I’m not talking about variables like that. I’m talking about straight averages. And to the average person, buying will always be better than renting.
Both of you say as much in your examples. In monstro’s example, it’s only the variable of a lost job that makes renting the better option. And Dangerosa clearly agrees with me: “However, because there is a middle, there are people who rent, who can afford to buy and who are really screwing themselves over long term with the decision not to buy.”
The problem is that your original post misconstrued the meaning of the “Now I own a house” and it did it in that rather condescending fashion which occasionally and unfortunately creeps into your posts at times. When someone says “I lived frugally and now own a house”; that’s not saying that owning a house is the be-all and end-all of financial responsibility. It is, however, a symbol of financial responsibility. That person can buy a house. They have enough financial wherewithal to do whatever it is they want. If they want to rent a closet in some crack house and go on expensive safaris to Africa every third month, they can do that. And that’s because they didn’t spend their youth doing silly things with money.
Like it or not, money is tantamount to freedom – if you have it, then you have many options (one of which is owning your own house).
But a real person has to factor in variables like this before deciding whether it makes sense to rent or own. Most people are not “average”.
The lost job is just one possibility, though. Person A’s job could get transferred to another state. His wife could fall ill and no longer be able to support the household. Walmart could move in across the street and now he lives on a buy thoroughfare where no one wants to live. He becomes paralyzed and doesn’t have any money to make the necessary renovations. The water heater goes out and he doesn’t have cash to replace it. His wife could get a job on the side of the country. The new baby they were expecting is suddenly triplets. The property taxes in the gentrifying neighborhood shoot up 10%. The schools they thought were so excellent turn out to be pretty mediocre. Etc. etc.
This doesn’t consider the obvious fact that money doesn’t determine what’s the “better option”.
She’s entitled to her opinion, and you yours. Personally, I don’t think “screw” is the right word, here. Unless you want to say that a librarian is screwing herself by not being an engineer, or a couple who has two kids is screwing themselves by not having any. And it’s not like renting represents an absolute opportunity cost. A person can take the down payment they would use on a house and invest it in other vehicles that perform just as well or better than real estate does. The reason more people don’t do this is because they’ve heard their whole lives that homeowning is the safest investment, and that you’re a big ole loser if you rent. A lot of homeowners regret they swallowed this koolaide so quickly a few years ago.
Yes, a house is a symbol of middle-class prosperity. That’s exactly it- it’s a symbol which holds enormous power for some people.
Having saved to buy something you want is an achievement. But it’s not different than someone else saving to buy what they want and what they value. My objection is to the idea that buying a house is the pinnacle of fiscal responsibility, while all that stuff other people buy is just wasteful junk.
It’s all just buying stuff you want. Everyone is doing the same thing. Basically none of us live without waste or indulgence, and even if we did, it’s not like that’s really be a great thing. So IMHO, as long as you aren’t becoming a burden on society, I don’t see much room to look down on other people’s choices.
And buying less will always be less than buying more.
This is laughable to me given how Dopers typically love to collectively roll their eyes at people who flash other status symbols. Being a homeowner is just as much a symbol of fiscal responsibility as being a car owner or throwing expensive parties. In both cases, an individual puts down a big chunk of money and borrows a shitload of even more money. Sorry, but this is not a major feat of responsibility. Banks don’t have any qualms giving money to irresponsible people. See the Great Recession.
I’m not against a person flashing status symbols, but symbols don’t signify anything objectively. A homeowner is not necessarily in a better position to lecture someone about personal finances than anyone else.
You sound like a real estate agent. Post 2007, that’s not necessarily true.
I actually think that for people who do rent, they are more likely to fall into the people who prefer to rent and can afford it as part of their disposable income lifestyle choices, or people who really shouldn’t buy because it involves more expense and risk than their financial or life situation allows (people who move a lot shouldn’t buy). The number of people who rent and shouldn’t rent is probably pretty small. Likewise, the number of people who buy and shouldn’t buy is probably pretty small.
Owning a home is a big deal for which there is not a one size fits all piece of advice. So no, I don’t agree with you. I agree that those people exists, I don’t agree that they are average.
I rather suspect the psychology might be. When you have the same dollar that needs to pay for utilities, medicine or food, which one will it be, and this happens for years, it makes you think differently about money. I don’t think middle class and most especially upper class people have those problems day after day for years. They may go through bad patches, but that’s different from a perpetual hole where your money should be.
My FIL was a contractor. I can tell you that there are a lot of variables that affect the cost of a bathroom. One is whether or not you are using current space (like a walk-in closet) or building a whole new annex, which requires a special permit. Another is where your space is relative to the soil pipe. If you have to put in a long extension to the soil pipe, this will be expensive, but if the pipe happens to run right under the place you want to put the bathroom, it’ll be a lot cheaper. Also, whether you want a toilet only, a bath/shower, or just a shower, all make a difference. Turning a closet right over the soil pipe into a small room with just a toilet and a sink is not a big deal compared to building a whole new room, with joists and a roof, and running a lot of pipe to it, not just for the toilet, but for the bathtub/shower.
I had to replace the toilet and most of the interior pipe to the tub and sink, plus about half the exterior pipe to the shower and some of the drain pipe to the sink in our existing bathroom in our old house, and it was a few hundred dollars. Pre-fab shower installments range from $400-2,500. So, if the bathroom were going into existing space, and were a so-called 1/2, or 3/4 bath (no tub), I can see getting a strictly practical, no-frills one for $5,000.
Not on credit, though. Third mortgages are for things like kidney transplants.
By the way 64.4% of Americans own homes. So if you define average as “all Americans” - its possible that its a good decision for some sort of mean American. I think its more likely that more Americans who own homes shouldn’t than Americans who rent or have other living arrangements should own. There are a lot of Americans who simply own too much house, or own houses that are too much of a stretch and a risk to pay for each month.
Agree, but my point is that its really not that different of a mind set than a kid who gets out of college having had Daddy pay for everything - and then suddenly has a perpetual hole because Daddy doesn’t fund your adult life. Or someone who is in a hole because at their level of social standing they MUST be driving a new model German import. But we tend to think those people are ridiculous for making excuses - yet its the other end of the same problem - they don’t know how to handle money, have never needed to plan for having and not having money because they’ve never not had it (as opposed to never having it), and don’t have the skills to make good decisions. Its a double standard.
I’ve watched friends (I’m 47 and have had the same friends since high school) come at it from both directions - people who grew up inner city government cheese and bulgur poor and those that grew up with trust funds - and I’ve seen them both make stunningly bad financial decisions for pretty much the same reasons. They can only think short term because that’s all they’ve ever had or been able to do. They spend and gift because it fills an emotional need.
Nonsense. Do you realize current mortgage rates are
30 year fixed rate 3.94%
15 year fixed rate 3.21%
Do you realize the average historical rate is vastly higher?
Suppose someone can afford a monthly payment of $1000. You can buy a substantially more expensive house when the mortgage is 3.94% than when it is 7%.
So what will happen when mortgage rates return to normal historical levels? House prices will go down.
You can, you do not have to. That is more or less the entire point of this discussion.
Home ownership also brings with it certain social benefits for both the homeowner and society at large. Renting doesn’t do that but renting does allow for economic mobility which is extremely important, particularly for those in low-income jobs.
Back to the OP’s initial point.
The use of check cashing services has to be a great example of financial disacuity. Using these services are unduly costly and often lead into using other services (title loans, payday loans etc.) which are almost always a bad idea.
Having more lower income people using bank services (most fees are waived if you do direct deposit) would have direct benefit on their economic life.
I know someone who fell into the check cashing/payday loan trap for a while. She makes (I think) about $1,100 a month and she told me that in one year her fees and interest was something like $3,500. Just insane. I understand that when you get caught in the cycle it can be really hard to get out. She did, finally, when she paid off her car and had an extra few hundred freed up each month.
I once worked in retail banking and so have a good grasp of how accounts can be used to the consumer/depositor’s benefit, as well as far too much experience, then and since, with people who use bank services to cut their own financial throats. Like the woman above who consistently paid huge overage charges on her cell bill rather than $10 more for unlimited minutes, I saw many, many people who would sign up for the cheapest checking account plan (this is largely pre-ATM/debit card) because the “premium” plan’s $3/month was an obvious ripoff. They would then proceed to write checks, at 10-25 cents each, and consistently pay service charges of $15-20 or more a month. This proves that banks are out to rip them off no matter what, so phuk them. They cash their check (paying a fee to do so) and live out of their wallet (except when they have to buy money orders to pay bills), and of course are more prone to fritter cash in hand, meaning they are often behind and broke and “can’t afford” a bank account.
This seems to be the majority of 20-30ish who don’t have accounts - they tried, made bad choices, overdrew the account and got into the fun of compounding fees, closed it and swore never again. Another plurality are the group who have screwed up so badly (with loans, criminal fines, child support etc.) that any money they bank will be seized or garnished.
A class in sensible finance management for the working stiff should be a high school graduation requirement. Some districts have something like that, but all jumbled up with general consumer economics and nonsense. Personal finance and money management, on the small scale, should get a quarter or semester of its own.
Let’s not forget the pawnshop trap
I second that point. One big advantage of renting is say you are living in Atlanta and lose your job, you can easily be stuck right there in the Atlanta job market because you owe more money on your home than what its worth and cannot sell it so you can be stuck. Which is tough if say a good job opens up in say Chicago. Yes you could sell your house and move but that is hugely expensive if all your money is tied up in that house.
This is why even in my suburban neighborhood which used to be all houses, they are building apartment complexes like crazy and young families with kids are moving in. Something you didnt see 20 years ago.
That would seem to be a poor comparative. WDC public schools are a horror show, for one (two of my kids have traumatic memories of their year there). But the first consideration for the President’s children is security, which I’m sure Sidwell provides; or at least the Secret Services knows the place well enough to have security measures set up to protect the children of high level politicians from kidnap and harm.