I truly don’t understand why it seems that The American Dream is home ownership. I mean, homeowners still pay mortgages for decades - that’s a monthly payment, just like the rent on an apartment or house rental. And while you can always decline to renew a lease, or oftentimes break it for a few month’s rent - with a mortgage, you’re stuck.
What’s the point? You can raise kids just as well in a rented house as a purchased one - and if you think you’ll have your mortgage paid off before the kids are grown, you’re probably mistaken. I suppose that owning a home gives you greater flexibility in terms of renovating and so forth - but you can often work that out with a reasonable landlord.
People say that their mortgage payments are an investment, while paying rent is just spending money - and that can be true. If the housing market doesn’t crash. If you don’t lose your job and get foreclosed upon. If everything goes well. Meanwhile, you’re locked into a decades-long committment. There are other ways to invest for retirement - IRAs, 501(k)s, and so on - that don’t have nearly that level of risk, and leave your money available for emergency use.
And, on the positive side of renting - having a landlord means that someone else has to deal with many of the routine hassles of running a home. If my appliances break, I don’t have to worry about it - my landlord does. I don’t mow my lawn - my landlord hires a guy. And so on.
I just can’t see why I’d ever want to own a home - certainly not in the foreseeable future. Am I nuts?
You’re not nuts. I am actually VERY interested in the responses to this thread.
Just last September, I joined your way of thinking.
I owned a $150,000 3br 2ba with a pool and a 1/4 acre. I got it at a very good price 7 years ago (89,000). I spent tens of thousands of dollars updating, renovating, improving, fixing, etc. Three years ago, I take out a second mortgage to pay for a new AC and some pool repairs for the market value, cashing in equity.
Then the housing market crashed, and now I’m trying to unload a house that’s only worth $60,000.
Not to mention all the maintenance, $100/month in pool chems, lost weekends with house chores, etc.
This is the second home I have owned. The first one was lived in for 3 years and didn’t appreciate one fucking cent, even though more thousands of dollars was spent on renovations and improvements (including kit and bath – I’m not stupid).
There are always these stories of homeowners who purchased a house, and a few to 10 years later they sold it for some enormous profit. Well, I haven’t been that fortunate.
I now rent and will happily do so for the rest of my life. As a matter of fact, I just discovered a large crack in the one-piece 10’ granite bath counter (probably a $5k piece of rock). One call to the landlord, and it was replaced the next day. $0.
You mean worth that much now. Who knows what it will be worth in a few years. More? Maybe. Less? Maybe.
Don’t forget the tax adavantages of home ownership. There’s also the fact after paying rent for 15 years I have nothing, while I home owner with a 15 year mortage has a house.
I think the advantages outweigh the disadvantages.
That assumes you live in one place for 15 years. If you’ve moved 3 times, with the most recent being 5 years ago, you have, maybe, 1/3 of a house, and a mortgage that’s underwater.
For me, being tied down to one particular neighborhood could potentially be a huge problem. Sure, living in Queens is fine since I work in Manhattan, but what if my next job is in Brooklyn? I’d have to sell up with no gain in equity or face a hellish commute.
So for me, right now, buying really don’t make a lot of sense. I could see it making sense when you’re sure you want to stay put for a while. I think this is very obviously why people buy a house when they have kids – people figure that once they’ve settled on a school system, they’ll hang around for the next 12-15 years.
I think that pretty much nails it for me. If you’re renting the same place for 15 years, no matter what the property itself is worth at any given moment, you’ve paid the same amount of money or more into it but you don’t own shit.
I look at it like the same difference between renting or owning a car. If I rent a car for a week, I’m paying a premium for that use well over what the monthly payment would be had I bought the car, plus I’m severely restricted in what I can or can’t do with/to it.
Our reasons for wanting to own a home are many. First, because we have to pay money to live somewhere we might as well have something to show for it in 30 years. Second because being screwed over by the worlds shittiest landlord is enough to make anyone dream of home ownership. Thirdly because of the location we are in we can expect our rent to go up 5%-8% every time we renew a lease or be forced to move every other year for the rest of our lives. A 30 year mortgage keeps your payments (mostly) the same for your entire life.
Beyond that we LOVE the city we live in and don’t ever anticipate leaving for more than a vacation. Those people who live in NYC and fantasize about owning a little cottage in Maine one day? That isn’t us. I fully intend to be the 85 year old woman with the walker getting on the bus to get around town. When I think about living somewhere else it makes me really sad and then I have to go stand outside and absorb some more of the city to feel better.
But really? The biggest reason is that since we have to pay something to someone to have a place to live we might as well have a house or condo we can turn around and sell in 30 years if we want. If we pay $300,000 for a place and can only get $60,000 for it in 30 years that is still $60,000 more than we would have if we had rented for all that time.
Owning isn’t for everyone. Some people really like not being responsible for the repairs and upkeep on a property. Some people really like knowing that in a year they can pack up their stuff and travel around Brazil for 6 months. Some people don’t want to have that kind of debt for any kind of purchase ever. For us owning a home makes sense but it might not make sense for you.
All your points are valid. Just because it’s referred to as the American Dream doesn’t mean it has to be every American’s Dream. To me the big advantage though, everything else aside, is that you’re building equity.
Home ownership can be a bit of a pain, but in the final analysis, it gives you complete control over your living situation. If you rent, your landlord can choose not to renew your lease or sell the property, which may require you to move at a time you don’t want to. Your rent can be raised from time to time. Any improvements you make to the property (if you’re allowed to) are lost to you the second you move out.
While it may be a wise investment for some (pbbth, Lieu and Kathmandu make good points), I believe it’s mainly due to bad lessons and irrationality/status.
Bad lessons: It may be that people learned that housing has a rather stable value, absent bubbles (huge “if” here). Most people don’t realise that a boom will almost inevitably turn into a bust or they believe they won’t be victim to it.
The demand for housing is less price elastic than, say, transporation, entertainment and most manufactured goods since you’ll get housing before you get most others goods and basic housing is one of the last things you’ll cut.
Irrationality: Being able to tell yourself “I made it” and being part of the American dream. Home ownership can also be a status good that elevates you above the renting peons. It gives people a sense of independence, much like a car. Sometimes, the fact that the desire for a particular good has been drilled into your head since you were a kid as “something you have to get” has a big impact on your choices as an adult.
It’s not difficult to find an apartment or condo to rent that shares walls with a neighbor; free-standing houses are available for rent too, but IME they’re much more rare (and expensive). I happen to like not sharing walls with my next door neighbor so that I don’t have to suffer from his loud noises and he doesn’t have to suffer from mine. I like having the freedom to (for example) watch Gladiator late on a Friday night with the volume turned up to 11.
I like having the freedom to improve or damage the dwelling/landscaping as I see fit, without having to consult anyone other than my wife.
True, if I rented, a call to the landlord would get broken things fixed, but that often takes more time than I’m willing to wait; I have the skills and the impatience to just fix the damn thing myself right now and get on with my day. So renting does not hold this advantage for me. Moreover, I derive personal satisfaction from improvements/maintenance. It’s difficult to articulate this, but working on a thing makes it “mine” in a way that simply paying for it (or paying someone else to work on it) does not. I am happy when I mow the lawn or trim the bushes and see that it looks better; I feel pride of ownership when I fix a broken appliance or nail down a loose piece of edging.
The big tradeoff, of course, is lack of flexibility/mobility. Renting? You can leave when your lease ends in a few months, and if you’re really in a hurry, you can skip town today and you’ll only be out a few months’ rent, maybe less if the landlord can find another renter to take your place. Got a mortgage? Oh shit, if you stop making those payments, you will lose your entire equity - possibly hundreds of thousands of dollars - when the bank forecloses. If you want to not lose, you have to go through the pain in the ass (and expense) of polishing the place up and waiting for an interested buyer.
Yep, tradeoffs galore. The best choice depends on what things you value most.
…Nothing, except the investment proceeds from our quite substantial down payment, and the investment proceeds from the savings we’d be able to put together from what we are now paying in time and money for house maintenance, utilities (some of the utilities were included in our rent), etc. There’s also the thing where the stock market has historically beat inflation, while housing is steady with inflation. (Both markets I think are overvalued now, but that’s another story altogether.)
When we crunched the numbers, we definitely came out ahead not owning, assuming historical standards for the stock market and housing appreciation (uh, again, not that I totally believe those numbers, but I don’t really have any other ones to work with). We bought a house anyway, for the following reasons:
we hate moving, and we figured if we rented we’d probably have to move at least once more
my husband likes fixing things up the way he likes them
we were probably brainwashed by both our sets of parents, both of whom nagged us for five-ten years about buying a place. GAH.
So, none of these were really good reasons, but this is the kind of decision that is never really rational.
ETA: Oh, how could I forget property tax!! Actually, that is a pretty big chunk of money that is down the drain forever, and we even live in CA where the amount of property tax we have to pay relative to the value of the house is relatively small.
However, the homebuyer can pay a boatload of interest over 30 years, which in a way goes out the window the same way rent money does. It really depends on many many factors and people have studied the question of renting vs buying, but it’s quite complicated. It’s certainly not as simple as having something to show for it while renters don’t. Because if you made some different choices and rented, and say, invested in some other intruments as mentioned in the OP and by other posters, you can conceivably come out ahead monetarily over owning when all is said and done.
:shrug: I LIKE working on my own home. I also like living in something that is my responsibility. And, it will be paid off in a few years. No rent, no mortgage.
I bought a house right out of moving from my parents’ house, instead of renting, purely because I wanted a place that suited my needs. I didn’t want to share walls with anyone, I wanted a fenced-in back yard, I wanted some grass to mow, I wanted to paint with abandon, I wanted to knock holes in walls and choose my own plumber.
I had no aspirations to make an investment or save money. I don’t even particularly like doing projects myself - I prefer to come up with projects and pay people to do them.
I just wanted a place of my own that I could beat the shit out of, or improve upon, with no one else’s input (ok besides city regulations). Renting would never give me the ability to do that.
What is the usual price differential for owning vs renting, given similar dwellings?
I can see one case where ownership would be clearly preferable: Market crashes. Perhaps someone else will correct me, but rents seldom go down dramatically whereas house prices certainly do.
To take dmastch’s example, it might be very much worthwhile for someone to buy D’s house for 60k. The mortgage might be quite close to the rent if you buy when the market is depressed enough.
So my breakthrough idea is : buy low, sell high.
Unfortunately, it may be almost axiomatic that the average person buys high and sells low.
Like anything else in life, it isn’t for everyone. For me, I’ll have my house paid off before I’m 40 so that will be one less bill as I get older.
I know a few people who are renting well into their 40s, which is fine, but they have no real savings for their retirement and I often wonder “Where will they live when they can’t work anymore?” It doesn’t phase them so more power to them.
For me I like knowing that once the mortgage is gone it’s mine as long as I pay the taxes and do the upkeep.
My house will be paid off just about the time I retire. Then, just as my income is reduced by retirement, I will be living rent-and-mortgage-free. If I were renting, I would just have to keep paying that ever-escalating rent right on through my retirement.
That ever-escalating part is another key point in favor of buying. Rent goes up almost every year. Not so a mortgage payment if you lock in a fixed rate.