Am I an idiot for not buying a house?

In My Humble Opinion
21

Most investment analysts will tell you that your first, best investment is to purchase your primary dwelling.

Another advantage if you have a family is that you are never forced to move. Moving to a new home is pretty traumatic for children - there’s real value in having stability.

That said, whether or not buying is better for you depends on a number of factors. The primary ones are interest rates and the health of the housing market in your area. Today, interest rates are so low that the balance has really shifted in favor of buying a house. When you can get a mortgage for 5%, you pay much, much less in interest than if interest is at 10%, especially when you consider that most mortgages are amortized over 20 years or more. Even a t 10% it usually makes financial sense to buy rather than rent - at 5%, it’s a no-brainer.

However, only you can figure out how much cost you are willing to pay for the privilege of having someone else do your maintenance and take your risks for you. But it can be a significant cost. Around here, the value of houses is increasing faster than the the interest rate, which means living in a house you buy is essentially free, except for maintenance.

I’ll give you an example of our situation. Ten years ago, we bought a 2000 sq foot house. It was brand new, and cost us $143,000. We paid essentially nothing in maintenance for the next 8 years, and paid $1100 a month. So two years ago we sold it for $178,000. We still owed about $100,000 on the house, so we had equity of $78,000. We put that down on a house that was $285,000. Our mortgage on this house, because of lower interest rates, is about $1300 per month.

Since we bought this house, the real estate market has gone bananas, with houses increasing over 11% per year. So now this house is worth $330,000 or so, giving us about $130,000 in equity today.

Our total out-of-pocket payments for our living expenses for the last ten years turn out to be just under that amount.

If we had rented a $600 apartment instead, we would have paid about $72,000 in rent, and today would have no equity. Now, if we had taken the difference and invested it, we would have had to gain close to 10% per year on that extra monty before our equity today would be equal. Over the last ten years, we would have earned maybe half that.

But the big difference is that if we had done that, we would have been living in a small apartment for the last ten years. Instead, we live in a 2700 sq foot house on a lake. And we pay $1300 per month. To rent a place like this would probably cost triple that.

And ten years from now, we’ll STILL be paying $1300 per month, and I expect a simple two bedroom apartment in the neighborhood to be close to $1,000.

As time goes on, owning a house looks better and better

22

Here’s my take on it as posted in this thread.

Imagine just not having a monthly rent payment anymore. Yes you’ll still have taxes, maintenance and utilities but you also have equity and stability. Just my opinion.

23

But you could achieve the same thing by renting and taking the difference and investing it, then drawing down on that investment when you retire to pay your rent. Same thing, IF the value of the investment is the same as the value of the house.

Generally, it’s not. Often, when people compare renting to buying, they compare relatively small apartments to much larger homes. If you were to rent a large 4 bedroom home, you’d find it is a hell of a lot more expensive in the long run than buying. After all, the people renting it to you are making a profit. If you buy your own house, you keep the profit for yourself.

24

My apartment is approximately 600 sq. ft. Maybe 680. (It’s been a while since I figured it.) The house I’m buying is over 1,000 sq. ft. The apartment costs $783/month starting in November. The house is about $550/mo. So in my case, I’d be better off buying the house and living in it since it costs less than my apartment.

25

Ugh … please don’t say 30 is getting up in years :slight_smile:

Home ownership isn’t for everyone and if you don’t want to buy a house try this one on them: Why I would love to buy a house… do you plan on paying my mortgage/doing my maintenance?

We bought primarily for the extra space and the freedom to paint any color I want, add a dog, put a swingset in the yard, have a garage, not have neighbors who share a wall/floor to share noise with.

Where we lived we had a nice apartment that would never have fit any children (3 rooms) for $750/month. That was considered middle of the road rent wise… that was 5 years ago. Those same apartments were $1100/month last time I spoke to someone who lived there about 2 years ago.

Our house (Principle&Interest&Tax&Insurance) is $1400/month. For a lot more space. Hopefully the equity will help put the kids through college someday depending on what kind of job I can get when they start school.

We’re lucky and hubby is handy so we are able to do a lot of things ourselves (he just totally gutted and redid the bathroom for example)

You could split the difference too and buy a condo/townhouse where you get equity but a lot of the maintenance is done for you. Just be careful you get a decent association and that they don’t kill you with fees!

26

My mortgage is $460/mo, including insurance and taxes. I have 3 large dogs and two cats. I have almost an acre lot, and about $40K in equity. I wouldn’t be able to afford animals and an apartment. I’m presently looking at another house, which is half again as big (1600 sq ft, as opposed to a little over 1000). It has 10 acres and a barn. The only catch? It’s almost an hour from my work. I can’t decide if the extra drive is worth it. The mortgage would be about $150 more per month, but I wouldn’t be paying for horse board. The drive is longer, but I wouldn’t have to spend 45 minutes at the barn each night. I just can’t decide. But I wouldn’t live in an apartment. My animals and my solitude are too important.

StG

27

There’s no question that home ownership is more sensible from a financial point of view. You can deduct the mortgage interest and you’ll build up equity (see multiple examples above). I don’t know much about the real estate situation in OH. Here in TX it’s very healthy. I’ve been living in my current house for 2 years. I just had my house re-appraised and it’s now valued at about $18,000 more than I paid for it. That’s giving me about $750 a month since I lived here. My mortgage payment is $1,200. Essentially, I’m getting to live in a beautiful 2,000 sq ft home for $450 a month. Works for me.

Of course, I’m hoping you can find a house where the roof doesn’t need fixed all the time, the plumbing is sound, etc. If you decide to get a house, don’t get a fixer-upper. They’ll kill ya. Yardwork? Hire a kid. He needs the money and you can sit on your porch sucking on a Bud Light and watch him sweat. It’s good for him.

Just my 2 cents (oh, hey, my 2 cents just turned into 3 cents).

  • PW
28

lagged2death has the right answer. please give his response a second read.

29

Well, labboy, lagged2death may have ONE answer, but it’s not necessarily the RIGHT answer. I’ve already covered the lawn issue. He also cites “unpleasant realities like taxes, interest, inflation, and upkeep”.

Taxes, OK. Mine are about $2,000 a year. They’re included in my mortgage payment as escrow. They’re also included in your rent.

Interest? I can deduct ALL my mortgage interest. How much of your rent can you deduct? Hm?

Inflation? Well, that’s true. But I guess rent goes up too. I’m guessing that most landlord don’t want to foot that bill themselves.

Upkeep? Well, sure, there’s some upkeep. If you buy a fairly new house, this shouldn’t be too much of a problem. If you move into a 1959 fixer-upper, you only have yourself to blame. Hope you got a GREAT deal.

Being a compulsive saver is good, of course, whether you live in a house or a rented apartment.

  • PW
30

Idiot? Hardly. It is true that financially, you are almost always better off buying than renting if you can swing it.

But life isn’t always about maximum financial gain.

Now take me - I live in the most expensive metropolitan area in the country and I’m moving this month. Specifically to a pleasant enough, roomy for one person, but hardly extraordinary or fancy two-bedroom flat that’s going to run $1400 a month ( not including utilities, I might add ). An acquaintance pretty much said to me, what your friends say to you - “You’re crazy, at that price you should be buying, not renting.” Hmmm…Well, the average home price in my area now tops 450k. At my ( pretty reasonable IMO ) salary my only options are:

  1. Buy a condo that is either tiny, in a miserable neighborhood, or way out in the boonies, where I will suffer through an agonizing one+ hour commute each way in something like the third or fourth worst metro area for traffic. I don’t even like condos. Shoot, I’m not crazy about apartments, period. I’ve usually rented single-family homes and the only reason I’m not this time is expense ( I’m getting too old and cranky for roommates ) and the fact this place is a flat with only one shared wall ( actually floor/ceiling ) and enough house-like amenities ( my own laundry room, my own nice patio with trees ) for me to tolerate. Why buy a box?

  2. Buy a home waaayyyy out there, commute two+ hours to work each day, each way, or get a “fixer-upper” in a truly nerve-wracking neighborhood.

No thanks. Financially it would be smart. But at this point, buying would be silly, unless I am prepared to suffer ( in some way ) 5-10 years before I could maybe move to a less stressful place. Peace of mind trumps economics - life is too short and I’m not interested in the least bit in my financial legacy ( I fervently hope to die childless :wink: ).

So it all depends on your situation and your priorities.

  • Tamerlane
31

Put me in the camp that says “there’s way more to it, than just adding up financial sums”.

If it’s not something you want, after having looked into it, don’t do it. If it’s something you have an urge to do, after having looked at the practicalities, go ahead and do it.

If you’re 80 years old and financially behind where you might have been, but have planned carefully and still have enough to support yourself for the rest of your life, plus you’re happy with the choices you’ve made, you’re way ahead of most people, IMO.

Too many people are convinced they have the answers to what will make everyone happy. Unfortunately, they fail to realise everyone isn’t carbon copies of themselves. Do what your head and heart tell you, and of they contradict each other, go have a nice holiday until they agree :slight_smile:

32

For a lot of people, buying a house does make sense. However, for a select few, renting is a better option.

As several have already said, look at YOUR life and options.

There have been times in my life I have moved every 8-10 months, for a couple of years. If that is your lifestyle it is, to put it bluntly, stupid to buy a house. If you’re moving that much renting makes much more sense.

If you don’t want to, or physcially are unable to, do the maintence on your house then either a condo or renting might make more sense. Even if you can keep up with it now, that might not be true in the future. This happened to my parents - owned a home, paid for, but eventually could no longer do the physical work due to age. So they sold it before it deteriorated, invested the profits, and now rent an apartment. For them, this was the best choice.

Sometimes, you can get a great deal while renting. I currently have 1100 square feet, utilities included in the rent, for such an insanely low price I am not permitted to share it on-line. The landlord tolerates bagpipes, the machine tools in the spare bedroom, boat building out back, and at least one airplane has been constructed in what is now our living room by a former tenant. Right at this point in time, I’d be a fool to move. Of course, if he sells the building all that might change.

Then again, if the neighborhood your house is in goes bad, you’ll lose equity and have a much harder time moving than I will.

There are also things like home owner’s associations to consider. If you are a fairly conventional person this may not be a burden. If you run a business out of your home, or you’re a tradesman who needs to bring home a business-related vehicle, or you like to weld 14 foot steel scupltures in the backyard, or need to put up a 100 foot antennae for your amateur radio equipment this may be a serious problem.

Another problem is size. Some communities around here are now limiting new construction to 2000 square feet and up… but what if I don’t need that much? A single person living alone may be quite comfortable in 1000 square feet, and the large footage requires more money to heat and cool, which figures into your maintenance costs.

Buying a house requires you to consider neighborhood, long term plans, your job both now and in the future, and many other factors. Those busy-bodies trying to order your life for you - tell 'em to get lost unless they’re paying the bills.

33

I’d like to differentiate between buying a house and buying a home. Lagged2Death’s answer is nice if your comparing renting an apartment and buying a house. You can buy apartments. If you want to compare the two financially, you have to compare like living conditions.

Generally speaking, it will be cheaper to buy than rent, that’s why landlords are in the business, they will make more money renting than selling. Don’t kid yourself into thinking that the landlord provides free repairs on your unit, it’s all in your rent. Not to mention that landlords often do the ‘cheapo’ repair rather than the ‘top notch’ repair you might want.

I own a co-op, I don’t do outside repairs, mow the lawn or shovel the walk. I can put nice things in my apartment (new floor, appliances, fixtures), and get value back when I sell. If I were to sell and go back to renting, I’d likely have an extra $15,000 in the bank because of the appreciation.

Owning isn’t necessarily for everyone, just don’t compare renting a 2br apartment to owning a 3br house on a half acre.

34

One important thing about buying a house: unless you love to do home repar work, buy the newest house that you can afford! Newere means less mainatainence work…if you buy one of those old victorian ratrtaps, you can go broke fixing it! And, if the house is so old that it needs major things (like roofs, rewiring, new plyumbing) your house can rapidly become a money pit!
Watch out for the house that has had a few slapdash repairs…you can really get burned! (I had a house that was one such a dump-when we took down some interior walls, we found concealed water damage, bad wiring, and a lot of amateur work. A house can be an excellent investment, but make sure you buy a house that won’t bury you in repair costs…I would not buy anything over 40 years old, unless it had been completely rehabbed!

35

Hi everyone. I’m new to this site.

I just bought my house 2 years ago and am 37 years old.
I am paying more than rent but, I am building equity in the home, if my wife does not like the tile in the kitchen or the wallpaper, I change it, I can do small repairs, and I love it!!

I rented a mobile home before I bought. It took an act of congress to get the owner to make repairs. I had pipes bust in the middle of the night, the roof started leaking, etc.

With home ownership, you have to make repairs yourself or hire someone to do it. If you rent, you are still paying for the work, via your rent.

The interest on a home loan is tax deductibe, rent is not.

I prefer home ownership myself

36

“smart thing to do would be to sell out”

We usually have about 39 homes for sale. Right now there are about 129 for sale. Maybe they are doing that?

37

I’m in the camp of “whatever fits in YOUR lifestyle and YOUR set of priorities”.

Financially, you can always find reasons to rent OR to own. Yes, a rule of thumb that I’ve always heard is to buy the place you live in. But if it doesn’t fit your lifestyle, then it’s not worth it.

For me? My family is three adults and four children. We have three pets combined. Looking for a place to rent for all of us? Next to impossible. After being squashed in like sardines for years now, we’ve finally purchased a house.

My lifestyle? I love lots of space. I love gardening. I love redecorating. I love landscaping. I even love renovating. It’s the way I was raised. My dad was a reno-aholic, and I definitely inherited that.

Does a house make sense for me? Absolutely. I couldn’t even justify renting.

I can tell you many stories about people who made money on their houses. I can tell you stories about people who lost money on houses (although not nearly as many as those who made money).

The bottom line is that if you hate upkeep, you hate landscaping, you hate dealing with all those things that come along with owning a home - you’re better off paying a landlord to do those things. Your rent may go up so high as to get totally screwed in the deal. Your rent may not go up, and due to leases and the like, wind up with a pretty good deal.

Ultimately, I think that it IS a better deal to own in the long run. But not if it’s going to be a tremendous pain in your side. Just make sure that you’re putting money away on the side, because unlike home owners who eventually do own their homes, you won’t. You will need to count on paying rent, whatever the rates become, forever.

38

The value of my condo has doubled in the three years I’ve owned it. Sure sounds like an investment to me.

You do know that at least part of what one pays in realestate tax can be deducted from one’s income tax, right? This tax break is part of the reason that some investment advisors say one should always have a mortgage.

39

You are NOT an idiot, FisherQueen. I’ve been an apartment dweller for my entire adult life (I’m 42 now; been in my present apt for just about 18 years), and I agree with you totally on your reasons for not buying a house. I’m not mechanically inclined or physically able enough to make my own repairs/do my own maintenance, and I’m sure as hell not rich enough to hire professionals to do that kind of work. Like you, I’m perfectly happy to call the superintendent and say, “My sink is clogged. Please come up and fix it.”

Also, I don’t know where you live, but in my area (Northeast USA), it snows. In my state homeowners are required by law to shovel the snow and salt or sand the public sidewalks in front of their houses as well as the walkways, steps and driveways on their own property which they’d have to do anyway to dig themselves out. For me – no can do.

There are things about apartment dwelling, I should note, that I do find unpleasant at times – such as my noisy neighbors who disturb me at the same time I feel forced to think about if I’m making any noise that might bother them – things that owning a house would alleviate for the most part. For instance, in a house, your neighbors are in different buildings, not on right on top of you, next to you and below you. But THAT’S what I think about when I get pissed at my neighbors and wonder about the advantages of home ownership – the peace and quiet, not the financial aspect of what people have told me also, “You’re throwing your money away by renting.”

So when my noisy neigbors and their bratty kids piss me off, I remind myself, “At least I don’t have to shovel the damn snow other than what my car gets buried in, and when the plumbing is messed up, the super fixes it.” And that makes me calm down.

On the other side of this coin, my boyfriend owns a house. While he IS mechanically inclined and physically able to do repairs, redesign (he’s moving the kitchen from one end to the other, wants to make a living room out of where the “old” kitchen was) and maintenance, it does consume a lot of his time, energy and money, and it stresses him out. However, he doesn’t consider me an idiot for not wanting to buy a house (and totally agrees with the reasons why I’M better off renting an apt).

The issue for his insistence on home ownership for himself is primarily that if he owns his dwelling, it’s HIS to do with as he pleases, in addition to having a hell of a lot more privacy than any apt dweller will ever have. Next comes not being trapped into leases which not only tell you what you can and can’t do but require you to stay there for the term of the lease. And yes, though this is the last reason he mentioned when we’ve had this discussion, even that financial business, i.e., a homeowner build up equity with continued mortgage payments while an apartment dweller’s rent payments disappear into the landlord’s pocket forever.

Funny thing is this – even though I’ll never buy a house and my boyfriend will never rent another apartment (it’s been a few years, but he HAS lived in apts before), there are times when he envies my comparatively stress-free life (since I don’t have a house that needs fixing up and serious excavation when it snows) and I envy the peace, quiet and privacy we have when I’m at his house.

I don’t think that either decision (rent an apt or buy a house) is idiotic. Rather, I think it depends on what the person in question thinks is best for him or herself, and what he/she is able to deal with. I just happen to be better able to deal with the hassle of apartments – noisy neighbors/lack of privacy primarily, but it’d be nice if I didn’t have to be trapped by the lease since I’d like to get out of this apartment in particular but one reason I’m trapped here is because the timing’s always been bad to get out – than with the hassle of houses (all the work involved in keeping them from falling apart).

40

You can argue about the value of investment, appreciation, equity, cost of repairs,etc vs. the ease of renting.

But you can’t argue about one thing: FisherQueen is 30 years old. She should live another 55 years. That’s 660 months. A 20 year mortgage is 240 months.

So on a very,very simplistic level–ask yourself: Do I want to write checks for rent of (say, $700) six hundred and sixty times?
Or do I want to write checks for a mortgage (say, $900) two hundred and forty times?

Yes, if you play the game right, you can put the difference ($200) in the bank every month, invest it and have a lot of money when you need to move into an old age home. But its “funny money”–based on logical interest calculations and illogical,blind guesses about the inflation rate in the year 2021 and the stability of the economy. (Remember,it collapsed in 1929, and for a day or so after Sept 11,there was fear of another collapse)

They call it REAL estate for a reason: it is real, nobody can take it from you.And it will still exist even after 10 years of 10% inflation, or Enron stock goes bust.You may or may not have much money when you reach age 80. But if you own a house, you will at least have a roof of your own when the grandchildren come to visit.