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Is It Better to Rent or Buy?

nytimes.com

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Re: Is It Better to Rent or Buy?

#171

Post by dgrant »

jbarham wrote: post #152
usaar333 wrote: post #150

Earlier quoted context omitted.

> This calculator ignores the fact that the market for real estate buyers is increasingly global but the rental market is local. How is the calculator ignoring this fact? If you think that increasing globalness will cause home price growth to be higher than inflation/rent growth, you can modify that parameter.

My point is that for young people who grew up in cities like London or Vancouver, the choice is not buy or rent, the choice is rent or move away from the city they grew up in if they want to be able to buy a house on a middle class salary.

The choice is still or rent. What you're saying is that renting is better than buying in these cities because housing prices are high. This calculator demonstrates this; if you put in an extremely high house price, you'll find that renting is better (or moving somewhere else where housing prices are cheaper of course).

Re: Is It Better to Rent or Buy?

#172

Post by eloisant »

mbostock wrote: post #18

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative. For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your…

How do you take into account the initial fees? (Taxes, real estate agent fees). It would be nice to have that configurable.

It's important to have it separate from the price you pay to the owner because you shouldn't include them in the resell value of the house.

Re: Is It Better to Rent or Buy?

#173

Post by crimsonalucard »

seanmcdirmid wrote: post #31
Frozenlock wrote: post #20

Earlier quoted context omitted.

And you still need to pay taxes (rent) to your municipality (landlord). So if I summarize, you can't do what you want with it and you need to pay your landlord. Why are people calling this 'owning' a house?

There are countries that lack property taxes, but they tend to be communist (china) and you are only buying a 99 year lease. Also, the lack of property taxes doesn't work very well, as it encourages speculation and then sitting on then property doing much with it waiting for values to rise. Property taxes enforces mandatory deprecation (you have to make it productive enough to at least pay the tax) and also funds thi…

The 99 year lease is basically identical to ownership as people are exchanging the "lease agreements" like property titles. China hasn't decided what to do when the lease is up but in general it is highly unlikely they'd make you renew the full lease. Most likely they're going to start charging property tax.

Re: Is It Better to Rent or Buy?

#174

Post by roel_v »

mbostock wrote: post #91
pessimizer wrote: post #76

Earlier quoted context omitted.

Your mentioning of this made me check out the graphs again - and I noticed that the graph depicting the size of a down payment was flat. That could only mean one thing: the cost of mortgage insurance (that you will be forced to get if your down payment is lower than 20%) hasn't been included. That's a major cost on low down-payment house purchases. Intentional or oversight? https://en.wikipedia.org/wiki/Mortgage_insu…

We’re not currently including mortgage insurance, no. You could approximate it by increasing the mortgage rate, but the tax treatment of mortgage insurance payments may be different and so that may not be accurate. Perhaps this is something we can add in the next iteration of the calculator. The interaction between down payment rate and mortgage insurance rate also reveals a limitation of our user interface: On the o…

"The interaction between down payment rate and mortgage insurance rate also reveals a limitation of our user interface: On the one hand, it’s nice to have all the variables decoupled so that you can set and explore them independently. On the other hand, many of the variables are not independent. If you change one variable, you may need to change other variables to maintain a realistic scenario."

Well I'm not sure I'd call this a 'limitation' of your UI. This is actually a very common issue when designing user interfaces for models (I have been doing this for a living for almost 15 years). There is a continual tradeoff between the positives of the software ensuring internally consistent, and realistic, values - and allowing the user flexibility for edge case exploration. And then there are issues like discoverability, speed of use, technical limitations, etc. - as always.

One of my favorite mental toys in this area is: devise a way for a user to assign a fixed amount (call it a 'budget') to several categories. For a simple example, consider a budget of $100 over 5 expense categories. But it should also work for allocating a road maintenance budget across 25 districts, or for assigning a weighting to the importance of policy objectives (ecology, health, economic growth for example).

In the vast majority of cases, after several meetings about this, clients say 'fuck it, let them copy/paste their own values from Excel' (at this point I come in and broker a truce between the warring factions of several solutions and implement a meet-everybody-halfway solution :) ) It's one of those 'how hard can it be?' 'oops yeah pretty hard' things.

Re: Is It Better to Rent or Buy?

#175

Post by kjackson2012 »

refurb wrote: post #117
greedo wrote: post #73

Earlier quoted context omitted.

I might be missing something, but if house prices rise just 1% annually, your differential would shrink dramatically in favor of ownership.

In the scenario I modeled, I was assuming around ~3% growth. Rent control definitely favors renting in a lot of situations. If you were at the whim of your landlord, then I could see buying being more attractive, especially in a market where housing prices are going up. The real kicker about owning a house is that housing prices never go up a nice steady 2% or 3% per year. They go up 5% one year, then down 5% the nex…

There is no rent control on single family homes in SF, regardless of its age.

Re: Is It Better to Rent or Buy?

#176

Post by dingaling »

refurb wrote: post #121
nilkn wrote: post #22

Earlier quoted context omitted.

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

That's what makes me laugh when I talk to people who are looking to buy a home. Despite the housing crash of 2007, when I ask them what would happen if housing prices go down, they get this disturbed look on their faces and say "nah! not in this city!!".

As someone who has nearly paid-off a mortgage I have absolutely no interest in whether house prices increase or decrease.

I'm buying somewhere to hopefully live for the rest of my life. I have no idea what the current 'value' of my house is, nor will I be enquiring.

If it turns-out that the house eventually achieves negative equity, who cares? I'm still living in it and that would actually mean my property taxes decrease...

People still buy cars despite meteoric[0] devaluation.

[0] meteors plummet to the ground, you see

Re: Is It Better to Rent or Buy?

#177

Post by vijucat »

IgorPartola wrote: post #140
kenrikm wrote: post #135

Earlier quoted context omitted.

I used it to calculate if buying my house was a better deal than renting. Turns out over 30 years it was exactly the same.. down to the dollar.

Including the fact that you own the house after the 30 years?

Not sure why you're getting downvoted for this, it's actually a quite relevant point, i.e., the the side-by-side comparison should include the consideration that you get to enjoy rent-free accommodation in the home for a certain number of years (or even generations!) once it's paid for. It gets more complicated when you have to factor in a positive probability for various outlier events such as the house getting bombed in a war, the entire city going Detroit, etc;

Re: Is It Better to Rent or Buy?

#178

Post by ryanjshaw »

vijucat wrote: post #177
IgorPartola wrote: post #140

Earlier quoted context omitted.

Including the fact that you own the house after the 30 years?

Not sure why you're getting downvoted for this, it's actually a quite relevant point, i.e., the the side-by-side comparison should include the consideration that you get to enjoy rent-free accommodation in the home for a certain number of years (or even generations!) once it's paid for. It gets more complicated when you have to factor in a positive probability for various outlier events such as the house getting bomb…

Even more complicated:

- owning a house may make it harder for you to decide to move and accept a job/opportunity elsewhere, or to travel -- the impact of which is unquantifiable

- for some people, by the time they'd finish paying off a house they'd already reasonably expect their parent's to have passed on and left wealth/property; for these people, particularly entrepreneurs, having free capital in the intervening period would turn out to be more rewarding so rental is a very sensible option

- not everybody is born where they want to end up; I've moved between 3 cities and 2 countries in my 12 years as an adult (each time increasing my earnings, opportunities and life experience significantly, like climbing rungs on a ladder), and I'm hoping to move a 4th time so that I can finally have access to the top-rung opportunities other people born in major cities and 1st world countries take for granted -- the idea of owning houses in each of these cities and somehow managing to rent them out as some propose here is absurd to me, I barely have enough time to take care of my basic needs, nevermind run a multi-national property empire, and besides which there a

Ultimately as nice as this calculator is, this is a very personal decision.

Re: Is It Better to Rent or Buy?

#179

Post by vijucat »

ryanjshaw wrote: post #178
vijucat wrote: post #177

Earlier quoted context omitted.

Not sure why you're getting downvoted for this, it's actually a quite relevant point, i.e., the the side-by-side comparison should include the consideration that you get to enjoy rent-free accommodation in the home for a certain number of years (or even generations!) once it's paid for. It gets more complicated when you have to factor in a positive probability for various outlier events such as the house getting bomb…

Even more complicated: - owning a house may make it harder for you to decide to move and accept a job/opportunity elsewhere, or to travel -- the impact of which is unquantifiable - for some people, by the time they'd finish paying off a house they'd already reasonably expect their parent's to have passed on and left wealth/property; for these people, particularly entrepreneurs, having free capital in the intervening…

> owning a house may make it harder for you to decide to move and accept a job/opportunity elsewhere, or to travel -- the impact of which is unquantifiable

Why is it harder? Not sarcastic at all, by the way : it's just that I am in Hong Kong and it's actually quite common for expats here to buy a house, give it out for rent, and never come back to Hong Kong again! In fact, I know of some cases where people have bought flats without even looking at them! (In both cases, someone they know manages rent collection + maintenance, presumably for a small fees?). So I was wondering what is different about the US / wherever you are right now.

Yes, it's a very personal decision, those were the exact words I was looking for! I suppose hardcore economists would say that the Utility Function is very personal.

Re: Is It Better to Rent or Buy?

#180

Post by sampo »

millstone wrote: post #57

My wife and I found a great apartment to rent. It was spacious, quiet location, reasonable rent. We were happy for a few years. Then the owners sold the complex, and the new owners set out to remodel everything, very much against our wishes. Construction crews started entering our apartment. They came in while we were out, laying down plastic sheets and moving our furniture around. They sometimes came in while I was…

> They sometimes came in while I was sleeping, and while I was getting dressed.

Your country (which country is it?) seems to have very substandard legislation in these matters, if such intruding is not illegal.

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