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The real cost of owning a home

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Re: The real cost of owning a home

#311

Post by dijit »

tedggh wrote: post #307

Financially, in very few cases renting actually makes sense. Assuming of course you make an informed purchase of a home given your particular circumstances. Most homes in the US appreciate in value, unless you live in rural Pennsylvania. I also believe buying early forces you to be more financially responsible and makes purchasing your first family home later in life a lot easier. So I always recommend young people t…

If you take away the "always increasing" price of homes.

Is that true.

Homes for the majority of human history have not been something that "always appreciates", the condition of the domicile might actually be worth less than the components it was constructed with.

At some point, nobody who isn't already on the ladder can afford to buy, then you've hit your market saturation. Then it's about how much more can you squeeze them for.

If interest rates rise, house prices fall, because most people buy at the edge of their affordability -- and soon there'll be no homes that they can afford at all, or: the house prices must stabilise and not "forever appreciate".. they can't both be true.

Re: The real cost of owning a home

#312

Post by hdndjsbbs »

OP seems to disregard the fact that equity in the house is basically a pile of cash you can live inside of. If you're renting you're paying some premium for the landlord to pay their mortgage interest and pay down their own principal. The cash flow is lumpier for ownership (fewer, bigger expenses) and your risk concentration is greater (you're committed to a single asset). But ultimately that stuff is all priced into rent, plus a premium for your landlord to have "passive income".

If you're able to own a rental property in today's economy it feels like you'd have to be stupid to not be able to make above-market returns

The long-term promise of buying a house isn't necessarily "number go up" but "after 25 years you own it outright".

Re: The real cost of owning a home

#314

Post by mholm »

tencentshill wrote: post #226
mholm wrote: post #6

Beyond the financials, the psychological impact of both being able to make greater-than-superficial changes, and having extremely predictable payments for years without worrying about substantial rent increases, is substantial. I redid/improved the bathroom to exactly what I wanted. I renovated the kitchen. I added paneling to the walls. I added a few outlets to rooms that needed more. I wouldn't do these things in a…

>says local homeowner, 2007

I was in middle school in 2007

Re: The real cost of owning a home

#315

Post by dividefuel »

Beyond financial costs, I was caught off guard at how much time home ownership took up. House maintenance and projects have taken up most of every single weekend of mine for the past few years.

Part of it is simply that I bought a house with more space than the places I usually rented. More to clean, more to maintain, more things that can go wrong, etc.

But the biggest thing is that I'm the only one in charge of maintenance. There's no one person I can call for every single problem. Keeping track of regular maintenance, performing that maintenance, and learning how to DIY things takes a lot of time. And even if I want to pay someone to do it for me, I still have to research contractors, coordinate estimates, and schedule the project. And I still need to learn enough about the project to determine whether they're doing it right!

Home ownership is definitely a lifestyle choice first and foremost more than a financial one.

Re: The real cost of owning a home

#316

Post by jandrewrogers »

jstanley wrote: post #298
Paracompact wrote: post #280

Earlier quoted context omitted.

> I, and most people I know who have invested in home ownership over the past 30-40 years, have done way better than we could ever have in the stock market or 401k. https://www.macrotrends.net/3072/us-house-price-index (~3x in the past 30 years, about 3.7% return per year) https://www.macrotrends.net/2324/sp-500-historical-chart-dat... (~15x in the past 30 years, about 9.3% return per year) This is in line with conve…

You're missing that most people are able to buy houses on borrowed money, so their housing investment is effectively levered up 10x or more, at least at the beginning. It's not a choice between $1m in housing appreciating at 3% and $1m in stocks appreciating at 9%. It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.

The problem with leveraged investments is that they can put you deep underwater.

Many people in Seattle that bought $1M leveraged with $100k now own a $800k asset. They've lost twice as much as they invested. They would have been much better off investing that in stocks without leverage.

Re: The real cost of owning a home

#317

Post by LargoLasskhyfv »

1970-01-01 wrote: post #305

Completely missed the tech-heavy features of owning your own home: Wire your network however you like. Those walls are yours. Invest in as much solar power as you want. The only limit is the sun itself. Want to be a Ham? Be a ham. The antenna goes wherever you want. Charge your EV as long as you want. The EV charger is yours and only yours. Also, do you want a cat? A dog? A massive tree? Just get it. Nobody can say n…

Depends very much on the region/country/jurisdiction/county you're living in.

Walls are your's? Not when it falls under some heritage laws/building codes which forbid too much deviation from the original.

As much solar as you want? Again, very much depends on not disturbing someone elses view, or the 'general character' of the surrounding landscape. OFC again dependent on jurisdiction.

Big bad antenna? See above. Cats 'n dogs, again dependent on country/county. The same for tree.

All of this applies to some regions only, where your next neighbour is far away, out of sight, usually.

And even then you can have shit like 'water rights', like in Colorado.

Re: The real cost of owning a home

#318

Post by Nemi »

Our_Benefactors wrote: post #129
foobarian wrote: post #120

Earlier quoted context omitted.

Once upon a time I had a car, a daily driver. I kept it clean, vacuum/wash/polish with crazy waxes and the works. Stressed out about people riding with dirty shoes, drinks, etc., and when I asked myself why, the usual self-justification was "ah it's for the resale value." Hearing relatives get charged various fees at lease returns just fed that attitude, even though I owned the car outright. One day it was time to re…

Of course, you should never sell the car to the dealer and should always make the effort to sell private party, which will often get you 50% or more greater than the dealers best offer.

50% is a stretch. 20% maybe, depending on the vehicle.

But here is another consideration. Sales tax. If I buy a car and trade one in, the sale price that I pay taxes on is the price of the vehicle I am buying minus the trade in.

For instance, if I buy a new car for $30,000 and trade in a vehicle and they give me $15k for it, I pay sales tax only on $15k. That saves me about $1k in my area in sales tax. If I could have sold the used car for over $16k, then I would technically be money ahead. But your time is also worth something. For it to be worth it to me, I would need to be able to get at least $17k for the used vehicle to make it worth the effort.

Re: The real cost of owning a home

#319

Post by EdgeExplorer »

relium wrote: post #15

I think 1% per year is insufficient for repairs. Even a paint job will cost more than that these days. There's also a potential HOA fee, even in many neighborhoods with freestanding homes. But there are tax benefits of home ownership too. The interest deduction used to very significant, although less now since they raised the standard deduction. There's also a $250K/500K non-taxable capital gains benefit when you sel…

Seriously. My experience with 15 years of home ownership is probably more like 3% per year. I don't think I've ever had even a single year where 1% was accurate.

Re: The real cost of owning a home

#320

Post by kennywinker »

For renting to be a better deal than owning, one of two things has to be true:

1. Your landlord is losing money

Or

2. The rental market is dominated by landlords who own outright, or bought long enough ago that their cost is much lower than the cost of owning is now.

I’ve never seen #1 happen, and the only place i’ve lived where #2 was the case the market has now adjusted and it’s very much not true anymore.

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