It stands to reason that owning must be cheaper than renting an equivalent place over the long term, unless the guy renting to you made a poor investment. But you're usually not comparing equivalent places when you make the comparison.
The real cost of owning a home
391–400 of 901 posts
Re: The real cost of owning a home
#392Earlier quoted context omitted.
They also neglect the Mortage Interest Tax Deduction and State and Local Tax Deductions, whcih reduce the cost of both by your marginal tax rate, and is a big benefit towards owning. More importantly, this neglects that buying a home is locking in the price for the long term for the majority of your housing cost. Buying usually is similar all in the first year, but after 5 years your mortage payment is the same while…
Not everyone benefits since many people take the standard deduction.
If you own a house and pay interest, especially like this person, they'd max out the SALT deduction with the house alone, much better than the standard deduction.
Re: The real cost of owning a home
#393Beyond 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 main…
What maintenance is there to do exactly ?
Yard work, gutter cleaning, power washing exterior, cleaning windows, bi-annual HVAC service, exterior paint (especially if the house has any wood) and trim upkeep.
And as the house ages, you get things like repainting interior rooms, more frequent plumbing issues, major HVAC repairs, roof replacement, repaving driveway, electrical upgrades, remodeling, etc.
We downsized to a townhome to avoid some of that (half the walls are shared, so no exterior upkeep for those; smaller yard; fewer rooms).
Re: The real cost of owning a home
#394Earlier quoted context omitted.
> House maintenance and projects have taken up most of every single weekend of mine for the past few years. Mine come and go but it's no where near every weekend since I've purchased in 2019. What sort of things occupy this much time?
Houses are very different. I grew up in a guest house (so: three floors, a cellar, 14 flats/rooms) that has various layers from various ages. The foundations are hundreds of years old, most of the rest 50s, 60s, 70s, 90s. If you're living in a new house you may have peace for a few decades, but at the cost of everything piling up the longer you wait. Exchanging corroded drain pipes someone thought was a good idea to…
I think it's a U shaped curve probably... lots of stuff breaks initially due to mistakes/defects, and then 10/20/30 years out. The sweet spot is moving into home renovated 5-10 years ago.
I've lived in a new construction condo as well as a 1970s home that had renovations in 1990s and 2010s.
New construction you deal with a lot of defects that show themselves in the first few years. You also contend with modern construction just being lower quality materials in a lot of cases unless you do a high end build for yourself. So the floors, cabinets, etc are going to wear out much faster.
My 50 year old house of course had a ton of deferred maintenance from previous owner that resulted in break-fix work on plumbing, heating, cooling, siding, roofing, etc.
I type this as I have 2 faucets, a fence, some driveway potholes and paver stones to mend, an irrigation head to replace and a new central air unit coming in next week. Dishwasher was replaced 2 months ago.
Re: The real cost of owning a home
#395Earlier quoted context omitted.
All investments inherently have risk. Looking at historical data the average return is 4% per year on houses in the US. This average includes the '08 housing market crash. If you hold for long enough, your risk is drastically mitigated. Whereas with rent you're basically guaranteed for prices to go up year over year, unless we are in a deflationary market which is quite rare.
> If you hold for long enough You are improperly accounting for risk. People don't own a diversified portfolio of houses, they typical own one house. The "if you hold it long enough" is to some extent disqualifying. Many people never see any real return over multiple decades. Where I live rents won't cover the interest payment on a new mortgage. The return on renting is insanely good here in addition to the increased…
I'm not saying you need a diversified portfolio, I'm just saying that the actual rate of return will regress to the mean of 4% given enough time. Obviously we don't know if that regime will hold forever but that's the nature of investing, predicting the future is very difficult.
I agree though that this is a very location-dependent thing to consider. Local renting rates vs property values is hugely important when determining if it makes sense economically or not. In your area you'd probably be taking a loss compared to renting until rents rise enough to make your mortgage look appealing and appreciation offsets those early losses, which could be a long time depending on the situation. And you may not want to do that at all even if the math looks ok depending on your risk appetite!
My original comment was just address shortcomings in the original post omitting benefits to home ownership, it's certainly not a cut-and-dry issue which is why I had problems with the post originally.
Re: The real cost of owning a home
#396Earlier quoted context omitted.
Love that the two most solid pro-homebuying points I've ever encountered (jedberg's about the psychological benefits, yours about leverage) immediately surface in an HN discussion. It's probably worth making a closer comparison though: * Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments,…
I always consult this calculator: https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal... It forces you to make some assumptions on market returns and such, but it gives a pretty clear picture. The biggest variable is how long you expect to live in the same place (longer favors buy) and the next biggest is the ratio of average rent to average housing payment. The inflection point being that if you live in one…
> but that requires you predicting your life 30 years in the future.
This is true, but the vast majority of people - especially in the US - don't move around the country or even state every few years. One of the biggest, perhaps the biggest, pro of renting is that you're not tied down to one place for very long.
It's pretty rare that someone buys a house then is suddenly forced to move hours away.
Re: The real cost of owning a home
#397Earlier quoted context omitted.
Love that the two most solid pro-homebuying points I've ever encountered (jedberg's about the psychological benefits, yours about leverage) immediately surface in an HN discussion. It's probably worth making a closer comparison though: * Buying a House on Loan: commit to paying off a $450k loan over 30 years at 5% interest, with an immediate $50k down payment and the home itself as collateral. So ~$2500/mo payments,…
You forgot to include the actual living costs if you invest. You're not gonna be able to contribute $2,500 a month. You would be able to contribute not that much , around here rents are $2,500 a month.
Exactly lol
Re: The real cost of owning a home
#398This is nonsense. The person counts the 12 month escrow prepayment during closing as "cost to get a loan" It's not. It's the cost of 12 months of taxes and insurance on your property. Also notable is the "1 year insurance premium" either they're double counting the escrow, or this 1 year insurance premium is mortgage insurance where the bank makes you take out insurance to protect them. This can be prepaid, split pai…
As a non American, I have to admit a lot of things sounds very weird to me, especially on the "mortgage loan fees" part. In particular, the title part sounds horrible (and expensive). As far as I know, over here it's all handled by the state, no insurance required. I don't know if it's because of different laws regarding future claims (the registry is the truth, too late to change it?) or just better records? Same wi…
The title part is kinda weird. The government makes a best effort to ensure all lien holders are satisfied, but that can't be always guaranteed, so title insurance happens. They do the indepth research and put their money on the line (and charge a pretty penny for it). It's pretty rare, but there's little recourse if you buy a home from somebody and they weren't empowered to sell it to you. Banks obviously want to be protected from these situations since the loan is secured with the property. If the title company finds something suspicious, they won't insure it, which is why it's almost never a good idea to buy it for yourself too.
> Same with tax/insurance escrow
You can do this, but only for jumbo loans (>400k). Property tax and home insurance is usually paid once per year, and especially for first time home owners, not being prepared for one of these could be significant financial hardship. So the bank mandates an escrow to make sure a regular yearly charge isn't going to make you miss payments to make. They don't make money on this escrow and there's no interest or fees involved.
> On the other hand, here mortgages only have a closing fee (and quite often even none at all, with all the small fees being invisible and rolled into the margin), so that transparency is welcome.
Yeah, it's super nice. Spells out all the fees, the interest rate, the APR and everything. It clearly delineates fees that can be negotiated/shopped for and which are set by the government and which are set by the bank that you can't shop for (unless you change banks who might charge differently). It's also required to be provided to you in advance with a minimum time window to allow you to read, understand and come prepared.
Re: The real cost of owning a home
#399Beyond 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 main…
> House maintenance and projects have taken up most of every single weekend of mine for the past few years. Mine come and go but it's no where near every weekend since I've purchased in 2019. What sort of things occupy this much time?
I'm a heavy DIY person who does almost everything myself and I'm also confused about the comment above.
The only periods where housework took up every single weekend were during renovations, which can take extra time on an old house like mine.
Simply maintaining a house shouldn't take up every single weekend unless you have a humongous old house on an extremely large property.
Re: The real cost of owning a home
#400Beyond 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 main…
What maintenance is there to do exactly ?
Basically everything. People think of homes as static but they are a big machine that is aging.
Nothing is getting better with time, only worse.