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The real cost of owning a home

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Re: The real cost of owning a home

#531

Post by DonsDiscountGas »

throw0101c wrote: post #152

Ben Felix, a Canadian portfolio manager that does personal finance videos and podcast, has been arguing for years that rent versus buy is often a wash financially, and that you should make the decision for non-financial resasons. * recent 2026 video: https://www.youtube.com/watch?v=aU7v87EhDBI * 2025a: https://www.youtube.com/watch?v=j4H9LL7A-nQ * 2025b: https://www.youtube.com/watch?v=lBG-g1CKfgs * 2021: https://www…

In a perfectly efficient market that's what one would expect. It's pretty likely that the housing market has plenty of inefficiencies but it probably varies by region and people would need to compare rent and sale prices in their area.

Re: The real cost of owning a home

#532

Post by tomjakubowski »

fuomag9 wrote: post #513
throw0101c wrote: post #209

Earlier quoted context omitted.

> Especially if you’re positioned to buy when you can lock in low mortgage rates. Above 6% you might be better off putting your down payment into the stock market and renting. "Locking in" a rate for multiple decades is mostly (only?) an American thing: * https://www.tandfonline.com/doi/full/10.1080/15214842.2020.1... * https://www.investopedia.com/why-your-30-year-mortgage-exist... * https://www.cnbc.com/2024/05/07/…

In italy not only you can lock it, you are allowed to change bank for lower rates (surroga) without any penalty

Also true in the US, the term of art here is "refinancing". Just about every homeowner I knew during Covid refinanced and now has a rock-bottom interest rate on their mortgage.

The downside of doing that is you end up "locked in" to the property too. They now have a strong disincentive to sell, because they'll lose that sweet sweet interest rate and relatively low payment. I'm unsure what the broader effect is on the market.

Re: The real cost of owning a home

#533

Post by insane_dreamer »

All those costs are baked into your rent by your landlord (who had/has to pay them).

The difference is that after 30 years you can own the house and have a low-cost place to live in your old age (not free, you still have prop taxes, repairs, etc.), whereas with rent you have nothing. That is significant.

But really, the biggest benefit of paying a mortgage is related to the value of money.

Over 30 years your rent will increase substantially in then-current dollars, while your mortgage remains fixed. Which means that it essentially gets cheaper over time.

Consider that the US national average rent in the US was ~$550-$600 30 years ago, and is ~$1700-$1800 today.

Re: The real cost of owning a home

#534

Post by jandrewrogers »

ambicapter wrote: post #461
jandrewrogers wrote: post #316

Earlier quoted context omitted.

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.

Yeah, but they still have a place to live. If the landlord is losing money on their asset, what's one place they could make up the difference?

The landlord isn't losing money. Totally different cost basis. The landlord rarely has a carrying cost that is equivalent to the renter buying the same property with a mortgage. It is frequently half that or less.

I've sold a home I lived in to rent something equivalent because the rental rate was a fraction of my carrying costs. Saving the difference in costs added more to my net worth than the appreciation on the property.

Re: The real cost of owning a home

#535

Post by BirAdam »

sakopov wrote: post #97
cosmic_cheese wrote: post #12

On the other hand, renting comes with hidden (and some not so hidden) costs too. The main one for me is the inherent precariousness that comes with renting. You don’t know how much longer you’re going to be able to stay in your apartment, whether that be due to rent hikes or the landlord deciding that they want to give the apartment to their nephew or any number of other things. The constant low level stress of knowi…

I would argue against this. I'm not sure owning is that much better. At the very least it's just as bad as renting if you bought in the past few years... I bought my home in 2023 and since then my monthly HOA payments doubled, my insurance premiums (nearly) tripled and my property taxes have gone up about $1000. Homeownership went from 35% to 45% of my monthly income. If you bought in the past few years, owning has a…

The HOA is something I could fight, but mine is currently cheap. The taxes, however, are infuriating. I’m getting taxed on unrealized gains after having paid taxes when buying the home. There is nothing I can do about the taxes, and if I do not pay my home will be taken. Essentially, I cannot own my home in any meaningful sense.

Re: The real cost of owning a home

#536

Post by bushido »

I was half expecting/hoping this would talk about the opportunity cost of owning a home. More precisely, owning a primary residence.

There are quite a few studies about this, but it is something which is not discussed broadly enough. But there is a inverse relationship between home ownership and income.

Because for most regions across the globe, once someone buys a home, they start looking for work that's in geographic proximity to their primary residence. And in most parts of the world, incomes generally tend to stagnate since higher paying jobs are almost always away from where people live.

Now a lot of people believe that they will pick the higher income, but the amount of logistics which goes into thinking about selling your home or renting it even often dissuades people from trying to look for a job which pays significantly more.

Interestingly, some multinational companies that I know of facilitate the entire transaction for their executives and senior managers when they need to move cities or countries because of this effect.

Owning a home for the purpose of investment and not living is a different matter, and the same effect isn't seen there.

Re: The real cost of owning a home

#537

Post by bombcar »

natebc wrote: post #491
bombcar wrote: post #482

Earlier quoted context omitted.

If you treat your house like a rental that you rent to yourself, you can avoid a bunch of headaches - mainly because you’ve given yourself “permission” to spend on it.

wait ... There are landlords out there who will "spend on it"? Mine took 3 weeks to replace a broken HVAC when it was 35 degress out. 5 days to fix a toilet that when flushed dumped sewage into my downstairs neighbors ceiling. Maybe if you're treating yourself as a tenant but your run of the mill rent extracting (or worse, middle man) landlord is the cheapest creature on the land.

There are, but they're often found in places where the rent pressure isn't so great (e.g., there are many options for renters). When demand is so high or prices are fixed, everything else goes out the window; because what are you going to do, move?

Re: The real cost of owning a home

#538

Post by locusofself »

bob1029 wrote: post #232

> You can save a lot of money in maintenance and repairs by doing your own work whenever possible. I replaced the drain pump in my dishwasher, replaced a leaking kitchen faucet, replaced the control board on my HVAC system, do all my own yard work, etc. This is where the margins of home ownership open up. Doing your own yard work also has added benefit of giving you routine awareness of potential issues around your p…

It's also really nice to just do some work outside instead of staring at a screen . I really enjoy mowing my huge lawn, doing some light landscaping stuff. My wife and daughter pick weeds for hours and it really centers them.

Re: The real cost of owning a home

#539

Post by bell-cot »

jandrese wrote: post #401
bell-cot wrote: post #138

Earlier quoted context omitted.

> If you know what you are doing it isn't even difficult to install. How much time does it take to acquire & refresh the skills and code knowledge, and how many water heaters can you amortize that over during your life?

The skill is in being able to solder pipes together, something that is useful to learn as a general skill. It doesn't even need specialized equipment, just a torch, some flux, and a spool of plumbing solder. There is also a tiny bit of electrical work, but that's literally just matching the colors and using a couple of wire nuts. The building code stuff is more of a bugbear.

> The skill is in being able to ...

Admitting that one of my grandfathers was a blacksmith and the other a farmer, that my own father could have built a house from the ground down (I helped him dig and pour a foundation once) and then up, etc. - most modern Americans just don't have the backgrounds/aptitudes/comfort levels needed to try and succeed at such tasks.

Re: The real cost of owning a home

#540

Post by locusofself »

SirMaster wrote: post #277
cmiles8 wrote: post #62

Over short term windows it’s very possible for renting to make more sense. Over the long term it’s very difficult for renting to come out ahead. If you’re talking about the same town over say 20 years then the chances of renting coming out ahead is near zero. In the US at least the tax system is also heavily setup to favor home ownership. Mortgage interest and real estate taxes (which are baked into rent) are tax ded…

I have been renting the same unit for 15 years now. It was 400/mo when I moved in 15 years ago, and it's 650/mo now, 15 years later. I have paid about 90K in rent now over the last 15 years and this also includes water and heat. My friends with houses in my area pay about that much in property taxes plus heat that I pay for rent... I pay this small amount and make 6 figures and I put the majority of my income into in…

650/month is incredible. My mortgage payment is almost eight thousand dollars.
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