Home ownership is still mostly renting
mattbruenig.com
Home ownership is still mostly renting
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Re: Home ownership is still mostly renting
#2I went in expecting hyperbole or clickbait but the author has a very sensible breakdown.
Nothing shocking, and the conclusion is really that it comes down to being a numbers game. Either renting or buying could be better financially based on a hundred different variables, some of which you know in advance and others you don't.
Re: Home ownership is still mostly renting
#3This totally misses the point that there is no where else you can get 20x leverage at < 3% interest. Even with modest appreciation, you're going to make a lot of money putting 5% down on a house.
Re: Home ownership is still mostly renting
#4I'll conceded that I might be missing something but houses in my area cost significantly more to rent ($1.5K+/mo) than my mortgage ($1.2K) and have a ton more restrictions (pets, modifications, etc). Every house or apartment I've rented I've had to fight tooth and nail with the owner/manager to get anytime fixed (I once had water seeping out of my kitchen floor for over 2 months in an apartment, it just finally stopped, they came out multiple times and did nothing). This doesn't even start to take into account the yearly monthly rent hikes to the tune of $50-$100. One apartment complex I lived in did these rent hikes like clockwork all while removing/closing amenities left and right.
The author here seems to be making the point that "not really that much money is going to the principal in the end and even the money that does could be better invested". Maybe that's true but it ignores a ton of other upsides to owning a home IMHO.
Re: Home ownership is still mostly renting
#5This totally misses the point that there is no where else you can get 20x leverage at < 3% interest. Even with modest appreciation, you're going to make a lot of money putting 5% down on a house.
20x leverage = 20x return, but also 20x risk.
Re: Home ownership is still mostly renting
#6In the first year of a 30y mortgage, yes interest is a big component... But even in year 5 or especially in year 10+ interest is much smaller and the principal impact greater. The long term impacts of ownership are the benefit, of course a large purchase will not stack up against renting in the short term!
Re: Home ownership is still mostly renting
#7This totally misses the point that there is no where else you can get 20x leverage at < 3% interest. Even with modest appreciation, you're going to make a lot of money putting 5% down on a house.
This! Putting down 20k on a house in my late twenties was one of the best investments I’ve ever made.
I was especially surprised so many of my peers who had no clue that’s how little it takes to get into a mortgage. Of course, assuming you have a steady job/income.
Re: Home ownership is still mostly renting
#8Not a great argument, really. In much of the country ownership is a much better deal both financially (cost for equivalent housing per month) and in terms of stability. Once you buy, unless you're foolish enough to get an ARM, your costs are fixed -- but rent is subject to capricious shifts upward annually.
Re: Home ownership is still mostly renting
#9In the first year of a 30y mortgage, yes interest is a big component... But even in year 5 or especially in year 10+ interest is much smaller and the principal impact greater. The long term impacts of ownership are the benefit, of course a large purchase will not stack up against renting in the short term!
Yes, unless I missed something, the analysis doesn't account for the decrease in interest costs over time. Still an interesting piece, just would be a fairer comparison.
Re: Home ownership is still mostly renting
#10In the first year of a 30y mortgage, yes interest is a big component... But even in year 5 or especially in year 10+ interest is much smaller and the principal impact greater. The long term impacts of ownership are the benefit, of course a large purchase will not stack up against renting in the short term!
Also that interest is largely (if not totally) tax deductible.