Learning, Sharing, and Teaching > Ask a Mustachian
What's wrong with renting forever?: Stigma of non-home ownership
Shane:
--- Quote from: clifp on October 22, 2015, 02:35:55 PM ---Here is the source http://www.estateofmindsites.com/subscriber_new/map.php?user_id=1&share=y of the data. If you hover over a state it shows the year by year price appreciation so I'm inclined to believe that they did the math correctly. As you can see it shows California leading the nation with a 6.92% annualize appreciation since 1975. Inflation over the same period was just under 3.8% so other than a few state in the midwest and south in most state housing prices appreciated faster than inflation.
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The site you linked to is run by a mortgage broker, someone who has a vested interest in getting everyone to believe it's a good thing to take out a big loan to buy a house. I'm sure that doesn't affect the data, though. :)
clifp:
--- Quote from: Shane on October 22, 2015, 05:08:37 PM ---
--- Quote from: clifp on October 22, 2015, 02:35:55 PM ---Here is the source http://www.estateofmindsites.com/subscriber_new/map.php?user_id=1&share=y of the data. If you hover over a state it shows the year by year price appreciation so I'm inclined to believe that they did the math correctly. As you can see it shows California leading the nation with a 6.92% annualize appreciation since 1975. Inflation over the same period was just under 3.8% so other than a few state in the midwest and south in most state housing prices appreciated faster than inflation.
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The site you linked to is run by a mortgage broker, someone who has a vested interest in getting everyone to believe it's a good thing to take out a big loan to buy a house. I'm sure that doesn't affect the data, though. :)
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I've crossed check the year by year data for two states I'm familar with NV and HI. The year by year numbers corresponded to the numbers compiled by the Real Estate boards for those two states over the last 5 years. Do you have specific examples of incorrect data, or are you make wild ass accusations?
bryan:
Didn't read the whole thread but did search for "security" and read those comments.
I think there is an argument for security that no one has mentioned yet: getting priced out of a place you want to stay.
Say you moved to a city in ~2006 for a good, new job and found a nice neighbourhood that is perfect for your MMM tendencies. You decide to rent since you are not sure how long you will stay at the job/city and the rents here are cheap (you checked the NYT buy/rent calculator and looks like 7 years is the timeframe buying is better). After a year you are in love with the surrounding area, the city at large is pretty agreeable, and the economy seems to be doing pretty well. You've made a nice circle of friends and do various little things/events in the neighbourhood. You would feel comfortable sticking around here for a while but you are still early in your career, no family, etc. You keep renting for another year. During this time, the housing bubble pops and homes start going on sale/foreclosing all across the country. You could buy a place and come out ahead if you stay in the city for ~5 years.
Now, you have to make a decision. Keep renting or Buy.
In one possible future, your gut feelings were right and the city's economy weathers the recession just fine and has a large influx of jobs. You could easily maintain your career here. Your hunch about the neighbourhood was even more on the mark and it's super awesome. Over the next year, rents go up by close to 25% and house costs in your neighbourhood are starting to really go through the roof; buying is better after 14 years. Hope you bought, else after a few more years you will be forced to move out of the neighbourhood because of soaring rent, at least a couple miles away.
I largely made up the numbers, but the situation is perfectly believable. There's another scenario where it's not such a boom/bust as well. But the end result is the same that if you want to secure your location, you have to buy else be forced out.
markbrynn:
--- Quote ---I've crossed check the year by year data for two states I'm familar with NV and HI. The year by year numbers corresponded to the numbers compiled by the Real Estate boards for those two states over the last 5 years. Do you have specific examples of incorrect data, or are you make wild ass accusations?
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I haven't inspected the data, but I wonder if they control for various things besides sales price, for example, increase in the average size of houses and money spent on renovations. In addition, if they're using average sales price instead of median it could be skewed by high appreciation on the most expensive houses (people who are less affected by real world economics) and lower appreciation on the rest.
It seems a challenge to get trustworthy, accurate numbers on this. If someone can find some that specify what factors are taken into account, that would be helpful (no luck on my end).
markbrynn:
--- Quote ---Well, no. That's only really comparable if you could rent $500k home for $1500. You could never do that where I live, where $500K homes are not all that common. Again, what's the point in debating something that is so circumstance dependent? It sounds like a lot of posters are just trying to justify their personal decision to buy or rent.
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I think you missed my point. I don't care if $1500 can rent an apartment in your neighbourhood. I was only trying to point out that the opportunity cost of living mortgage free is quite substantial. It may still make more sense to own in that case, but the cost is not "only taxes and insurance," as a previous poster said.
If you ignore the tied up capital in your home, then you are missing a large part of the equation. How the decision falls in your neck of the woods is not something any of us can tell you about (or particularly care about), we* just want everybody to make a truly informed decision.
*sorry for the royal "we"
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