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The Rise of Renting in the U.S

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Re: The Rise of Renting in the U.S

#81

Post by fist »

irishcoffee wrote: post #57
turar wrote: post #42

Earlier quoted context omitted.

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

I believe what they're arguing is that you don't pay your mortgage off early with a 3.5% mortgage rate.

You invest your excess money in the stock market (hopefully returning more than 3.5%) instead of paying off your mortgage early.

Re: The Rise of Renting in the U.S

#82

Post by AnimalMuppet »

chishaku wrote: post #13

Why are mortgage debtors referred to as home owners? Edit: I was being a bit facetious. With liar loans, no down payment mortgages, deferred interest, "prices only go up," etc, it's been too easy to sell home "ownership" to people without their requisite understanding of the risks involved and the constantly changing market realities. I'm all for personal responsibility but the use of language is powerful.

Why are people who have to pay property taxes referred to as home owners?

As a homeowner (even with a mortgage), I can do things to my house that as a renter I can't do to a rental unit. Yes, I can lose the place if I don't pay the mortgage (or the property tax). But (apart from eminent domain) I have to not pay in order to lose it. If I rent a place, I can lose it at the end of the lease at the landlord's sole discretion, even if I have paid my rent faithfully.

So, yes, my control is not total, but it's a lot more than a renter's control. The difference matters.

Re: The Rise of Renting in the U.S

#83

Post by turar »

irishcoffee wrote: post #57
turar wrote: post #42

Earlier quoted context omitted.

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

I'm not sure I understand why you would pay rent to live somewhere else. I'm talking about living in the house that you bought and have a mortgage on.

Say your mortgage loan amount is $300K at 3.5%, locked in for 30 years. Instead of paying it off in 6-10 years with extra payments, I say invest those extra payments in the stock market, and keep paying the mortgage for 30 years at a locked rate of 3.5%. If that money that you invested makes anything above 3.5% over 30 years, then that's free returns to you.

On top of that, it also depends where you think the interests rates will be in 10-20 years from now. If you believe that they will be higher than they are currently, then that's even more reason to keep that loan locked in for 30 years instead of paying it off sooner. Hope that helps.

Re: The Rise of Renting in the U.S

#84

Post by danielvf »

floppydisk wrote: post #66
maxerickson wrote: post #44

Earlier quoted context omitted.

This makes me wonder if 30 year mortgages even end up making housing more affordable. (I guess it would be a prisoners dilemma situation, where individuals benefit by taking them out but the overall situation is made worse)

30 year mortgages make the monthly payment smaller, which reduces the monthly cost of housing, BUT you end up paying more interest since you aren't paying principal off as fast which means the total long term cost of the asset is more due to compound interest. A 15yr mortgage takes more out per month, but it's cheaper overall since you're paying off principal faster and interesting isn't accruing or compounding as qu…

I don't think this works, because 30 year mortgages have a higher rate of interest than 15 year mortgages do.

Re: The Rise of Renting in the U.S

#85

Post by jdmichal »

Avshalom wrote: post #67
jdmichal wrote: post #62

Earlier quoted context omitted.

Where I live, if the landlord doesn't fix the problem within a reasonable amount of time, you can fix it yourself and deduct the repairs from your rent payment. You should educate yourself on your local laws surrounding rentals if you haven't already; there are likely similar terms where you live.

and then what lose more money taking time off work to go to court when the landlord tries to evict you for not paying rent in full?

You would resolve it the same as any other contract dispute. If resolution fails, then you go to the courts. If they sue first, you counter-sue and tack on malicious prosecution as well.

Re: The Rise of Renting in the U.S

#86

Post by dragonwriter »

jpmattia wrote: post #73

I'm a little surprised that there hasn't been a populist rebellion over interest rates. Low rates have inflated pretty much every asset class. This is especially so in housing: The Fed needed to reinflate housing prices in order to make many systemically important players (banks, AIG) solvent again. I have to wonder though: In re-inflating house prices, have we just off-loaded the bad investment to non-systemic insti…

> I'm a little surprised that there hasn't been a populist rebellion over interest rates.

Low interest rates are in immediate terms good for net debtors and bad for net creditors. In broad strokes, this makes them good for the poor and bad for the rich (they are usually responses to conditions for which the reverse is true -- or, at least, which are more bad for the poor than the rich, but I'm just considering the interest rates themselves.)

So, a populist rebellion over (low) interest rates makes little sense. (A populist rebellion over the conditions that provoke low interest rates makes sense, and is, in fact, visible on both sides of the partisan political divide, split by what people see as the source of and solution to those conditions.)

Re: The Rise of Renting in the U.S

#87

Post by floppydisk »

danielvf wrote: post #84
floppydisk wrote: post #66

Earlier quoted context omitted.

30 year mortgages make the monthly payment smaller, which reduces the monthly cost of housing, BUT you end up paying more interest since you aren't paying principal off as fast which means the total long term cost of the asset is more due to compound interest. A 15yr mortgage takes more out per month, but it's cheaper overall since you're paying off principal faster and interesting isn't accruing or compounding as qu…

I don't think this works, because 30 year mortgages have a higher rate of interest than 15 year mortgages do.

Perhaps, I haven't fully explored that option and it would make sense since the investor's money will be tied up longer. However, paying down principal quickly reduces total cost of the asset since there's less $$ for the interest to grow/compound against.

Re: The Rise of Renting in the U.S

#88

Post by dsp1234 »

irishcoffee wrote: post #57
turar wrote: post #42

Earlier quoted context omitted.

I would argue in the current situation of 3.5% mortgage rate, the best scenario is to invest the cash in the stock market. If your returns are anything above 3.5% over the 30 year load amount, you're good.

I read this counter-point a lot. Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere. Am I missing something? Sincere question.

The New York Times buy vs rent calculator[0] can help determine which side of the rent vs buy is better (from a financial standpoint only, not including factors like 'freedom') depending upon various factors.

For example, here in Oregon based on all of the factors I adjusted, the result was "If you can rent a similar home for less than $1,422 per month then renting is better.". I could probably break even by moving to a different location, but then (for me) the freedom factor pushes it back towards home ownership.

So you put your own assumptions in, and that can give you a good idea of where your own situation results.

Its never clear to me how you invest the mortgage payment and also pay rent to live somewhere.

As a direct response to this, the calculator will actually show what the expected costs are assuming you invest any difference between the rent vs mortgage in a vehicle with the specified returns (and over the time period you specify)

[0] - http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...?

Re: The Rise of Renting in the U.S

#89

Post by seivan »

lowglow wrote: post #64

I've sorta turned my back on the standard american dream. Racing to new areas of growth, working to build someone else's dream, getting paid well immediately for performance, paying high rent, etc to afford the image of success, and making friends that participate in this same high ambition culture. Instead of making markets, markets start making you. All the rules, and "norms" we've collected around ourselves to par…

How does it work with having a companion. It might be easier to find someone with the same outlook. But if you're already in a relationship it's going to be an uphill battle.

Re: The Rise of Renting in the U.S

#90

Post by toomuchtodo »

cryoshon wrote: post #69
themagician wrote: post #41

Earlier quoted context omitted.

Because in the US we like to sell people on the idea of "ownership", when the reality is that the bank retains all the real value. Only a fraction of so-called "homeowners" actually own more than 50% of their home. Most homeowners just rent from the bank. Many will rent from the bank for life. The way homeownership is sold in the US is nothing more than a way to get people to give up hundreds of thousands of dollars…

Hm, I've never thought of it this way, but you're entirely right. This explains why many struggling families can "get" "reverse mortgages" in which they sell their earned equity back to the bank that has always owned the majority share. Until they have sold all their shares, and are evicted, that is.

Indeed. Being a mortgagee is simply a renter by another name, with tax breaks.
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