Author Topic: Not buying a house is the single biggest millennial mistake  (Read 6272 times)

mindy

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"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none". True story. You can't become wealthy by saving money or anything. You have to put it all into a house which will obviously appreciate.

http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html


stylesjl

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Re: Not buying a house is the single biggest millennial mistake
« Reply #1 on: March 08, 2017, 12:13:11 AM »
"The average homeowner to this day is 38 times wealthier than a renter."

Talk about a form of selection bias! Absolutely not the slightest attempt to account for the fact that people who own houses are likelier to be wealthier to start with.

Not to mention extrapolation of past performance (when he talked about moving from San Francisco to New York), assuming that the bull market he lucked out on will hold indefinitely.

Linda_Norway

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Re: Not buying a house is the single biggest millennial mistake
« Reply #2 on: March 08, 2017, 12:30:26 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

jinga nation

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Re: Not buying a house is the single biggest millennial mistake
« Reply #3 on: March 08, 2017, 06:13:00 AM »
People can't even complete 30 years of marriage. Or even divorce amicably. A 30 year mortgage is another ball-and-chain for these people.

Commitment-phobes should stick to a lifetime of renting. Some of us need our renter supply chain working constantly.
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MrGville

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Re: Not buying a house is the single biggest millennial mistake
« Reply #4 on: March 08, 2017, 07:34:02 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.

Drifterrider

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Re: Not buying a house is the single biggest millennial mistake
« Reply #5 on: March 08, 2017, 07:56:37 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

I think most people don't differentiate between price and cost.  The price might be $100,000 but with 30 years of interest, taxes and insurance; the cost would be substantially more.

The banking and real estate industry has been pushing the notion that a house is an investment and most people don't have very high FI-Qs; so they follow. 

Not buying a house for younger people might just be the smartest choice they make.  Unless you have a reasonable expectation you will remain in that area long term (you are not transient in nature), buying could well be a mistake.

Chris22

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Re: Not buying a house is the single biggest millennial mistake
« Reply #6 on: March 08, 2017, 07:57:55 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.

Well, obviously, they'd be renting somewhere...  Which should be cheaper than the mortgage, but probably not THAT much cheaper. 
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StarBright

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Re: Not buying a house is the single biggest millennial mistake
« Reply #7 on: March 08, 2017, 08:08:05 AM »

Well, obviously, they'd be renting somewhere...  Which should be cheaper than the mortgage, but probably not THAT much cheaper.

^ yes.

Though I have to say, one size fits all advice in a country as geographically diverse as the US drives me crazy. We went from renting to buying in 2016, taking the chance that we'll settle down for several years. If you have enough for a downpayment then having a mortgage is much cheaper than renting in our region.

We're saving $500 a month now that we have a mortgage. $350 of that is going straight into my DH's 457 that we opened when we bought the house (the rest is being put back for house maintenance). If we had kept renting that would have just been eaten away with raising rents year over year.
« Last Edit: March 08, 2017, 08:10:42 AM by StarBright »

J_Stache

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Re: Not buying a house is the single biggest millennial mistake
« Reply #8 on: March 08, 2017, 08:16:45 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.

Well, obviously, they'd be renting somewhere...  Which should be cheaper than the mortgage, but probably not THAT much cheaper.

All depends on area.  My mortgage is a few dollars less than my rent was before I bought.  When no one can afford a downpayment, it's really easy to hike rents.

talltexan

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Re: Not buying a house is the single biggest millennial mistake
« Reply #9 on: March 08, 2017, 08:19:56 AM »
Perhaps young people need to be educated about the downside risks of home-ownership:

Your house can go down in value. The things that make this happen could also result in you losing your job at the exact same time, meaning you'll want to move!!!

The person who buys your house can sue you. Even if you did everything right, you're now paying rent for your attorney's downtown condo because he's the only one who can protect you.

The money you store inside your house can only be set free when you sell it, which you need a whole cast of people to help you do, and every one of them wants a little piece.

Chris22

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Re: Not buying a house is the single biggest millennial mistake
« Reply #10 on: March 08, 2017, 08:23:45 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.

Well, obviously, they'd be renting somewhere...  Which should be cheaper than the mortgage, but probably not THAT much cheaper.

All depends on area.  My mortgage is a few dollars less than my rent was before I bought.  When no one can afford a downpayment, it's really easy to hike rents.

Yeah, I know rents and mortgages can be disconnected and one is cheaper than the other in various markets, my point was simply that "well, if you didn't have a $1k/mo mortgage you wouldn't have the discipline to save that $1k/mo!" is stupid because if you didn't have a $1k/mo mortgage you'd probably have a $700 or $1200 or whatever rent payment.  Very few people, especially young people, can just choose to go without paying for housing. 
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MilesTeg

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Re: Not buying a house is the single biggest millennial mistake
« Reply #11 on: March 08, 2017, 09:42:30 AM »

"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none". True story. You can't become wealthy by saving money or anything. You have to put it all into a house which will obviously appreciate.

http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html

Actually, it's very true (though probably not for the reasons expressed in the linked article), regardless of how much currency you have. Currency is not wealth. Holding items of real, tangible value is wealth. USD, stocks, bonds and most of the things that investors accumulate are not wealth. Gold, silver, etc. has some tangible value, but not nearly as much as it's current going rate. Real Estate also has inflated value, but also has the virtue (unlike precious metals) of having practical use for common people.

MilesTeg

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Re: Not buying a house is the single biggest millennial mistake
« Reply #12 on: March 08, 2017, 09:47:29 AM »
A mortgage that needs to be paid off in 30 years is a forced way of saving the whole price of your house over 30 years. This might be more than people are willing to save by themselves otherwise.
It is of course not smart to assume that houses will continue to increase in value forever.

Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.

Well, obviously, they'd be renting somewhere...  Which should be cheaper than the mortgage, but probably not THAT much cheaper.

Depends on the locale. In my locale (moderate COL), you typically can buy a house (even with zero down!) for substantially less than the rent on a comparable property. This is despite (or perhaps because of) a very hot local market. We just sold a house for $300k with a 800 PI payment (80% LTV) that is now being rented out for $1800/mo, which is typical of the area.

RFAAOATB

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Re: Not buying a house is the single biggest millennial mistake
« Reply #13 on: March 08, 2017, 02:37:21 PM »
Very few people, especially young people, can just choose to go without paying for housing.

Young people are some of the most able to choose to go without paying for housing.  Moving back in with your parents can be very financially lucrative.

MgoSam

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Re: Not buying a house is the single biggest millennial mistake
« Reply #14 on: March 08, 2017, 03:01:55 PM »
This article isn't terrible for the vast majority of consumers. 2/3 of Americans don't save for retirement (article I saw said 401k, but I think the numbers are similar), and so buying a home likely is among the better things they can do with their money. Sure it's forced savings, but at least it's better than to have equity than nothing*.

*I realize that renting isn't simply throwing your money away as you get a place to live and someone else who worries about taxes and upkeep.

Helvegen

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Re: Not buying a house is the single biggest millennial mistake
« Reply #15 on: March 08, 2017, 05:45:12 PM »
This article isn't terrible for the vast majority of consumers. 2/3 of Americans don't save for retirement (article I saw said 401k, but I think the numbers are similar), and so buying a home likely is among the better things they can do with their money. Sure it's forced savings, but at least it's better than to have equity than nothing*.

*I realize that renting isn't simply throwing your money away as you get a place to live and someone else who worries about taxes and upkeep.

Also if it just is plain and simple cheaper to rent than buy. I am sure not going to be able to buy the SFH I rent for the same price I rent it for. I have never actually rented a house for the cost of ownership, always much below it. It makes no financial sense to buy as long as I keep finding these kinds of deals around on rentals. First two SFH rentals were Mom and Pop, the current one, sort of Mom and Pop, but on a larger scale. 1 and 3 paid off the homes a million years ago and were long since retired. 2 was retired for five minutes and then health crisis forced them to move (too far from now needed medical services) and start working again. The market could not support any higher rent because rural area/no jobs/just starting to come out of the recession. The house was worth $400k (they were unwilling to sell because they thought it was worth $500-600k), but we rented it for $1200. That was a beautiful two years until job change and commute forced a move. We still miss it, but oh well.

 
« Last Edit: March 08, 2017, 05:49:41 PM by Helvegen »

talltexan

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Re: Not buying a house is the single biggest millennial mistake
« Reply #16 on: March 09, 2017, 07:22:13 AM »

"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none". True story. You can't become wealthy by saving money or anything. You have to put it all into a house which will obviously appreciate.

http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html

Actually, it's very true (though probably not for the reasons expressed in the linked article), regardless of how much currency you have. Currency is not wealth. Holding items of real, tangible value is wealth. USD, stocks, bonds and most of the things that investors accumulate are not wealth. Gold, silver, etc. has some tangible value, but not nearly as much as it's current going rate. Real Estate also has inflated value, but also has the virtue (unlike precious metals) of having practical use for common people.

I'm going to push back on this regarding stocks: ownership of a slice of a (potentially profitable) business has value, and therefore should be considered wealth.

LalsConstant

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Re: Not buying a house is the single biggest millennial mistake
« Reply #17 on: March 09, 2017, 07:33:03 AM »

"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none". True story. You can't become wealthy by saving money or anything. You have to put it all into a house which will obviously appreciate.

http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html

Actually, it's very true (though probably not for the reasons expressed in the linked article), regardless of how much currency you have. Currency is not wealth. Holding items of real, tangible value is wealth. USD, stocks, bonds and most of the things that investors accumulate are not wealth. Gold, silver, etc. has some tangible value, but not nearly as much as it's current going rate. Real Estate also has inflated value, but also has the virtue (unlike precious metals) of having practical use for common people.

I'm going to push back on this regarding stocks: ownership of a slice of a (potentially profitable) business has value, and therefore should be considered wealth.

Also stocks are the best way to buy tangible wealth.  I for one have some small claim on all of the facilities trucks and machines owned by Exxon Mobil, the Coca Cola Corporation, 3M, etc.

Chris22

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Re: Not buying a house is the single biggest millennial mistake
« Reply #18 on: March 09, 2017, 07:41:42 AM »
This article isn't terrible for the vast majority of consumers. 2/3 of Americans don't save for retirement (article I saw said 401k, but I think the numbers are similar), and so buying a home likely is among the better things they can do with their money. Sure it's forced savings, but at least it's better than to have equity than nothing*.

*I realize that renting isn't simply throwing your money away as you get a place to live and someone else who worries about taxes and upkeep.

Also if it just is plain and simple cheaper to rent than buy. I am sure not going to be able to buy the SFH I rent for the same price I rent it for. I have never actually rented a house for the cost of ownership, always much below it. It makes no financial sense to buy as long as I keep finding these kinds of deals around on rentals. First two SFH rentals were Mom and Pop, the current one, sort of Mom and Pop, but on a larger scale. 1 and 3 paid off the homes a million years ago and were long since retired. 2 was retired for five minutes and then health crisis forced them to move (too far from now needed medical services) and start working again. The market could not support any higher rent because rural area/no jobs/just starting to come out of the recession. The house was worth $400k (they were unwilling to sell because they thought it was worth $500-600k), but we rented it for $1200. That was a beautiful two years until job change and commute forced a move. We still miss it, but oh well.

That's short term though (which is fine if you are not planning on being somewhere long term).  Longer term, I'd rather lock in the price of a house and stay there indefinitely for a (mostly) defined amount of money.
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KBecks

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Re: Not buying a house is the single biggest millennial mistake
« Reply #19 on: March 09, 2017, 07:53:26 AM »
One question is how much rent a young person spends -- rents can be as much as mortgages, or they can be cheaper, in older, less fancy apartments.  I lived in cheap rentals until we bought a house.  It worked.  The places were safe and I got a good value, but it is tempting to get a snazzy apartment and blow the chance to save.

StarBright

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Re: Not buying a house is the single biggest millennial mistake
« Reply #20 on: March 09, 2017, 08:30:06 AM »
This article isn't terrible for the vast majority of consumers. 2/3 of Americans don't save for retirement (article I saw said 401k, but I think the numbers are similar), and so buying a home likely is among the better things they can do with their money. Sure it's forced savings, but at least it's better than to have equity than nothing*.

*I realize that renting isn't simply throwing your money away as you get a place to live and someone else who worries about taxes and upkeep.

Also if it just is plain and simple cheaper to rent than buy. I am sure not going to be able to buy the SFH I rent for the same price I rent it for. I have never actually rented a house for the cost of ownership, always much below it. It makes no financial sense to buy as long as I keep finding these kinds of deals around on rentals. First two SFH rentals were Mom and Pop, the current one, sort of Mom and Pop, but on a larger scale. 1 and 3 paid off the homes a million years ago and were long since retired. 2 was retired for five minutes and then health crisis forced them to move (too far from now needed medical services) and start working again. The market could not support any higher rent because rural area/no jobs/just starting to come out of the recession. The house was worth $400k (they were unwilling to sell because they thought it was worth $500-600k), but we rented it for $1200. That was a beautiful two years until job change and commute forced a move. We still miss it, but oh well.

But it isn't always cheaper to rent then buy - very area dependent. Sure, if you are in NYC, SF, Boston, Boulder, etc  it is cheaper.  But we are in the midwest and went from renting a 3 bed/2bath 1300 sqf, 4th floor walkup for $1540 a month to buying a 3 bed/2 bath w/ office, 1900 sq ft in a better location for $1,100 a month. 

The rental estimate on our home is 1650 dollars a month and I bet we could get it based on what a couple of nearby houses rent out for.

Saving up enough to put a 20% down payment on our first house (we're now in our second) was one of the luckiest choices we made for ourselves and has put us so far ahead of our friends financially.

(I agree it is only a good idea to buy if you know you are going to be somewhere several years. And I also highly recommend the NYT rent or buy calc. It is solid)
« Last Edit: March 09, 2017, 08:59:26 AM by StarBright »

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Re: Not buying a house is the single biggest millennial mistake
« Reply #21 on: March 09, 2017, 08:51:51 AM »
Apartment living has the potential to be enormously cheaper than purchasing a house because the price range goes much lower.  I currently live two blocks away from work and feel no need to purchase a car.  I could purchase a home - for cash if desired - but it would double or triple my annual expenditures and add 60-90 minutes of travel to my day.

The real advantage of purchasing a house is you can acquire a (hopefully) appreciating asset with low-cost debt.  A true apples to apples comparison of buy vs rent would assume that the money not spent on a downpayment or interest gets invested in the market to offset future rent payments, and would also include taxes/maintenance/upkeep.

MilesTeg

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Re: Not buying a house is the single biggest millennial mistake
« Reply #22 on: March 09, 2017, 10:08:25 AM »

"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none". True story. You can't become wealthy by saving money or anything. You have to put it all into a house which will obviously appreciate.

http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html

Actually, it's very true (though probably not for the reasons expressed in the linked article), regardless of how much currency you have. Currency is not wealth. Holding items of real, tangible value is wealth. USD, stocks, bonds and most of the things that investors accumulate are not wealth. Gold, silver, etc. has some tangible value, but not nearly as much as it's current going rate. Real Estate also has inflated value, but also has the virtue (unlike precious metals) of having practical use for common people.

I'm going to push back on this regarding stocks: ownership of a slice of a (potentially profitable) business has value, and therefore should be considered wealth.

I somewhat agree. I agree that owning a company is considered wealth, though I disagree that a typical "small fish" investor holding common in a publicly traded company is really ownership of a company. Common stock gives you a claim to ownership and in some cases dividends but that infinitesimal slice of ownership doesn't provide you any real control or any way to obtain tangible value. Real Estate (and in many cases companies) can provide you tangible value (a place to live, a place to grow food, etc.), not just access to more currency. Dividends or capital gains just provide you with more currency.

Don't get me wrong, I am not ideologically opposed to fiat currency or investing in stocks or anything, but when all you have is a piece of paper saying you have something or a piece of paper saying you are entitled to some other pieces of paper, then you really don't have anything more than a promise, and promises are easily broken.

mindy

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Re: Not buying a house is the single biggest millennial mistake
« Reply #23 on: March 09, 2017, 11:07:47 AM »
Very few people, especially young people, can just choose to go without paying for housing.

Young people are some of the most able to choose to go without paying for housing.  Moving back in with your parents can be very financially lucrative.

I wholeheartedly agree. Living with your parents can save so much money! Also, you can always find roommates to make the rent way cheaper than it would be if you were by yourself. I once lived in a 3 bedroom house with 8 other people; my rent was only $125/mo. I would never have been able to find a mortgage that low. Then again, you can always buy a house and rent rooms out to make the mortgage more affordable, but you'll still have to pay taxes, HOA fees, mortgage interest, etc.

Anyway, I agree with the people on here saying that buying a house can actually be a good thing since it forces you to save money. My real point with this article isn't that home ownership is a bad thing, but rather that I don't like the "one size fits all" attitude here. Not everyone will benefit from buying instead of renting, especially young millennials with huge student loan debts. I have seen way too many friends graduate college with an enormous amount of student loan debt, find a job immediately, and then buy a house right away because it's the next logical step in the game of life. They then find themselves in so much debt with the added mortgage and costs of home ownership that they can only afford minimum payments which will keep them in debt for the foreseeable future. Had most of them rented and paid off their student loans and saved for a bigger down payment, they would be better off*. Then again, some people, especially those in states like Maryland that will help pay off your student loans if you buy a house, will benefit from buying houses right out of college. It all depends.

*I went to college in an area where renting is cheaper than buying, and the friends I'm talking about stayed in this area.

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Re: Not buying a house is the single biggest millennial mistake
« Reply #24 on: March 10, 2017, 03:21:43 AM »
"The average homeowner to this day is 38 times wealthier than a renter."

Talk about a form of selection bias! Absolutely not the slightest attempt to account for the fact that people who own houses are likelier to be wealthier to start with.

Not to mention extrapolation of past performance (when he talked about moving from San Francisco to New York), assuming that the bull market he lucked out on will hold indefinitely.
Right? As if home ownership is what caused the wealth jump. Wish it had worked for me! I'm actually far less wealthy having bought my home than if I had kept renting. Not that that matters at my 'stache level, but clearly a counter point to the article.
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Re: Not buying a house is the single biggest millennial mistake
« Reply #25 on: March 10, 2017, 07:37:28 AM »
"The average homeowner to this day is 38 times wealthier than a renter."

Talk about a form of selection bias! Absolutely not the slightest attempt to account for the fact that people who own houses are likelier to be wealthier to start with.

Not to mention extrapolation of past performance (when he talked about moving from San Francisco to New York), assuming that the bull market he lucked out on will hold indefinitely.

In science we'd call it a "subject variable experiment". Many of the people categorized as renters are from the extreme left side of the bell curve, with serious physical maladies that prevent them from working or developemental delays that make it impossible to find paying employment. Others have been the victims of crime or accidents that have left them with traumatic brain injuries. Being such an individual, having a sick or injured spouse, or having a son or daughter that needs intensive help simply isn't conducive to home ownership.

Nobody plans for *their* spouse to be hit for a drunk driver or for *their* child to be born with, say, muscular dystrophy. But the bell curve has a left side, and 50% of all people are on it. The further left you are, the less you are able to contribute to your own upkeep and expenses. Medical and education treatment for someone on the far left side of the curve is so expensive that even with insurance most families cannot provide the sick or injured person with treatment and things like 24x7 supervision without at least a little bit of social assistance. In order to get that social assistance you must frequently first spend down whatever assets you already have. You cannot accumulate wealth. For many families this precludes home ownership, much less higher education for other children or continuing education for adults (good luck going to college or finding a job if you can't leave Junior unattended).

So for the original author to make the somewhat hoity-toity assertion that the people in the above paragraph would be oh-so-much-better-off if they were smart enough to buy a home instead of renting is pretty insulting. It's an example of why the "liberal elite" are so despised in many circles. The article was a somewhat sanctimonious piece of advice to help solve other people's problems, written by a person who hasn't actually experienced anything remotely resembling them.
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J_Stache

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Re: Not buying a house is the single biggest millennial mistake
« Reply #26 on: March 10, 2017, 08:05:25 AM »
So for the original author to make the somewhat hoity-toity assertion that the people in the above paragraph would be oh-so-much-better-off if they were smart enough to buy a home instead of renting is pretty insulting. It's an example of why the "liberal elite" are so despised in many circles. The article was a somewhat sanctimonious piece of advice to help solve other people's problems, written by a person who hasn't actually experienced anything remotely resembling them.
I was with you until this point.  I'm pretty firmly in the group that people are referring to when they say "liberal elite" (though I am definitely not elite).  Aren't the so called "liberal elite" the ones who want to expand the social safety net that would help the people in your example?  Isn't the GOP (effectively the alternative to the liberal elite) the party of "pull yourself up by your bootstraps"?  Before signing on to that mentality, I suggest you read the whole quote from MLK:
Its all right to tell a man to lift himself by his own bootstraps, but it is cruel jest to say to a bootless man that he ought to lift himself by his own bootstraps.

Anyway, David Bach, the author who the article is about, would probably best be described by "personal finance guru" (I say that with the same disdain normally applied to "used car salesman").

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Re: Not buying a house is the single biggest millennial mistake
« Reply #27 on: March 10, 2017, 08:56:24 AM »
So for the original author to make the somewhat hoity-toity assertion that the people in the above paragraph would be oh-so-much-better-off if they were smart enough to buy a home instead of renting is pretty insulting. It's an example of why the "liberal elite" are so despised in many circles. The article was a somewhat sanctimonious piece of advice to help solve other people's problems, written by a person who hasn't actually experienced anything remotely resembling them.
I was with you until this point.  I'm pretty firmly in the group that people are referring to when they say "liberal elite" (though I am definitely not elite).  Aren't the so called "liberal elite" the ones who want to expand the social safety net that would help the people in your example?  Isn't the GOP (effectively the alternative to the liberal elite) the party of "pull yourself up by your bootstraps"?  Before signing on to that mentality, I suggest you read the whole quote from MLK:
Its all right to tell a man to lift himself by his own bootstraps, but it is cruel jest to say to a bootless man that he ought to lift himself by his own bootstraps.

Anyway, David Bach, the author who the article is about, would probably best be described by "personal finance guru" (I say that with the same disdain normally applied to "used car salesman").

To answer your question, I do occasionally hear murmurings from the left about expanding the existing social safety net, typically with somebody else's money and labor. But the fiscally liberal faction in most nations' government has a credibility problem because of past failures in program execution.

The social safety net programs that actually get funded and implemented tend to be gifts to corporations, contractors, and committees. There ends up being a lot of money flying around, but very little of it ends up being spent providing services or products to the individuals that need them. Most of it gets skimmed off for administration and oversight. Yet the people providing the administration and oversight (and earning a living that way) are almost always members of a more privileged set of people due to their better health and education. Thus the preponderance of this money flows to people besides the intended beneficiaries. This money of course does not fall from the sky. It comes from taxes.

The most effective social safety net projects have been the ones where implementation has occurred without a great deal of bureaucracy. Yet that isn't usually how government initiatives operate. Due to inefficiency, redundancy, and other logistics problems that occur when governments try to provide uniform services on a large scale, the call for expanded government programs comes across as a call for more to be spent on less. There's not a lot of trust in the government's ability to actually provide the services to the people who are being billed for them.
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blackhart

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Re: Not buying a house is the single biggest millennial mistake
« Reply #28 on: March 10, 2017, 03:30:07 PM »
"The average homeowner to this day is 38 times wealthier than a renter."

Talk about a form of selection bias! Absolutely not the slightest attempt to account for the fact that people who own houses are likelier to be wealthier to start with.

Not to mention extrapolation of past performance (when he talked about moving from San Francisco to New York), assuming that the bull market he lucked out on will hold indefinitely.

In science we'd call it a "subject variable experiment". Many of the people categorized as renters are from the extreme left side of the bell curve, with serious physical maladies that prevent them from working or developemental delays that make it impossible to find paying employment. Others have been the victims of crime or accidents that have left them with traumatic brain injuries. Being such an individual, having a sick or injured spouse, or having a son or daughter that needs intensive help simply isn't conducive to home ownership.

Nobody plans for *their* spouse to be hit for a drunk driver or for *their* child to be born with, say, muscular dystrophy. But the bell curve has a left side, and 50% of all people are on it. The further left you are, the less you are able to contribute to your own upkeep and expenses. Medical and education treatment for someone on the far left side of the curve is so expensive that even with insurance most families cannot provide the sick or injured person with treatment and things like 24x7 supervision without at least a little bit of social assistance. In order to get that social assistance you must frequently first spend down whatever assets you already have. You cannot accumulate wealth. For many families this precludes home ownership, much less higher education for other children or continuing education for adults (good luck going to college or finding a job if you can't leave Junior unattended).

So for the original author to make the somewhat hoity-toity assertion that the people in the above paragraph would be oh-so-much-better-off if they were smart enough to buy a home instead of renting is pretty insulting. It's an example of why the "liberal elite" are so despised in many circles. The article was a somewhat sanctimonious piece of advice to help solve other people's problems, written by a person who hasn't actually experienced anything remotely resembling them.

As Nassim Taleb would put it: a soi-disant """expert""" with no real skin in the game.

https://twitter.com/nntaleb/status/839973967624458240

This reminds me of a link from Scott Alexander's most recent blogpost over on SlateStarCodex:

http://www.businessinsider.com/check-cashing-stores-good-deal-upenn-professor-2017-2

One wonders why it took an Ivy League professor 4 months to come to the completely earth-shattering realization that poor people might use payday loans and check-cashing stores because they feel that they get better value from them than banks, rather than because of their complete and utter naivete and financial ineptitude. "out of touch liberal elite" indeed.

WhiteTrashCash

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Re: Not buying a house is the single biggest millennial mistake
« Reply #29 on: March 10, 2017, 06:43:34 PM »
Please keep renting. I want to buy some more real estate and I'll need tenants to give me their money. :-P

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Re: Not buying a house is the single biggest millennial mistake
« Reply #30 on: March 10, 2017, 08:06:25 PM »
"The average homeowner to this day is 38 times wealthier than a renter."

Talk about a form of selection bias! Absolutely not the slightest attempt to account for the fact that people who own houses are likelier to be wealthier to start with.

Not to mention extrapolation of past performance (when he talked about moving from San Francisco to New York), assuming that the bull market he lucked out on will hold indefinitely.

In science we'd call it a "subject variable experiment". Many of the people categorized as renters are from the extreme left side of the bell curve, with serious physical maladies that prevent them from working or developemental delays that make it impossible to find paying employment. Others have been the victims of crime or accidents that have left them with traumatic brain injuries. Being such an individual, having a sick or injured spouse, or having a son or daughter that needs intensive help simply isn't conducive to home ownership.

Nobody plans for *their* spouse to be hit for a drunk driver or for *their* child to be born with, say, muscular dystrophy. But the bell curve has a left side, and 50% of all people are on it. The further left you are, the less you are able to contribute to your own upkeep and expenses. Medical and education treatment for someone on the far left side of the curve is so expensive that even with insurance most families cannot provide the sick or injured person with treatment and things like 24x7 supervision without at least a little bit of social assistance. In order to get that social assistance you must frequently first spend down whatever assets you already have. You cannot accumulate wealth. For many families this precludes home ownership, much less higher education for other children or continuing education for adults (good luck going to college or finding a job if you can't leave Junior unattended).

So for the original author to make the somewhat hoity-toity assertion that the people in the above paragraph would be oh-so-much-better-off if they were smart enough to buy a home instead of renting is pretty insulting. It's an example of why the "liberal elite" are so despised in many circles. The article was a somewhat sanctimonious piece of advice to help solve other people's problems, written by a person who hasn't actually experienced anything remotely resembling them.

As Nassim Taleb would put it: a soi-disant """expert""" with no real skin in the game.

https://twitter.com/nntaleb/status/839973967624458240

This reminds me of a link from Scott Alexander's most recent blogpost over on SlateStarCodex:

http://www.businessinsider.com/check-cashing-stores-good-deal-upenn-professor-2017-2

One wonders why it took an Ivy League professor 4 months to come to the completely earth-shattering realization that poor people might use payday loans and check-cashing stores because they feel that they get better value from them than banks, rather than because of their complete and utter naivete and financial ineptitude. "out of touch liberal elite" indeed.

In most university liberal arts environments there's an astounding amount of bigotry toward the generationally poor and to visible minorities. It's simply not an overt "this group of people is inferior and therefore less worthy" kind of bigotry. It's not the spit-in-your-face kind of activity the Freedom Riders encountered. But it's more insidious. It's a pattern of infantilization, and of acting and voting as though entire categories of people ought to be coddled and treated as though they're not capable of understanding what their own best interests are. A person who spends time in that kind of environment can easily "learn" that people who are less wealthy and less educated are somehow incapable of understanding what's best for them, and that their failure to choose the same thing we choose for ourselves (or, more particularly, what we WANT them to choose for themselves) is somehow an intellectual or cultural failing as opposed to an extremely reasonable decision based on the evidence and resources at hand.
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Tabaxus

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Re: Not buying a house is the single biggest millennial mistake
« Reply #31 on: March 12, 2017, 09:03:52 AM »
After years of living in a pretty nice, but by no means luxurious, apartment (it was a pretty large one-bedroom, significantly below-market rent because it was owned by a "mom and pop" owner just trying to cover his costs, and a mile walk from my work, but small kitchen, dated appliances, no outdoor space of my own, no parking unless I paid $250 per month for a place a block away, etc).

I finally "caved" last year and bought a very, very nice townhouse (gorgeous kitchen, second bedroom that we may need in the imminent future, available parking, patio and deck, etc.).  It cost me materially over $600k after factoring in renovations and the like, and I doubled my commute to work (which is a little harder to walk when the weather gets particularly hot or cold, though I still manage to walk most days, and my commute is still shorter than the commute people have from the suburbs--but not by much).

It wasn't an impulse buy, in that I had been saving money for a downpayment for years.  But it definitely was a massive lifestyle upgrade, and it will cost me a massive amount more than  my old rent over time.  About $2100 per month more, in fact, after tax-effecting property taxes (which are more than half of what my rent used to be on their own--once you factor in HOA fees, my recurring monthly "rent" is not quite $1,000 a month) and mortgage interest and factoring in my significantly higher utility bills and modest annual home maintenance costs of 1.5%.  If I treat the principal payments on the mortgage as investment rather than expense, then it's still about $1100 per month more.   I probably could have rented a similar place for $600-700 more than my old rent, so I'm definitely paying an ownership premium, and besides, I never would have upgraded my living situation to this extent if I wasn't buying (though I may have been forced into a 2-bedroom relatively soon).  And this all ignores the fact that I lost out on an amount of gains in the market on my down-payment that honestly makes me a little ill when I stop to think about it.

I don't regret the decision at all.  But there is no question whatsoever that from a strictly economic perspective, buying a house was a "mistake"--and a very large one, at that.   Article doesn't understand correlation vs. causation.

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Re: Not buying a house is the single biggest millennial mistake
« Reply #32 on: March 12, 2017, 11:48:37 AM »
For me, I think buying makes sense.  I don't think it makes sense for everyone.  When I run the numbers, it's probably pretty close.

First, I have long-term plans and reasons to stay in this area.  Second, the cheapest rentals in this area start at $1,000.  My mortgage payment is a little more than $1,000, but my house is nicer and larger than those cheapest rentals.  Also, the real costs of my house are less than $1,000.  I don't count the part of my payment that goes to the principal as a cost.  Since, I am essentially banking that amount into the equity.  The costs are the insurance, taxes, and interest each month.  That and a couple hundred dollars set aside for repairs and improvements.  That $200 isn't part of the mortgage, but it's built into the rental cost since they handle all repairs.  When you add all those together, my house only costs me $900 a month.

I don't end up a whole lot further ahead than if I was renting and investing the difference in costs, currently.  Each year the costs of owning will go down a little as the interest will decrease.  The real question is if my home's equity will out-perform that same amount invested in the market.  I think it will.

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Re: Not buying a house is the single biggest millennial mistake
« Reply #33 on: March 12, 2017, 03:08:32 PM »

But it isn't always cheaper to rent then buy - very area dependent.

I concur. All depends where you live. When our house ( upstate New York 1 hour for NYC, 3 bedrooms 2 baths) is paid off (1 more year to go!) our property/school tax will be $250.00 per month. In our town 1 bedroom apartments go for around $1,200 per month.  How is renting a better deal than that?

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Re: Not buying a house is the single biggest millennial mistake
« Reply #34 on: March 12, 2017, 03:35:10 PM »

But it isn't always cheaper to rent then buy - very area dependent.

I concur. All depends where you live. When our house ( upstate New York 1 hour for NYC, 3 bedrooms 2 baths) is paid off (1 more year to go!) our property/school tax will be $250.00 per month. In our town 1 bedroom apartments go for around $1,200 per month.  How is renting a better deal than that?

Ok, I will give it a shot:

I will assume based on your property tax that your home is worth around $250,000.

Since you are basing your expenses on a paid off house, I am going to assume the renter in your situation has $250,000 more cash to invest than you do.

Assume a market return of about 9%, 6% after inflation.   Assume your house will appreciate with inflation, 3%, so the 6% is a real investment return (includes dividends and capital gains) and at the end of any period of time on average the house and the cash should remain equal in value.

6% of $250,000 is $15,000 a year, or $1250 a month.  This is $50 more than you claim an apartment can be rented for in your area.

Thus the renter has $300 more per month than you do to spend and at any time they can exchange their inflation adjusted cash for a house.

Viking Thor

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Re: Not buying a house is the single biggest millennial mistake
« Reply #35 on: March 12, 2017, 03:47:10 PM »
It was a 1 bedroom apartment versus what is likely a much bigger house. It depends on individual variables but owning is almost always better than renting over the long term.

This is also obvious - renting can't be financially better than owning in totality, otherwise no one would be a landlord.

Roland of Gilead

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Re: Not buying a house is the single biggest millennial mistake
« Reply #36 on: March 12, 2017, 04:30:37 PM »
It was a 1 bedroom apartment versus what is likely a much bigger house. It depends on individual variables but owning is almost always better than renting over the long term.

This is also obvious - renting can't be financially better than owning in totality, otherwise no one would be a landlord.

A larger house is more cost to heat, more roof area that needs replacing every 15 to 20 years, more gutters to clean, more yard to mow.   Quite a few expenses the poster was leaving out.

You also take on more risk when you invest + rent than when you buy a home, so the returns CAN be financially better when you rent as risk is where money comes from (even in bonds, a longer term bond pays  a higher rate because it has interest rate hike risk).

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Re: Not buying a house is the single biggest millennial mistake
« Reply #37 on: March 13, 2017, 08:49:54 AM »
But don't get too distracted by these costs. We own a house. I mow the grass with a small push mower that cost $75 new and it costs me less than $10 all summer in gas. Free if I am motivated to use our reel mower. Cleaning the out the gutters is a one time expense - the cost of a ladder. Actually, I put gutter guards on our gutters and life got much easier. My roof costs me $200 a year spread out over 20 years.

Yes there are on going costs but anywhere you live there are going to be costs.

When I rented I had roommates and/or shared walls with other families. I found myself looking for ways to get out and away from the place so I could have some peace and quiet. That had significant costs - car, food and drinks out, movies, etc. I needed a break from the thumping stereo on the other side of the wall or the door slamming or the constant traffic of the place. Weather did not always provide opportunities to spend time outside.

My home provides me with many entertainment opportunities. Some weekends we don't even start the car once. We garden, play with the kids+dog, project in the garage, sit on the porch and read, etc. The place is truly peaceful most of the year except when everyone is mowing their grass. ;)

Linda_Norway

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Re: Not buying a house is the single biggest millennial mistake
« Reply #38 on: March 14, 2017, 02:22:45 AM »
But don't get too distracted by these costs. We own a house. I mow the grass with a small push mower that cost $75 new and it costs me less than $10 all summer in gas. Free if I am motivated to use our reel mower. Cleaning the out the gutters is a one time expense - the cost of a ladder. Actually, I put gutter guards on our gutters and life got much easier. My roof costs me $200 a year spread out over 20 years.

Yes there are on going costs but anywhere you live there are going to be costs.

When I rented I had roommates and/or shared walls with other families. I found myself looking for ways to get out and away from the place so I could have some peace and quiet. That had significant costs - car, food and drinks out, movies, etc. I needed a break from the thumping stereo on the other side of the wall or the door slamming or the constant traffic of the place. Weather did not always provide opportunities to spend time outside.

My home provides me with many entertainment opportunities. Some weekends we don't even start the car once. We garden, play with the kids+dog, project in the garage, sit on the porch and read, etc. The place is truly peaceful most of the year except when everyone is mowing their grass. ;)

Indeed, a house requires quite a lot of work. Both on the planned things and on the unplanned problems that will appear for time to time. Money must be spent on tools and it is good to invest in a good quality tool, better than a cheap one that will break during the job.

We have been discussing the option of renting out a room in the house, getting a house mate. But as you say, you're so depending on getting the right person in your house. There are just lots of people you wouldn't want to share a house with. Preferably you should have an invisible person who doesn't make any noise. We have friends who have had a friend living with them in an apartment for a year or so. That is pretty intimate. I was happy as a child when my then BF, now husband, got our own (rental) apartment for the first time.

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Re: Not buying a house is the single biggest millennial mistake
« Reply #39 on: March 16, 2017, 03:23:33 AM »

But it isn't always cheaper to rent then buy - very area dependent.

I concur. All depends where you live. When our house ( upstate New York 1 hour for NYC, 3 bedrooms 2 baths) is paid off (1 more year to go!) our property/school tax will be $250.00 per month. In our town 1 bedroom apartments go for around $1,200 per month.  How is renting a better deal than that?

Ok, I will give it a shot:

I will assume based on your property tax that your home is worth around $250,000.

Since you are basing your expenses on a paid off house, I am going to assume the renter in your situation has $250,000 more cash to invest than you do.

Assume a market return of about 9%, 6% after inflation.   Assume your house will appreciate with inflation, 3%, so the 6% is a real investment return (includes dividends and capital gains) and at the end of any period of time on average the house and the cash should remain equal in value.

6% of $250,000 is $15,000 a year, or $1250 a month.  This is $50 more than you claim an apartment can be rented for in your area.

Thus the renter has $300 more per month than you do to spend and at any time they can exchange their inflation adjusted cash for a house.
I think you are forgetting the significant differences between a 3 bed two bath house and a 1 bedroom apartment. Clearly one should cost more...
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Re: Not buying a house is the single biggest millennial mistake
« Reply #40 on: April 01, 2017, 05:30:35 PM »
Exactly what I was thinking.  Most people would not have the discipline to save the equivalent of their monthly mortgage payment if they didn't own a home.
Exactly.  We're talking about EVERYONE, not just those of us who really understand /optimize personal finance.  The average American isn't very good at personal finance -- or just isn't paying attention.  For that person, buying a house is probably a good choice.  It's "enforced saving" in that eventually the house will belong to him, which will make him better prepared for retirement.