I am a home owner since 1998 I think that none of you arguments against owning make sense to me. To me your writing reads like following: due to the world gone crazy I can no longer afford to buy house so let's concoct some soul soothing reason and pretend that all is fine.
There used to be a world where you could get INTO the investment with almost free money. You can't get a 2% loan and dump it into the stock market. Well you can't do either anymore but you used to be able to :)
I think a better take away from this article is that if you aren’t buying your home like an investment (looking at cash flow and prioritizing financial outcome over all other factors such as distance to work or functionality), then you shouldn’t consider your home one. You’re paying for a place to live and if it happens to be financially sound, great. Otherwise you need to accept that you might lose money on it. Somehow this has been normalized for cars but not homes.
My mortgage is $1900 a month and I am extremely grateful for that, because it's been that for three years. I chose to buy so that I could have more predictability in my housing costs, and maybe someday I'll move, but then I'll rent it out. All that to say, if you can buying is infinitely better.
And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.
Yep, owning gives you a lot more control over your living situation. I do think the financial case is really overrated, especially if you get hit with some expensive repairs, but that's not what I like about owning a house. A lot of people, including myself, have had some really nasty scrambles when a lease didn't get renewed like they were expecting and suddenly had to move in a hurry. That can really suck, especially if it happens at a bad time like with a new kid or sick relative.
Owning also lets you invest in your space a lot more, and I'm not really talking about fancy remodels that cost tens of thousands. More like smaller projects like adding a nice catio, buying workout equipment that fits your space, or setting up a nice home office in a dedicated room. My partner and I held off on all sorts of purchases and projects like that while we were renting because each would have been a huge hassle to move, and might not have fit in the next place we lived. The costs are manageable for a long term improvement, but I wouldn't want to toss one out in a year. Now that we own a house we have have gone ahead with a lot of those additions and they make our living situation much more pleasant.
The argument the author makes about the returns in stocks being higher than returns in real estate does not really hold when taking leverage into account.
In my country, buying a home is the only way to get cheap debt for the vast majority of people.
It's interesting to paint the homeowner as an emotional person and the renter as the pragmatic, however both are roughly equally emotional.
As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.
They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.
Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.
The framing makes it seem as if valuing stability is somehow inferior while elevating financial growth. This makes me think our financial and housing systems have become so distorted that it has infected our thinking. Adult humans are often super resilient, but kids aren't. Moreover, even adults have limits. I don't want to live in a system filled with chaos just because it makes some intangible number go up. We're all going to die one day. What will we leave behind, material or otherwise? Stability seems very underrated.
Home prices have dramatically exceeded inflation for a long time, so you're getting advice from people who reaped huge appreciation gains. Now housing prices are hitting affordability limits, interest rates are less appealing, so it's unclear if the future will look like the past.
My spouse and I quite like where I am now, but I don't want to buy something here due to rates, insurance and future potential of the city. So, I've pretty much settled on buying something small in another city and renting it out while we rent here.
I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p
This is written from the perspective of someone who doesnt have kids or other ties that reduce flexibility (and from that perspective I agree a house is a huge liability in term of being able to make big life changes). It also sucks if you have neighbors you can't stand.
The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.
Being 47 and still renting I think the piece missed a big issue, which is most prevalent these days: we cannot afford to buy. Anything. Anywhere.
I reckon I’m fatally doomed to renting.
Median first time home buyer is 35. Median first child birth age is 27. Most people buying their first home aren't looking for the flexibility to move every year.
This is one persons opinions on their own situation. It’s written too broadly, but does a reasonable job representing one side of the tradeoffs that people should consider. It is not particularly balanced or overly insightful for anyone who has spent much time thinking this stuff through, and a lot of statements that could be backed by data are not and are simply asserted as fact. (For example, the idea that renters are more likely to pursue promotions is a very non-serious argument unless backed with some actual data)
If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)
As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.
There is one unmentioned far future benefit: if you pay your mortgage off before retirement you'll probably enjoy more shelter security than your peers. Rent is a monthly cost (eating into your retirement) that could skyrocket (which your retirement plans may not have accounted for).
Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.
I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.
Pretty lacking in math for an article that mentions math a few times.
I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion.
https://arriens.us/articles/housing.html
I have owned a few homes over the years and have also had many landlords. The house we rented in Lafayette, Ca in 2010 was in a nice hood. At the time it was 2 years past the financial crisis and homeownership was not something I wanted to do for a while. The land lady we rented from wanted to sell the house for 650k. That house is now 4.3 million on zillow. Granted it has since had a renovation and an addition, but still. We also rented a townhouse in Encinitas, Ca. The rent was 3k a month in 2017 and now a similar townhouse in the same complex is renting out for 6500. The problem with renting is that eventually you get priced out of the nicer hoods. The problem with not buying a house when a deal shows up in a decent hood is that eventually that hood will never be affordable to mere mortals again. Maybe these rules only apply to California.
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[ 3.1 ms ] story [ 61.0 ms ] threadAnd the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.
Owning also lets you invest in your space a lot more, and I'm not really talking about fancy remodels that cost tens of thousands. More like smaller projects like adding a nice catio, buying workout equipment that fits your space, or setting up a nice home office in a dedicated room. My partner and I held off on all sorts of purchases and projects like that while we were renting because each would have been a huge hassle to move, and might not have fit in the next place we lived. The costs are manageable for a long term improvement, but I wouldn't want to toss one out in a year. Now that we own a house we have have gone ahead with a lot of those additions and they make our living situation much more pleasant.
In my country, buying a home is the only way to get cheap debt for the vast majority of people.
As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.
They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.
Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.
That sometimes under the right circumstances a home is both a great place to live, the best deal you can get in your area, and also an investment
You sort of alluded to it in your post, but it’s different for everyone, but then you go on ahead and speak as if there were one answer
Good for you you chose to rent - you don’t have to deny homes potentially being good investments to validate your decision
I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p
The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.
If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)
As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.
Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.
I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.
I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion. https://arriens.us/articles/housing.html