I should have been a contractor/tradesman.
this post was submitted on 02 Nov 2023
125 points (93.7% liked)
Personal Finance
3855 readers
33 users here now
Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!
Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)
founded 2 years ago
MODERATORS
all 30 comments
sorted by:
hot
top
controversial
new
old
Doesn't this mean that rent is too damn high?
In my country an average house that sells for 200k would be rented for 800 euro. It's 20 years, seems reasonable. Add taxes and the burden to pay all the maintenance and it becomes 25-30 years
Otherwise people would buy houses as an investment compared to a necessity
Repeat after me: it's okay to rent. Equity is not everything.
The downvotes are really depressing. My point is that we've been conditioned in America to focus solely on homeownership. The banks, title companies, realtors, and home contractors tout it as the American dream. No matter the personal cost--the down payment, the interest, the insurance, the maintenance--and no matter what negative externalities--sprawl, inefficient heating and cooling, increased infrastructure, car pollution, divorce and obesity from commuting--you must buy a house.
I get it. If your overriding concern in life is to maximize investment, then by all means pour your cash into a house.
I dont want to own because of equity, there is a lot of other reasons why owning is important for me. For example there is a lot of things I would like to do in my apt that I cannot as a renter: passing cables in the walls, moving a wall, adding some electric plugs etc. I also have less stability, even if I have some protections tbe owner could always decide to do some big renovations and kick me out.
Renting is okay, but there is big drawbacks and I should be able to own if I want to.
And aside from that, house prices going up also means rent going up. Rent going up means more people in the streets. It's just bad for everyone who is not already an owner
Definitely. The effects on your equity and net worth are nice to have obviously, but owning is nice for really tailoring your living space to your preferences.
This goes for outside too. Having a completely fenced in back yard for kids and dogs is so nice.
Renting and ownership can be fairly similar in larger cities (but costs more than owning a house in my state), but when you're in the rural America, there tends to be a fairly sharp decrease in quality of life despite the fact that rental prices adjust up with housing prices anyway.
I mean, I can still get a half-acre of land and private house for a mortgage payment that's about the same as the rent on a 2 bedroom apartment. Without having to worry about a landlord, an upstairs neighbor with toddlers. I can do what I want with my yard, even have any pet without an additional "pet fee".
And rental houses (the happy medium?) in my area are going for exactly what the mortgage would be to buy one today. We're talking $3000, even $4000/mo. Yeah, current rates are shitty, but that still gets you a $550,000 mortgage (used to get you closer to $700,000). And rent isn't going down any time soon, but one can likely refinance to a lower rate in 5-10 years
What it means to me is that I'm not selling my house, with my 3% APR mortgage any time soon despite the $200,000 in equity I have from the price skyrocket.
Well I wouldn’t sell at that rate either, getting 3% in this market just isn’t happening.
I just bought a house and we had to pay $10k just to buy points to get our rate down to 6.9 😭
Okay? I mean we live in two entirely separate worlds. $550k in my area gets you 850 sq ft with added condo fees. And of course if you're locked in (trapped?) at 3% you're not going anywhere. You can't go anywhere even if you wanted. If that's worth the advantage of doing your own landscape maintenance on the weekend, and having to drive everywhere for the simplest of errands, then head on.
and having to drive everywhere for the simplest of errands
You say that as if most people lived in cities that didn't require driving for every simple errand, whether they lived in a house or apartment. Good on you if you live in a walkable city, but you're the exception.
If your paying 550k for a 1 bedroom you better be living in a walkable city.
Lol. Salt Lake City. 300k for a one bedroom condo - almost not quite bikeable.
Okay? I mean we live in two entirely separate worlds. $550k in my area gets you 850 sq ft with added condo fees.
There's not many "worlds" with those price points, so you're probably in Boston, NYC, SF, or somewhere similar. I, too, live in one of the highest cost-of-living areas in the US, so I get it more than you think.
But rent in those areas... 1 Bedroom apartments in Boston $4000/mo for 800sqft. Same thing, actually a bit more expensive to rent than to buy.
you’re locked in (trapped?) at 3% you’re not going anywhere. You can’t go anywhere even if you wanted
How so? If I actually were willing to rent, I could pocket a couple hundred grand and just pay apartment prices.
If that’s worth the advantage of doing your own landscape maintenance on the weekend, and having to drive everywhere for the simplest of errands, then head on.
In fairness, on the price difference I can afford a landscaper and use delivery services for errands. But I don't mind mowing my lawn or driving, so I don't do those things. But I don't grok your point here. Are you suggesting nobody would actually want to live outside of big cities "because lawns and driving"? I understand some people love cities, and I respect that. I had a starry-eyed coworker who GUSHED about his visits to Boston. I like leaning back and chillin in my yard, swimming in my private pool, without anyone bothering me.
I mean, yeah, I guess ...
But, that seems like bad advice in general and I'm not sure why you would say that. I am genuinely curious if you care to explain. Beyond reading most of this article, I haven't done any research into current interest rates or house prices lately, so maybe there's more to it than I am aware.
Generally, buying a house is a good long-term strategy. You can give 100% of your money to somebody else with rent, or you can effectively put an increasingly bigger portion of that money into savings. Even if a mortgage payment is 50% more than rent somewhere, that difference would basically be the principal portion of the payment at the beginning and more later on, meaning it stays your money. And even if the price of houses are leveling off now, they're nearly guaranteed to go up at some rate.
According to the article, if you don't think you'll be able to keep your mortgage for 13.5 years, then it sounds like the closing cost and other fees could make it a bad investment. So maybe if you're 60 years old or if you don't ever expect to increase your salary then maybe this isn't a good idea. Otherwise, I don't think somebody should just blanket decide to resign to being a slave to housing and life in general.
Buying a home isn't as easy as it used to be. But it's not impossible. And it is probably the single biggest thing you can do to change the trajectory of your life. For many people, I would think it is worth serious consideration.
These are just my opinions, though. I'm not a financial advisor.
Generally, buying a house is a good long-term strategy.
The essence of it is that this is only true if housing prices continue to go up, which is fundamentally at odds with the societal goal of housing being affordable. Houses cannot be both cheap and good investments. Over the past ~100 years, housing has been treated largely as an investment vehicle, which has created the current mess where you're golden if you're rich enough to buy and thoroughly fucked if you can't.
We've been grossly underbuilding for decades relative to population growth in cities, and this is the result. We'd be much better off if we built enough to make housing a non-issue and left the investments to assets that aren't required to live. But also, depending on the market, rents can be cheaper relative to a mortgage such that investing the difference in stocks etc. will have you pull out ahead. That's beyond the fact that, in some markets, down payments are simply out of reach of most people. I'm in Manhattan, and a decent condo clocks in at around a million. I might get there if I get married and we save for a solid chunk of time, but this isn't a place where a young person can move and quickly decide to buy a place. Renting isn't a bad thing in situations like this.
Renting can absolutely make sense, and it makes more sense in some areas than others.
But generally speaking, it's better to rent if you're going to move frequently or your lifestyle could change suddenly (i.e. you want to have kids), and it's better to buy if you're going to stay put. Changes in lending rates, housing prices, and rents just shift how long you need to "stay put" to come out on up, but something like 5 years is a good rule of thumb (I'll need to look through the article's math).
So yeah, do the math your for situation and area. In most areas, buying is the better choice financially speaking, but there are plenty of exceptions. One important thing to note is that rent changes year over year, but mortgages stay the same (insurance and taxes can change though), so generally speaking, rents usually exceed your mortgage after some years.
Or you can afford it. I am living in a city where the average salary is the same as the average mortgage for a 3-room flat. It is absolutely crazy, a city with one of the highest real estate bubble indexes in the world, and a bubble that refuses to burst stubbornly and things are getting progressively worse.
Not to mention that you are also supposed to have 10% of the price + real estate agency fee, plus cover the initial taxes and governmental fees in order to get an better mortgage rate. It is absolutely sickening.
Mission impossible!
It certainly does depend on where you live.
In my area, a condo/townhouse goes for $400k give or take ($3500/month @ 0% down over 30 years), and the median household income is ~$75k (~$6k/month before tax, ~$5500 after tax). So that's something like 55-65% of net income, which isn't ideal, but still possible.
I don't think you understand mortgages very well.
You know you can remortgage or sell your house before it's paid off, right?
If I pay in £500 a month. Likely, 20-80 of that goes to interest. I'm gaining £480 in equity each month.
Which I can gain access it at near any point with very little penalty.
You're focusing very blindly on your single point of "the deposit". Which is the hurdle everyone should focus on however possible.
If I pay in £500 a month. Likely, 20-80 of that goes to interest. I'm gaining £480 in equity each month.
What kind of amortization schedule is this based on? This seems completely divorced from reality.
You get down votes on Reddit or Lemmy when you go against the hive mind. Heaven forbid you try to have a rational discussion with a different opinion.
Yep! Although I'll be over here trying to maintain other points of view.
And posting cute rabbit photos.
PS. I agree. Although generally people aren't renting unless they are making a profit off of it. So if you have the ability to and it's not a 100% awful time to buy, buying may save you that profit. But there a huge benefits to renting. And to owning. And huge drawbacks for both.
Generally, rents should be about equal to cost of owning... Because if one was much cheaper or much more expensive everyone would pick the other.
Another point here- if renting is cheaper and you invest the difference you're still building your equity in a potentially far more diversified safe way.
(Although I want to buy simply because a mortgage is a more predictable cost than rent!)
Renting - $2800 a month you give to somebody else for the "privilege" of a roof.
Vs
Owning - $2800 a month you give to the bank for one day calling it yours