Despite being an outspoken renter over the last five years (I’ve actually been a renter since 2001), I still believe there are virtues to home ownership. The emotional benefits are palpable, and there are financial reasons to own. The main financial reason I plan to own again soon is to lock in a cost of ownership lower than the cost of a comparable rental. A secondary reason is to obtain the “forced savings” benefit of a conventionally amortized mortgage. I know a lender would give me a HELOC if I asked, but I have no intention of it. At some point, I want to pay off a mortgage and live truly free.
Renting has been good to me, particularly over the last several years. At some point, I will buy a home, although given the current state of inventory, it won’t be any time soon. A new study says perhaps I would be better off remaining a renter. Financially, to come out ahead as a homeowner, I will need to hold the property long enough for appreciation to cover the cost of selling. Plus, I will need to lay off the HELOCs. My plans are to do just that, so I will come out ahead. I recognize the need for a disciplined approach. For those who don’t have such discipline, they will be better off renting — unless of course, they plan to game the system and live as a Ponzi….
Renting v. Buying: New Evidence Emerges & Informs Housing Policy
e21 Staff Editorial | 05/06/2011
The basic premise behind the panoply of government policies aimed at stimulating home construction and financing – the mortgage interest deduction, Fannie Mae and Freddie Mac, the Federal Housing Administration (FHA) loans, down payment assistance, among others – is that homeownership yields huge societal benefits in the form of improved neighborhood aesthetics, reduced crime, and more civic attachment.
The purported benefits of homeownership could actually be a classic case of reverse causality, as higher income households less likely to commit crime and more attached to the community tend to also be more likely to own homes.
The same is true of wealth studies that purport to show homeowners are wealthier than renters. It’s true that homeowners are generally much wealthier than renters, but it’s not because they owned their homes. People who have the financial discipline to sustain home ownership also have other financial habits such as saving which contribute to overall wealth creation. Although many renters also have these characteristics, a larger percentage of homeowners do; thus they have greater wealth.
However, even if these social benefits are only imaginary, the basic economic proposition of “owning” a home is often assumed to be so far superior to “renting” that government policies to allow the marginal household to buy a home make sense –simply because they provide an avenue towards wealth creation.
The sense that homeownership was an essential building block to household wealth was a key psychological driver of the mortgage boom. As much as government policy was to blame for getting people to purchase homes that they otherwise wouldn’t, it is important also to acknowledge the role played by “societal coercion.” As Yale professor Robert Shiller explains, “bubbles are impossible without extreme public enthusiasm.”
No kidding.
Individuals who would have otherwise been content to rent were often asked by friends, colleagues and acquaintances, “why throw your money away on rent?”
Apparently, it’s okay to throw away twice the money on interest.
Whereas the rent check simply vanished each month, the mortgage payment helped to secure something tangible and allowed one to participate in the upside of house price increases. If a household could afford to buy a dwelling, the prevailing wisdom went, why in the world would they be so dense as to rent?
Like any real estate truism, there are times when it is foolish to rent — like when it actually costs less to own than to rent. However, the moment prices get pushed above rental parity, homeowners become the fools who are throwing their money away on mortgage interest.
This sentiment was intensified by expectations of continued price gains in 2004-2006, when first-time homeowners worried that if they did not buy soon, they’d never be able to afford a home.
Buy now or be priced out forever. Every realtor who says this should be rounded up and shot.
A new academic article in Real Estate Economics turns this conventional wisdom on its head. Using data from 1979 to 2009, the authors demonstrate that renting was the superior investment strategy for most of the past 30 years. Counterintuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property.
Amen. The only difference between renting property and renting money is equity participation. When you rent property, you don’t share in the gains or the losses if values change. If you rent money, you do. This choice seems like a no brainer if you believe real estate prices always go up. However, we all know that isn’t the case.
The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.
I am always amazed by how many people don’t recognize renting money is akin to renting property. The self-styled smart buyers were the ones who used interest-only loans. They recognized they weren’t making much progress on paying down a mortgage, so they didn’t even try. Idiots.
Housing advocates may respond by pointing out that at least the $8,600 in this scenario went towards home equity rather than simply being squandered on rent. But, as demonstrated in the Real Estate Economics article, the principal component of each mortgage payment – i.e. the portion of the mortgage payment that goes towards reducing the principal mortgage balance instead of interest – is an added expense renters don’t have. During the housing boom, the wealth created from housing was not principal amortization, but rather large price gains on a highly leveraged asset. A 20% increase in the price of a house purchased with 5% down results in a doubling of the homeowner’s equity. These wealth gains proved illusory and were a function of the leverage involved (20-to-1 in the case of a 5% down payment) rather than anything related to housing.
To fully understand this phenomenon, it’s worth taking a few moments to review the graph below. The impact of speculative bubble equity is obvious.
The relatively small down payment gets magnified many times over as lenders inflate bubble equity. The actual, sustainable price gains barely outpace inflation. The only real benefit from ownership is the forced savings of loan amortization — and that is a great benefit, assuming of course, that lenders don’t let homeowners plunder it.
They key to understanding why renting is so often superior are “price-to-rent ratios,” which reflect the difference between the monthly cost of renting or buying equivalent residences. While it is often less expensive to rent than it is to buy, the relationship can change over time causing one of the two options to be an especially (or comparatively) good deal in some circumstances.
One of the key features of my monthly reports is the relative valuation compared to historic norms and to rental parity. I make it easy to identify when circumstances favor renting or owning.
… To put this change in concrete terms, imagine a two-bedroom, 1,800 square foot condo. In 1999, it required a $1,200 per month mortgage to buy, compared to a $1,000 monthly payment to rent (a price-to-rent ratio of 1.2). For the price-to-rent ratio to increase by 2.2-times over this period it might have cost $3,000 a month (in mortgage payments) to buy the property in 2006, compared to a $1,100 monthly rent payment. In retrospect, it is remarkable that it was the household spending $1,900 per month less to live in the same property that was considered to be “throwing money away.”
Yes, it is remarkable. Remarkably stupid. Back in 2007, this debate used to rage at the IHB. People would actually claim paying double the cost of ownership as compared to a rental was not a waste of money. At the time, considering how much illusory gains people obtained over the several years prior, this delusion was understandable, but no less foolish — as they all discovered when prices crashed.
Renting was better than buying for nearly all households during 2005-2007 because prices collapsed after that period. Importantly, the authors make clear that in general, renting is only the superior financial choice if the renting household has the discipline to invest its marginal savings into financial assets. Renting generates residual savings because the cash outlays tied to housing consumption (or purchase) are lower. But if renting households, or the individuals themselves lack the discipline to save this money, and instead increase non-housing consumption, any wealth gains will clearly disappear.
Just as renters most often squander any savings, unfortunately, loanowners often do the same through mortgage equity withdrawal.
The basic intuition is that the principal portion of mortgages is what usually leads to more wealth. But as this article shows, that’s because it represents incremental savings not because of anything intrinsic to the mortgage itself. Viewed in this light, the economic gains come not from “owning” a home but rather the forced savings generated by the principal portion of the monthly mortgage payment.
It is instructive that at the end of the analysis, the much-touted economic gains from homeownership really come from the forced savings of an amortizing mortgage.
This has always been the real benefit of home ownership. It was the reservoir for retirement most people could count on. The destruction and elimination of this reservior by lenders is one of the greatest tragedies of the housing bubble. The younger generations are currently being asked to overpay for baby boomers’ houses to fund their retirements, and later one, those same generations will be asked to pay more in social services to support the Baby Boom Ponzis who squandered their home savings through a lifestyle of mortgage equity withdrawal.
And this benefit only accrues to myopic households that would not otherwise save.
No. It’s worse than that. This benefit only accrues to households that don’t empty the housing ATM the moment any equity accrues. Lenders have eliminated the benefit of forced savings through unfettered access to home equity through HELOCs. Many homeowners are in fact loanowners who have come to regard home price appreciation as income they are free to spend.
Thus, the government could replicate the same economic benefit generated by federal housing policy through a simple deduction from checking accounts that could then be deposited into a tax-free savings vehicle. This is an important point to consider the next time someone argues that removing or lowering a housing subsidy will necessarily inflict an acute economic hardship on the nation.
Think about that idea. If we simply removed any limitations on contributions to IRAs, we could produce the same economic benefit as all the housing subsidies combined. The Ponzis won’t like that idea, but those asked to pay their bills should strongly consider it.
Thank you WAMU
Renting may be better for those who play by the rules, but those who game the system, owning is much, much better.
- This property was purchased on 10/8/1998 for $250,000. The owners used a $207,500 first mortgage and a $42,500 down payment.
- On 12/7/1998 they obtained a $25,000 stand-alone second.
- On 11/15/1999 they obtained another $35,000 stand-alone second mortgage.
- On 10/28/2002 they refinanced with a $200,000 first mortgage.
- On 8/9/2004 they obtained a $250,000 HELOC.
- On 6/7/2006 they refinanced with a $565,000 first mortgage from WAMU.
These former owners did lose their house, but they managed to extract $357,500 before they left. I doubt their rental will be so rewarding.
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Proprietary OC Housing News home purchase analysis
24836 HON Ave Laguna Hills, CA 92653
$450,000 …….. Asking Price
$250,000 ………. Purchase Price
10/8/1998 ………. Purchase Date
$200,000 ………. Gross Gain (Loss)
($20,000) ………… Commissions and Costs at 8%
============================================
$180,000 ………. Net Gain (Loss)
============================================
80.0% ………. Gross Percent Change
72.0% ………. Net Percent Change
4.2% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$450,000 …….. Asking Price
$15,750 ………… 3.5% Down FHA Financing
3.55% …………. Mortgage Interest Rate
30 ……………… Number of Years
$434,250 …….. Mortgage
$112,915 ………. Income Requirement
$1,962 ………… Monthly Mortgage Payment
$390 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$113 ………… Homeowners Insurance at 0.3%
$452 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,917 ………. Monthly Cash Outlays
($293) ………. Tax Savings
($677) ………. Equity Hidden in Payment
$18 ………….. Lost Income to Down Payment
$133 ………….. Maintenance and Replacement Reserves
============================================
$2,097 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,000 ………… Furnishing and Move In at 1% + $1,500
$6,000 ………… Closing Costs at 1% + $1,500
$4,343 ………… Interest Points
$15,750 ………… Down Payment
============================================
$32,093 ………. Total Cash Costs
$32,100 ………. Emergency Cash Reserves
============================================
$64,193 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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31 Responses to “New study contends renting is superior investment to owning for most Americans”
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the National Association of realtors – those wonderful people who bring you the existing home sales update every month (with a documented upward bias every single time) – which just so happens is the only organization that actively lobbied for and received an exemption from AML regulation compliance.
That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.
http://www.zerohedge.com/news/why-nar-will-never-be-prosecuted-facilitating-money-laundering
NAr lobbies for and gains right to launder money from international criminals
Many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of “know your client” and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.
Here’s their official position:
“NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions.”
Hat’s off to the NAR – that is some serious doublespeak. My translation: We’ll support you as long as we don’t have to support you
There will be a HUGE risk of money laundering involving real estate agents and brokers if they are systematically excluded from regulations governing all the other parties that deal in large transactions where cash can be wired from who knows where in large quantities. Even casinos are subject to the regulations now.
I work for a bank and these regulations are NOT burdensome. You have to go to a website and enter the name(s) of the party or parties involved in the transaction. If you get a hit you have to do a little research. You almost NEVER get a hit…because people doing shady things know banks are going to run their names through the OFAC screen.
A shady party can use this loophole to buy property in America…then they have a valid reason for coming here, so its easier to get a visa. Thanks NAR!
IR: At some point, I want to pay off a mortgage and live truly free.
——————————————————
Well, you owe taxes on the property infinitas, even if you don’t have a job, not to mention upkeep expenditures (which always increase with the inflation everybody knows is coming); so, it’s just not possible to ”live truely free”
Southern California has more existing housing than new housing on the market, most buyers will be purchasing existing homes. It’s not 1955 where LA/OC still had a lot of open land. Maintenance will become a bigger expense for the average household.
I saw a house built as recent in 1968 was almost a tear down, because it was maintained so bad, really not at all. The agent quoted a contractor saying it take $150,000 to get it back into excellent condition.
What is the average lifespan of a southern california home? If you take out a 30 year mortgage on a 1960′s home will it even be around when the mortgage period ends?
Nothing is certain except death and taxes.
IR, you were ahead a of the curve. This going to help delay the trade up buyer. If you purchase your first home in your 30′s or 40′s, it’s going to be awhile before you can trade up.
Recession Generation Opts to Rent Not Buy Houses to Cars
By Caroline Fairchild | Bloomberg – 10 hours ago
The day Michael Anselmo signed a lease on his first apartment in New York City, he lost his job at Buck Consultants LLC. He spent about 10 months struggling to pay rent with unemployment benefits. Two years later he’s still hesitant to buy a home or even a road bike.
“Every decision that I have made since I lost my job has been colored by that insecurity I feel about the future,” said Anselmo, 28, who now rents an apartment in Austin, Texas, and works as a consultant for UnitedHealth Group Inc. “Buying a house is just further out on the timeline for me than it used to be.”
Anselmo and many of his peers are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.
As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers like Anselmo, said Cliff Zukin, a professor of public policy and political science at the Edward J. Bloustein School of Planning and Public Policy at Rutgers, the state university of New Jersey.
Recession Effects
“This is a generation that is scared of commitment, wants to be light on their feet and needs to adjust to whatever happens,” said Zukin, who’s researched the effects of the recession on recent college graduates. “What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it.”
One key difference is that technology now allows companies to provide younger consumers access to what they want, when they want it and at a reduced cost, said Paco Underhill, founder of New York-based consumer-behavior research and consulting firm Envirosell.
“Renting is something that is in play that wasn’t in play during the Great Depression,” he said. “To a modern generation, ownership isn’t about having it forever, it is about having it when you need to have it,” said Underhill, who has studied shopper behavior.
Hourly Rental
Enterprise Holdings Inc. and Hertz Global Holdings Inc. (HTZ) are expanding in what the Santa Monica, California-based research firm IBISWorld estimates to be the $1.8 billion hourly car- rental business, a segment dominated by younger drivers and made popular by Zipcar Inc. (ZIP) Startups such as Rent the Runway Inc. are supplying high-fashion apparel to satisfy those who want to wear, not own. CORT, a unit of Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), is increasing its furniture-rental marketing efforts to college students and fledgling households, said Mark Koepsell, CORT’s senior vice president.
8 Ways to Save Big on Rent
My landlord rents her properties at $850 a month. But I pay $750.
Why? Shrewd negotiation, patience, and a lot of research got me a $100-a-month discount. But that isn’t the only way to save money on rent.
1. Shop around
The Internet has turned me into a hardcore comparison shopper, and apartments are no different. There are dozens of apartment rental sites listing dozens of properties in my hometown. It pays to check out several of these sites when you’re looking for a new pad. I mentioned a few sites you should use (and a few you shouldn’t) in The Best (and Worst) Apartment Rental Sites.
But don’t stop your search with your computer. I found my last apartment through a “For Rent” sign in the window. The place was $150 cheaper than anything else I found, and I never saw an online ad for it.
2. Move a few miles away
Location is everything in real estate. If you live in the most popular area, you’re going to pay the highest rent. But if you move a couple of miles (or sometimes even a few blocks) away, you can get a serious discount. For example, renters in my city (New Orleans) pay about $1,250 a month to live in studio apartments on a trendy street. I live four blocks away and pay $750 a month for a one-bedroom. I don’t get bragging rights, but I’m still within walking distance – and I’m saving $500 a month.
3. Wait
I start looking for a new apartment a month or two before I need one. If I find a place I like, I keep an eye on it. More often than not, private landlords lower their asking price if they don’t find a tenant within a week or two.
4. Sign a longer lease
You’re locked into your rent as long as you’re under a lease. If you sign a longer lease, you’ll be locked into the lower rate if the cost of rent goes up. Two years ago, my friend signed a three-year lease on his apartment. Last year, the landlord raised the rent $200 across the complex. By locking himself into a set rate for three years, my friend has saved $2,400 so far.
5. Haggle
I am not a haggler, but when it comes to my single biggest expense, I negotiate. It doesn’t always work, but if you do your homework – and give the landlord a good reason – he may be willing to lower the rent. (Learn how to haggle here: The Simplest Way to Save on Everything.)
Start by researching the average rent in the area. If the landlord is charging more than everyone else, print out a few ads to prove it. Then convince the landlord that he should want you as a tenant. I ask for referral letters from my previous landlords, make copies of my bank statements, and pull my credit report. By showing the landlord that I’m a good tenant – and I know that he’s over-charging – I can negotiate a better rate.
6. Look for free perks
I always compare the cost of the rent with the amenities or the utilities that are sometimes included. For example, I recently looked at two duplexes. One went for $775 a month but didn’t include any utilities or a parking space. The other rented for $800 a month but included water, trash, Wi-Fi, and an off-street space.
Obviously, $775 is cheaper than $800. But when you consider the average water and trash bill in my area is $50 a month, and the average Internet cost is $45 a month, I’d actually save $95 a month by going with the more expensive rental.
7. Trade work for rent
If you have a skill a landlord needs, you might get a discount on your rent. My landlord rents a unit to a tenant who also serves as our maintenance guy. In exchange for doing the odd job, he gets $350 a month off his rent.
But you don’t have to be handy with tools. Landlords occasionally need people to maintain their website, design rental ads, or manage their properties. If you’ve got free time, offer to trade your services for a discount.
8. Turn a profit on your rental
A few of my neighbors have made a quick profit by renting out their place for the night to tourists. Granted, there are some serious downsides to the idea – like your place possibly getting trashed – but my neighbor made $300 in two nights. If you live in a popular city, you could stand to make a profit a few times a year. Just make sure you get your landlord’s approval – and ask for a security deposit before you open the door to strangers.
If you’re a renter, also check out 6 Myths about Renter’s Insurance – and How to Save and 9 Ways to Remodel Your Rental Without Breaking Your Lease.
IR, that’s all great advice for a normal market. The market we are in currently is everything but normal. Due to the ultra low inventory, many people who want to buy can’t so they are stuck renting. Landlords are getting aware of this and jacking up rent yearly. Most renters will probably just grin and bear it since it’s more hassle to find another rental and move.
I’m confused by the example above, comparing buying vs. renting in 1999. Assuming a fixed rate mortgage and no refi or HELOC:
The homeowner has the option to sell during the bubble, putting a bundle in the bank, and renting until prices come back down to earth. The renter never has this option.
If you didn’t sell, the mortgage payment on this property is still $1200. How much is this property to rent today?
Yes, the conclusions in the article don’t make a lot of sense unless you selectively ignore the advantages to owning. Of course, el ORACLE thrives on this kind of spin.
Please provide readers with the current advantages of owning.
Thx in advance
You’ve owned your home since 1994 so I’m sure you could elaborate on the advantages better than I could.
P.S. What in the world compelled you to buy when you could have been renting this entire time? Think of the killer returns you would have gotten on that money.
C’mon man, you’re deflecting. LOL.
Let’s face it….pdu was better at provoking responses to trivial questions than you are. Stay thirsty my friend.
There are few who will sell at the top of the bubble and rent. Most will do just the opposite and buy during the bubble and hang on all the way down.
My second point stands, though. We fit the example pretty closely.
Bought in ’98, with an $1100 mortgage payment. Payment today is still $1100. To rent a comp property it’s almost $2000 a month in our neighborhood.
If the author wanted to strengthen the argument of why renting beats owning, they could have done better than cherry picking 1999 as the date of purchase. Just sayin.
I suspect the administration has told the Treasury Department to cook the books at the GSEs to make sure there are no draws prior to the election.
Freddie Mac Won’t Draw from Treasury This Quarter
Things are looking up at Freddie Mac. As of the end of the second quarter, Freddie Mac had a positive net worth and reported it will not require a draw from Treasury this quarter. At the end of June, the GSE had $1.1 billion in net worth.
The new net worth is the result of $2.9 billion in comprehensive income during the second quarter. About $1.8 billion was paid to Treasury as dividends on 10 percent preferred stock.
“[O]ur financial results enabled us to avoid an additional draw from the U.S. Treasury, despite paying a $1.8 billion cash dividend to the nation’s taxpayers,” stated Donald H. Layton, CEO of Freddie Mac.
Freddie Mac’s net income of $3.0 billion in the second quarter is a jump from the $577 million recorded in the first quarter. The increase “primarily reflects a decline in the provision for credit losses due to positive trends in the housing market,” Freddie Mac stated in a press release Tuesday.
One of Freddie Mac’s stated goals is to provide liquidity to the market. The GSE reported that since 2009, it has provided $1.5 trillion in liquidity by purchasing and issuing mortgage loans.
Freddie Mac purchased or issued $215 billion in loans and mortgage-related securities in the first half of this year.
Also since 2009, Freddie Mac has assisted in providing refinances to about 5.2 million families, helping them save an average of $2,500 per year.
Freddie Mac has reached more than 680,000 families through the government’s Home Affordable Refinance Program (HARP). The GSE helped about 200,000 families through HARP in the first half of this year.
The GSE also reports preventing 700,000 foreclosures since 2009, about 81,000 so far this year.
Freddie Mac’s serious delinquency rate among its single-family book of business is 3.45 percent as of the end of June.
Ed DeMarco hasn’t shown any willingness to cooperate with the administration, so why would you think that?
I think DeMarco’s apparent lack of cooperation with the administration is a ruse. I think the administration wants him to do exactly what he is doing, and they want to publicly criticize him to pander to their own base.
Spot-on. DeMarco was appointed by Obama.
Either MR has a lot to learn about politics or he’s much MUCH younger than he looks
Found one of my old realtor notepads, did ya?
I have to disagree with the article. IF you didn’t buy at an overinflated3x price.
Buying was better than renting for a typical American. Because that’s how most get their nest egg.
A lot of people spend every bit of income and the house buying helps put some of that away, not everyone is a savvy saver, not many at all. Even if you take a loss over 30 it is probably better than not buying at all, long term respectively speaking.
The average American term of home ownership is seven years. Over that timeframe, owning and renting are a wash. If you keep increasing the ownership period, the benefits of a fixed cost of ownership make it a better choice. For those who own less than seven years, renting is almost always a better choice, particularly if the cost of ownership exceeds the cost of a rental.
The most profitable aspect of buying a home is the leverage one gains by taking on a mortgage. Other than mortgage leverage, residential real estate is a fairly poor investment compared to other investments on a long term basis.
Maybe we need to do a post on Earthquake Insurance?
Agreed. Long term. I know a lot of people who grew up in their homes 15-20 years and more, parents sell in retirement to smaller or warmer climates, florida etc. Short term is investing. Different conversation. But a lot of people stay put and work the same job, not CA so much, but many other states and outside of the big cities.
The urban coastal regions behave much different from the rest of the country. Mid-west RE has not really gone up, if you count the cost of maintenance. The weather is really tough on the roof, siding, and AC. Insurance is also high. Between 1970 to 1995 it was much better to rent and use the extra money in the stock market.
I’m so torn, as the thought of staying in the same house for 20+ years just isn’t that appealing to me in concept. But in reality, I’d hate to find out 20-30 years later that I would’ve preferred the stability of owning. A lot of people (myself included) have never lived in the same house for more than 7 years. I know many who haven’t for more than 3 years. Our society and idea of “home” has an answer for people like us. It’s called renting. The plan is that by the time you want to settle down (even in your 50s or 60s) you have money saved/invested from not over-paying on a mortgage to buy a place that suits your needs. I’d have to be a completely different person to stay put for 20+ years right now and I don’t think I’m alone in that.
You’re not alone, and the both the banks and the homebuilding industry are afraid more people like you will diminish demand for houses long term.