Totally agree, especially about tout first paragraph. Ive said the same thing here many times, for example in threads where people say not to go to law school because of the bad job market for lawyers.
Depends on when you bought, of course, but if you bought your house during the 2000s, that’s likely true. Here is a graph of median housing prices over the last few decades. Prices started to get wonky at the turn of the 21st century. By 2006, housing prices were way, way, off the normal housing trend. Where following the trend line would have predicted an inflation-adjusted median price of about $165K in 2006, the actual median housing price was over $275K.
The prices have come back to sanity in the last year or so, but, yeah, a 30-50% drop in value did happen.
Linky no workie!
I bought my house at 33. At the time, I thought I’d probably be a lifetime renter, but it didn’t work out that way. A few years later, I heard someone say, “When you buy a house, you don’t own it. The house owns you.” (“In Soviet Russia…” :D) Before I bought a house, I thought that was ridiculous thinking. After I bought the house, I nodded in agreement and thought, man I could have traveled more and done so many other things I’ve wanted to do, but now I’m shackled to this mortgage and can’t just give up my job, pack up the cat, and go RVing… Not that I wish to go RVing, but my options are limited now. I chose stability over adventure. Not always a bad choice, and in general, I’m pretty happy with it, but there are times when I wish I could take that mortgage payment money and just blow town.
The (financial) benefits of home ownership are different for different people.
A big part of it is your marginal tax bracket (the highest tax bracket that you are in - i.e., the rate that your last earned dollar is taxed at).
For some people, it’s 10%, for others 33% (and obviosuly lots of other possibilities).
The “savings” that home owners get is being able to write off the property taxes and interest expense.
So, for me, that adds up to about $1400 per month. My marginal tax rate is about 35% when you include state income taxes. So that means when I pay $1400 in interest and property taxes, it only costs me $910, as there is a $490 tax incentive. Of course, this will decrease over time as my payments become more towards principal and less towards interest. The rest of the approximately $450 that I pay per month has no tax benefit (HOA fees, insurance, mortgage payment applied to principal). So that means I have a total economic cost of about $1360.
For someone with a marginal tax rate of only 15%, on the other hand, would have a total economic cost of about $1640 (1400*.85+450).
When I bought the place, I moved out of an apartment that cost me about $1450/month. So, you can see that my total economic cost went down when I moved, but for soemone ina different situation, it would have went up.
So, yeah - your tax bracket plays a large role. There is much more incentive for people with high incomes and low amounts of exisitng write-offs to own. That’s not to say that it’s the only thing to consider, but it partially explains why what makes good financial sense for one person would not for someone else.
Watch Duplex. Then watch The Money Pit. And Pacific Heights. This is why I don’t own.
I expect to be a lifetime renter. There is no way in hell I could ever afford a mortgage payment, let alone down payment and upkeep, etc., except perhaps if I wind up in some ridiculously high-paying job one day, by which time I wouldn’t have enough time to pay it off before retirement anyway. I also really don’t like the city I live in and intend to move within a few years (can’t afford to as yet because the city I’d rather live in is even more expensive than this one). While I hate the city itself, I really love my particular apartment and plan to remain in it for as long as I live here. But even if I could afford a mortgage and liked this city, I’d rather not have a 30 year commitment to living here, or going through huge hassles to move elsewhere, not to mention all the maintenance hassles.
My brother bought a place when he was 24 and deeply regrets it now (he’s 27) - it’s costing him a fortune, he’s taken in a few boarders to help out but they have all turned out to be nightmare tenants, he desperately needs to replace tons of fittings and things that he can’t afford, and he really wishes he wasn’t stuck with such a huge commitment - he’d like to travel or take a job in another city but he can’t because his place would be too hard to sell at the moment. I’ve also lived in rentals that had lots of problems that would’ve cost my landlords a fortune to pay for, so much so I actually felt sorry for them!
Oh, also forgot to mention. My brother has considered renting the whole place out but he lives in a pretty crappy neighborhood because it’s all he could afford and would have a lot of trouble trying to rent it even without all the repairs he needs to make first.
The woman in the apartment next to mine also seems to be a lifetime renter. She’s 89 and has lived there for 28 years, I know she rented another place nearby for a long time before that and her husband would have still been alive for some portion of all that time so I find it unusual they didn’t own a place, particularly since their generation was big on the value of buying property. But it does show that some people really do rent a place for decades without ever deciding to buy for whatever reason.
Having taken in a roommate, I spend $322 on rent every month and have my utilities cut in half. This astounds all of my home-owning coworkers who spend 4-5 times that on their mortgage every month. I am quite happy renting.