMI, less interest), bigger more frequent payments or a shorter loan, and B) exactly 0% of your rent payment goes to your principle.
This might better be an examination of "can I afford a mortgage with the same rent payment as I make today" and the answer, not surprisingly, is no, if your rent payments are a the top end of what you can afford.
The person also discounts the impact of horrible neighbors, stomping and barking at all hours of the day. That can happen in houses but they are not right next to you
The author also seems to assume you'll be paying more to heat and cool your house because if you're renting you're in an apartment? Just down the road from him, four of the five homes I rented before buying in 2021 are larger than the home we bought.
"Less than 21% of my monthly payment is going towards paying off the loan" - well, yes, because it is front-loaded with interest. And as you get through the loan, 80%+ will be paying off the loan.
Maybe different loans are different, but generally your home insurance and property taxes are rolled into the mortgage (and often paid on your behalf by the servicer) - indeed, it seems like there's a double dipping of breaking down his mortgage payment and the component that is tax and then saying below "I currently pay $515 in taxes monthly".
There absolutely are additional costs to owning a home, to be very clear.
But there's definitely a contingent (and this post isn't the "worst" of them) that likes to paint home ownership as nothing more than opening your check or pulling out a credit card every month for "the next four digit expense".
Especially in Western Washington where the property market 2010-2020 was "a good one". (I put down 10% and at the contractual "year-and-one-day" on my loan for the soonest I could remove PMI I was able to because I'd hit 20% equity on value increase - only making my regular payment), something that he benefits from, too:
> I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k. I've put a lot of money into it catching up on maintenance, repairs, and improvements, but the appreciation will definitely exceed whatever I've put into it when I decide to sell it.
Maybe home ownership is becoming a luxury, but humans don't exist in financial spreadsheets. The intagibles of SFH ownership are worth literally everything to me after a lifetime of renting.
It's also absolutely a class differentiator in the US. If you're behind on your rent and getting evicted, that's seen as a personal moral failure. If you're behind on your mortgage and getting foreclosed, it's considered a tragedy, and there are many options for support like forebearance. Just look at what happened during COVID; red state renters were getting knocked on by the sheriff within 90 days, while it can take years for someone to lose their house.
Whatever you do don't read your local zoning code.
If you really want motivation to browse large bulldozers on Facebook Marketplace look into the legal doctrines that underpin these codes. It's pretty mind boggling.
Article did sum all the inputs/outputs, and came out at loss. I'm just wondering if there is some other trends over 10 or 20 years that make the house better.
Based on the nytimes version from 20 years ago but updated since then.
Actual rent vs. buy outcomes vary by location, but the general rule is that in most desirable urban areas, it's financially better to rent.
If you take literally anything away from this article, this opening line is it. People who say this bought their house decades ago and have no clue what the present situation is.
I pay as much as I did for rent in 2019 for my house now (and until 2050). And my house is over 3x larger.
I can move on a whim, and the worst-case costs will be a modest lease termination fee and literal moving costs.
I also despise the culture around owning a home and the insane things that we do to prop it up. Zoning restrictions, absurd mortgage terms (what other country does 30-year fixed rates?), overbearing building codes all so we can live up to this arbitrary life goal of Owning A Home.
Rent (because I'm a college student or in my 20s)
Buy (because American Dream and FOMO)
Buy a few rental properties (diversify income)
Buy a vacation home (seemed like a good idea at the time)
Sell everything and rent a house (move to an area better for my kids) <--- I am here
Buy one primary home and stay there forever <-- the plan next year
Renting a house is a great financial decision for my current market but the landlord is erratic (will he raise the rent? sell the house? move in?), I still have to deal with a HOA, and there are several big upgrades/changes I want to make and I can't: double the solar/battery, add some covered storage, put in wired cameras, put in a high quality RO water filter, devote most of the backyard to an orchard/garden, etc. And the rent will keep going up, whereas insurance/property tax will go up much slower because I plan to buy in cash.
Everything is so fucking expensive.
More importantly, this neglects that buying a home is locking in the price for the long term for the majority of your housing cost. Buying usually is similar all in the first year, but after 5 years your mortage payment is the same while rent has probably gone up significantly.
> I bought this house new, and didn't live there very long
End of story.
>I bought my home in Auburn, WA for $321k, and sold it a few years later for $333k. After all the costs to buy and sell it, I probably lost more money on it than I would have spent renting an apartment.
Home ownership isn't a net positive from day one. Otherwise, everyone would always do it. Home ownership is net positive in the long run. It's a long term position. You don't day trade houses.
For example, to mow your lawn, you have to find a time to do it every couple of weeks when the weather cooperates, be at home at that time, store and maintain the equipment, have a pair of "grass shoes", clean up afterwards, etc.
This might be worth the effort if you don't have much disposable income. But if you have money to blow, hiring someone to mow your lawn can give you more time to do something else you'd rather do.
But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or owner move ins or any of that other stuff that renters deal with.
And if you have kids, they get a sense of home and place.
But don't do it for financial reasons.
I'd also argue there are financial advantages (on top of the psychological ones) to the price stability as you don't have to hedge against your housing cost shooting up as much.
I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in an apartment, because rent could go up any year and exploit me for liking my home. Property value has gone up by 50% in the years since I bought.
And while I agree that it’s nice to customize things to your preferences, this has a downside in that it’s easy to get carried away and overspend. Might as well get the nicer finishes when you are remodeling, right? After all you’re paying so much for labor anyway. And you can’t have just your kitchen nice, now you need to upgrade the flooring in the whole house. And soon your small $30k improvement is $150k
Most landlords I've dealt with are an absolute pain to deal with when something breaks. It's often not that easy, maybe in high-cost / luxury rentals. Arguing over what is normal wear-and-tear, while knowing you cannot afford decent legal advice, and you also can't pay for the "unexpected repair" is just as bad.
> And you can’t have just your kitchen nice, now you need to upgrade the flooring
Yes you can. There is no need to have everything perfect...
Edit:
> You never have an unexpected $20k repair show up.
If this was even close to coming even with the added cost on rent, no one would be a landlord. It's obviously a lot less than rental overhead. So people could just set that aside (or get insurance).
I've never understood why people argue that the model of appealing to a landlord to perform house work is psychologically superior to doing that same work yourself. As a tenant, you have an inherently somewhat adversarial relationship with your landlord - they want to minimize costs, and they aren't the ones directly living with the household problem. You are living in their property and are bound to what they replace or repair, and how, and to some degree on what schedule.
Not being able to make my own decisions about what constitutes a household problem and what should be done about it is the single biggest annoyance of renting for me. It's the main reason I would like to live in an owned home; and this intangible facet of living is more important to me than any financial argument about the costs of renting vs owning.
"Rent is the most you'll pay for housing, but mortgage and property taxes is the least amount."
The current place has this stupid thing where the dishwasher is attached to a circuit that has ac on it so if you run both it flips. I have to flip the breaker everytime i use the dishwasher.
Not my experience, at all. All landlords I've had were lazy assholes who did the bare minimum, but never forgot to increase rent on the 1st of January, every single year.
Paying someone else for no other reason than to have the right to a roof is Middle Ages shit, that future generations will no doubt liken to serfdom.
We are extending the fence in our backyard.
However, getting rid of the parking means the project will likely detract from the value of the home. But since we don't have a car, let alone two, it makes sense for us to do the project anyway. Despite the warning of our realtor when we purchased the home.
I've noticed a lot of folks are afraid to personalize their homes because of concern about the value when they eventually sell.
Firstly, my home isn't principally an investment vehicle.
Secondly, I'm pretty sure I can find a buyer who can conceive of popping over to the grocery store around the corner a couple times a week rather than pretending like they're living off the grid and have to drive 100 miles to the nearest town to buy their monthly provisions for a family of 13. :)
As a renter in a place that protects renters from radical increases year over year, I'd argue the only compelling sense of stability would be trading the risk of being evicted for that of losing the house
> I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added panelling to the walls. I added a few outlets to rooms that needed more.
I think this is an interesting differentiation that would either be very compelling for a hobbyist or carpenter, or someone who works on cars, but it's also crazy to me if I frame homeownership this way. I don't think a condo would really provide the surface area for such customization *if* I were a person to be interested in doing it, nor would a townhouse or duplex. It seems that at least in my city, the premium to be able to do something as common as paint the exterior of your home, is like $2.5m CAD, or $1m more than a newish townhome, or $1.5m more than modest condo, or $10000/m more (just on the mortgage) than renting a sufficiently sized place.
That's partly because the kind of place I can rent is dramatically smaller than the minimum size of a place that has a modifiable exterior, and it's one of the most expensive cities. I guess it's sort of a framing that makes clear how dystopian the class divide is; I don't have any interest in painting my house, but if I did, I'll never be able to, and if I could (at the current rates), I'd have to be incredibly unimaginative to allocate that much to the house that could hypothetically be painted.
I guess people who value the concept of a home in that way more than anything else would simply move someone where they can buy one, but I value so many other things more than hacking away on the walls that it's an absolute no-brainer to continue renting where I want to live despite the ambient sense that I have no sense of permanence secured by land
HOA complaints typically are about control not really cost, and the terms are disclosed before purchase so not unpredictable at all. Insurance costs are directly correlated to risk, the costs are only as out of control as the risks (which are well known in Florida). E.g. if insurance expects to have to replace a roof every 5 years on average, and to replace a house every 30 years, expect to pay for 1/5th of a roof and 1/30th of a house for insurance each year.
But yeah, for a single family home in a not-too-flood-prone area it'll be very predictable.
This was my first time living in a house as opposed to an apartment. It's been three years of bitter regret, and I'm very eager to sell the damn thing and leave the nightmare behind. In the last three years, I had to re-paint the roof, replace the garden fence and a bunch of related stuff in the garden, replace the water boiler. I had to climb on the roof of the house to rake the leaves at least twice a year (not expensive, just scary). I had to repaint areas of the house because the previous owner did a crappy job painting them.
But, most importantly, it's a piece of junk. It's a typical front brick wall with the rest of the house made of wood covered in dry wall. Its foundation is going to skew and sink because... that's the general condition of everything in the Netherlands: the ground water is too close to the surface, so the foundation is too shallow. I can't hang anything heavy on the wall because the wall can't support it. Every wall is crooked and bent and so is the ceiling, so, for example, it's not possible to put a curtain railing on the ceiling...
Everything is made of perishable materials which will last five to ten years tops, and then everything needs to be torn down and redone. Looking at how my neighbors are spending their lives on the hamster wheel of infinite repairs... I want absolutely none of this. Some people enjoy sinking their time and finances into this black hole, but I'd rather just buy hard drugs for the same price all the way until I die. It's just an arduous and unrewarding toil.
I’d argue rental is more predictable. Housing has a huge amount of upkeep — $10k ac, $5k water heater, $20k roof…
Unless you think landlords are running a charity, some part of your mortgage is going to them as profit (over a large enough sample of renters anyways), and some percentage of your rent is covering 'bad tenants' (which you're not, right?).
Their entire improvement section is also something renters tend to not think about. It's a weird situation when renting that you aren't incentivized in any way to make improvements to where you live. You might not even be allowed to.
With home ownership though, things like a modern kitchen, a shed, new laundry machines not only better your life today but also (likely) have some value add. Though you also get the luxury of being able to ignore the value add if you just really want to paint that room neon pink for some reason.
Home buying/rental is a totally fair comparison, but I know several people whose main justification for buying a home, rather than continuing living in an apartment, was that they wanted to, "stop throwing their money away". Totally ignoring how home ownership is actually more costly than renting a suitable apartment.
Of course, I fully recognize their are a lot of advantages to home ownership. Some of which you already called out. However, I doubt those advantages are actually sufficient to justify a small, but significant, portion of home purchases.
You can make the same argument about a bank not being a charity and making a profit from selling you a mortgage (both are true but are not helpful indicators about rent vs buying). Similarly the interest you pay is insuring the bank against bad debtors, which you presumably will not be.
> With home ownership though, things like a modern kitchen, a shed, new laundry machines not only better your life today but also (likely) have some value add.
You can improve your living situation in a number of ways when renting. If you want a new kitchen or bathroom, rent somewhere new with those things. Renting also affords you the freedom to leave when things go from good to bad (crime, noise, building ammenities, etc.).
* recent 2026 video: https://www.youtube.com/watch?v=aU7v87EhDBI
* 2025a: https://www.youtube.com/watch?v=j4H9LL7A-nQ
* 2025b: https://www.youtube.com/watch?v=lBG-g1CKfgs
* 2021: https://www.youtube.com/watch?v=q9Golcxjpi8
* 2019: https://www.youtube.com/watch?v=Uwl3-jBNEd4
The 2019 video goes over a handy "5% rule of thumb". The company he works for created a tool to examine the numbers:
* https://research-tools.pwlcapital.com/research/rent-vs-buy
It’s also more likely that you’ll feel good about spending money to improve the home if you think you can get the money back when you sell. (And then you get to live in a more pleasant place for years)
The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowing that you might need to go through the hell of apartment hunting and moving annually is awful.
It’s been much nicer to have a mortgage with more or less locked in monthly payment, even with the maintenance costs that come with the territory. It’s more predictable and frees up mental bandwidth for other things.
Most people do not do this, and many homes thus slowly degrade in value. It is a fast track way to destroy potential generational wealth.
Home repair issues also tend to be bursty (rule of three...). You'll have a few years of nothing that'll lull you into a false sense of security, then suddenly three major issues will come up. So far this year I've had nearly 10K in random expenses pop up (!!) and based on the life expectancy of my HVAC system I expect I'll have some more major expenses next year.
If there is one near to you, join a tool library. It is a huge savings over buying specialized tools for one off jobs. Tool libraries are an amazing community resource.
Find a good reliable handy man, even if you know how to do things yourself. Hopefully one you can trust with your door code so if your neighbors report running water while you are away on a trip you have someone you can call who you know will take care of it.
I misjudged the scale. Going from .5 acre to 10 I feel like the amount of time I spent on home and property maintenance before could all be allocated to just one bucket titled "nature." Mowing, whether it's lawn, meadows, trails, tree line, all on different schedules. Trees die, they fall, hang up. The volume of brush, invasive species, pulling it, burning it. When we bought it, I made a mental note: "we'll have to replace the driveway." That driveway is asphalt, and 1000 feet long. The quotes for that alone are in price territory of a luxury vehicle. Irrigation, 12 zones, repairing, winterizing. Septic is another ticking clock. When that goes, you're in for 5 digits. Don't have a suitable secondary location? Engineered system, multiply everything by like 3.
So remove that time from my schedule, that's what I have left for home improvement work.
We're deep into it and really enjoy aspects of it. But if I could talk to my pre-purchase self, I would advise that the scale difference is huge, and consider the amount of time that goes into baseline maintenance when deciding how much of a "fixer upper" to take on, especially when acreage is involved.
Interest rates sure have made it less of a good deal than it was ~5-10 years ago, but it's usually still worth it in the long run.
Not only that, but when interest rates come down it's usually pretty easy to refinance
Which means the potential losses are leveraged too. Plenty of people have ended up in that position. It isn't all upside.
Similarly, taxes will depend on the locality, loan costs depend on the lender and the loan amount. Utility costs in SFBA can be easily 4-5x higher than elsewhere in the US, etc. So your totals could be easily 30% or 300% of what's outlined in the article.
The one important point that the article makes is that your ongoing costs will also vary dramatically depending on how much work you're willing to do yourself, especially in high-regulation, high-labor-cost areas such as SFBA. A basic job, such as replacing a leaky flush valve, can be hundreds of dollars in plumber costs, or $19.95 if you go to Home Depot. Hiring a painting contractor can cost thousands. Etc, etc.
I've also seen several homeowners outright taken advantage of. My main example in the US are various "mold remediation" contractors, who can help you in some really bad situations, but they're just as happy to charge you $20,000 to do nothing of value based on vague fears.
There's also a potential HOA fee, even in many neighborhoods with freestanding homes.
But there are tax benefits of home ownership too. The interest deduction used to very significant, although less now since they raised the standard deduction. There's also a $250K/500K non-taxable capital gains benefit when you sell a house for more than you paid.
> You've probably heard someone say something to the effect of "renting is just throwing your money away". Don't believe it. It's a glib statement that simply isn't true.
No, the statement is completely true: 100% of your rent money goes to someone else, and you also don't get any asset to sell later on.
However, this statement doesn't exist in a vacuum. You need some place to live, and you have to compare the cost of renting to the cost of owning.
To give an example, the typical rent in Toronto is $1000~2000/month, and the typical home ownership cost (including principal, interest, taxes, and maintenance) is $2000~3000/mo. We can just pretend that both are around $2000/mo.
If owning is still $2000/mo but suddenly rent is $500/mo, then renting suddenly becomes a great deal - even though you are still literally "throwing money away". You can use that differential $1500/mo to invest in a savings account, stocks, etc.
And speaking of that, I realized that the biggest cost in owning a home isn't the mortgage (and you correctly pointed out that paying down the principal doesn't change your net worth). The biggest cost is the opportunity cost of the down payment, when you could have instead invested in the stock market at 7~10%/year.
Continuing with the Toronto example, if you bought a home for $500k with 20% down, then the counterfactual if you had continued renting is that the $100k chunk of money could've generated $7000~10000/year = $580~$830/mo, which is a substantial fraction of the $2000/mo rent.
Shoutout to this article again: "You Are Naturally Short Housing" https://thezikomoletter.wordpress.com/2012/12/10/you-are-nat...
You can borrow from your property’s value by neglecting maintenance, and that is sometimes even harder to notice than dollars in a bank account.
This is one of the ways condo ownership can bite you.
If you're just looking at the numbers, it's worth doing the math. Obviously many things will be estimates.
Most people don't do apples to oranges comparisons, because a 2-bedroom, 1.5 bathroom you're living in is not comparable to a 3-bedroom, 2 bathroom, quarter acre house on a lot you're considering buying.
So it's obviously not just math, but also preference, or need.
Local house prices, tax rates, utility rates, services for maintenance and upgrade... they'll all vary greatly depending on the area. And if you're moving from an urban apartment to a suburban house, you're changing how much you'll drive, maybe even need an additional car. But maybe you turn in your rail pass, and decide to cook at home more, and eat out less.
If you think you can decide this based on a formula (or some folk wisdom), well you probably can, for yourself. But of course there's no one universal right answer that applies to most people, because there are too many variables and too many options.
Another thing to keep in mind is the lumpy nature of costs, meaning you need to have access to cash to pay for multiple major maintenance projects in one year. My largest single-year expenditure for maintenance was 25k in a LCOL area pre-pandemic. That would probably translate to 50k today. If you have to dump that on a credit card, good luck digging yourself out of that hole.
It's common to hear that renting means you might need to move at the end of any 12-month period. Well, that cuts both ways. You have the option to move away at the end of any 12-month period too. Lots of folks had to turn down job offers in the aftermath of the housing crisis because of their homes.
It's a higher interest rate, but then you only get charged on the amount you have actually borrowed which ideally would be get lower and lower.
If anyone has any feedback on it I'd love to hear it
Renting has no similar protections. Your choices are, "Pay the (increased) rent" or "Move"
In 1960 rent was about 10% of median income. Today it’s more like 30%. This might sound bad but in 1960 food was 30% of median income and today it’s around 10%. Prices are always relative, it’s impossible for everything to get cheaper. There’s no reason to assume rent is especially prone to this except that it has been over a certain period. Other periods it has been the opposite.
Always negotiate repairs into the offer price.
Probably the biggest factor of considering the rent/buy question is how long to do you expect to be there. We paid off our mortgage after 16 years, so now it's 'free', except for ongoing maintenance and taxes. And we're looking at some nontrivial reno in the future: the kitchen is quite beat, and someday we'll need to deal with the asbestos siding (one of four layers on the house!). But it least it's our choice.
However many of us knowingly exceed that point. For example we pay ~$500/mo over that point. Though there is no really comparable rental, we definitely could have chosen a more cookie cutter rental to be about +$6000 / year.
That doesn’t mean it’s equal for any given individual of course. So it’s important to do your own calculations and make your own decisions. But I think the fact that it is debated so much shows that it is probably roughly equal on the margin.
In the US at least the tax system is also heavily setup to favor home ownership. Mortgage interest and real estate taxes (which are baked into rent) are tax deductible for the home owner and not for the renter. That’s another big difference that adds up over time.
I calculated it recently and in retrospect I would have been vastly better off renting and buying VOO with my equity stake. It doesn’t help that taxes + maintenance have cost almost the same as rent even if you don’t count the actual purchase price.
Renting and buying tends to work out the same in the long run if renters invest the difference on the early years - but which they rarely do
you can rent for multiple years at a favorable rate - then save some money into the stock market.
however in america - people have been fed the propaganda you need to live in a single family home.
The cost of owning absolutely does increase over time. The mortgage payment is just one part of the fully burdened cost. Furthermore, there is a real risk of an unexpected $20k expense that you have to pay for. Owning is less predictable than renting because the liability and risk surface area is much larger.
In SF, you can’t evict tenants because you sell the house, and you can’t evict tenants with kids during the school year (without a just cause).
It just seems nice to be able to customize the structure without being tied to a particular location.
I imagine this is also likely passed through in the cost of rent in other places.
That said, it's totally possible to have a legal and fiscal framework that makes renting affordable and safe.
The government, particularly in Western countries with insane pressure on the rental market, needs to act as a homebuilder and landlord of the last resort. It keeps supply up, prices and risk down.
We've had a couple of generations locked into the housing market as an investment, and it's causing demand crunches which have artificially inflated prices and are choking and dividing our societies.
I'd happily spend my life in a rental if it was affordable and safe, and part of a considerably more fair society.
Absolutely. I had three landlords in a row promise all manner of things. "We're never coming back, moving to the country" (followed by "my wife hates it, we're moving back"). "We're looking to do other investments, we'd happily sign a 5 year lease with you if we could" (WA law limits residential lease lengths. Just as well for them because they decided "the property market is so hot it'd be irresponsible of us not to sell").
If that premium is too high though, you can be worse off than accepting the risk of variable costs.
Another drawback, you're likely to have less negotiating power with a corporate-owned rental.
Except in my experience the lack of upkeep doesn't actually affect the value all that much. In many places the vast majority of the price is the land and people seem less interested in valuing based on the condition of the structure. It may affect time to sell, but that seems about it. Sure some credits might be offered during escrow for some repairs, but again often the money is insufficient or the seller simply says no.
Rob Carrick, a now (semi-)retired personanl finance writer in Canada, observed that owning a home tends to not be a forced saving plan but rather a forced spending plan:
* https://www.instagram.com/reel/DWG223bPjvf/
* https://thewealthybarber.com/video/owning-a-home-is-so-expen...
Full interview on The Wealthy Barber podcast:
A fairly unintuitive resolution to this is to setup a "fun and nonsense" budget and force yourself to spend it every half year, or to make a conscious plan on how to spend it over the year. If you plan the budget right, it won't hurt you, but it will force you to make your life better.
Maintenance, especially of owned property, seems similar to me. You should be saving up for the real "oh shit" situations, and you should accumulate a budget to just do things continuously. 6 months of routine maintenance budget saved up, what do we spend it on actively, before it becomes a mess?
This way one’s housing costs feel like a bargain and savings (including repair reserves) quickly rack up unless the individual in question has serious problems holding onto money.
I agree with the first part, people absolutely do shoddy work or none at all but the value doesn't seem to go down. My mother bought a house had it inspected beforehand but massive issues with the foundation and the roof showed up the following spring when there was heavy rain. Sure, all that can be fought with attorneys and insurance (both cost time and money) but it doesn't feel very good psychologically or physically to be dealing with so much paperwork and house repairs.
Sorry to rant, I think your comment is spot on... owning a house is expensive.
If you expect the whole place to be manicured like a city lot, yeah, that's a huge amount of work.
We maintain the areas around our house. The rest is just oak woodlands. Looks like nature because it is nature.
Likewise never reduce your paved or roof covered square footage. Even if you don't want that parking space or patio or falling down barn the developer who might be your next buyer is factoring that in.
But for the length they last it is less than my city sewer bill. Though if my septic fails I'll connect to the city system was the quote I got to do that was about what a new septic costs.
But that's the quote just for the connection. Then you get to pay a sewer bill every month.
Why don't we say this about other expenditures? Am I throwing my money away when I buy dinner and not a cow? Did I throw my money away by buying a carrot and not farmland? I don't think the statement is true or false, it's just meaningless.
The oft-repeated statement that "renting is throwing your money" is an implicit contrast to owning a home, where the mortgage payment "builds equity" in your asset that can be sold later.
"Throwing money away" means you don't get to own something that can be sold for money later on. That's why we "throw money away" on gasoline, but not "throw money away" in a savings account.
The second part of my argument is that throwing money away isn't necessarily a bad thing, because the alternative (such as paying to own something) can end up being more expensive and being a worse deal financially.
OP uses that phrase to imply the (un)worthiness of spend. You're using it to mean that it doesn't build or maintain equity, which is true almost tautologically but wouldn't be very meaningful unless your audience doesn't understand what it means to rent something.
My gut feeling is that repairs and maintenance cost more with condos than if you own a home and you're handy to fix minor stuff and know how to find good contractors for bigger jobs. I imagine condo jobs becomes more difficult and contractors charge more for those jobs. But I don't have data to back my hunch. Condo has extra issues in dealing with neighbor problems (issues with garbage, pets, unpaid fees, noise, etc...) and you have to maintain shared spaces (hallways, elevators, etc...) and you end up paying for that via your condo fees.
Condos can also benefit from efficiencies of scale - e.g. there are plenty of small jobs on myself that I do myself, but between the time spent on research, and expenses/trips to pick up supplies and tools, I'm spending multiple hours of my time/money on things that someone experienced/equipped could bang out in 20 minutes - but any decent handyman is going to charge their call out rate of $100 + materials for a 20 minute job. vs at appropriate scale a condo corp can effectively just have/share a full-time handyman and save a pile of overhead.
However, not all HOAs are actually financially responsible. So they might raise monthly fees, issue “special assessments” (lump-sum charges that can be $10k+) or take on loans. And they decide when they will do that.
Condos are generally the worst of both worlds, because you have almost all the responsibilities of homeownership combined with nearly all of the restrictions of renting an apartment.
There's a reason they appreciate significantly less than other types of property.
Sure sometimes they do make bad decisions, but you're welcome to just show up to their board meeting and give them some advice.
You may own your condo, but the condo board can also hit you with a 6-figure bill for building repairs and aggregate maintenance. Enough to force you to get a new loan, even when you might still be paying your mortgage.
And if the tenants take issue with these kinds of bills (they frequently do), they can tie things up while things get worse and more expensive to repair.
This was actively a problem for the tenants at the center of the Surfside condominium collapse, with maintenance needs directly related to the problems that resulted in the collapse.
You lease remains in force even with a change in ownership. So in most cases there will be no immediate impact to tenants.
Not necessarily true. Our HOA fees doubled precisely because of drastic insurance premium hikes. There wasn't much that could be done by them to avoid that, and in fact they worked hard to reduce some of those premiums the following year, which resulted in a lower monthly fee for everyone.
I'm under a guy that just manages 20 or so doors now and he's a good dude, but I have to wait a longer time, generally, like when my heat wasn't working at the beginning of the winter and his plumber had the flu. Luckily it wasn't bad weather yet, but I definitely felt the potential for strain.
Then on top of that after COVID dealer gave me $5k tradein for an Ecoboost car with a leaking cylinder wall, check engine light, missing parts, etc. where KBB was less than that. I really don't get it.
How is it foolish to spend money on housing?
I've never heard someone claim I am throwing away money when I buy something consumable except rent. It's a stupid statement that doesn't convey any useful information.