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The real cost of owning a home

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Re: The real cost of owning a home

#791

Post by robeym »

I don’t think we should be discouraging people from buying homes. In a healthy market, the goal should be more households owning the homes they live in, not more homes being accumulated by investors and non-owner-occupant buyers.

The mistake is not buying a home. The mistake is buying too much home, stretching the term too far, and ignoring maintenance.

A cheaper house, shorter loan term, and realistic repair/addition budget change the math a lot.

Own what you can actually afford to maintain.

Re: The real cost of owning a home

#792

Post by dennis_jeeves2 »

jedberg wrote: post #164

The benefit of owning a home is almost always psychological, not financial. If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place. But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or ow…

> If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place.

You won't - you got to account for real inflation which is about 7% in US and taxes.

Note that in both cases investing (simple investing like S&P500) vs owning a house you loose. It's just that overall loses will generally be lesser if you purchase and then sell a house. I will need you to to show me figures on yearly basis if you want to tell me otherwise.

Re: The real cost of owning a home

#793

Post by modo_mario »

jedberg wrote: post #164

The benefit of owning a home is almost always psychological, not financial. If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place. But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or ow…

> If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place.

Everywhere here rent has rapidly outpaced the mortgage payments and the down payment also pushed down my monthly payments significantly so it's not like nothing comes out of that.

To top it off my home is far more spacious.

Maybe it could work out if you went for the cheapest rent and invested the difference and happened to be that rare case that avoids a market crash. But then you'd also be living in a small appartment for at least 2 decades.

Re: The real cost of owning a home

#794

Post by xnx »

BobbyTables2 wrote: post #692
shrubble wrote: post #686

Earlier quoted context omitted.

The frustrating thing is, that for not much more spent at the time of construction, we could have nearly maintenance-free homes for 80 years or more. Like, why use wood in an climate like the American South, where there are multiple species of termites that like to eat wood? I was a member at a maker space - the building has been around since the 40s or 50s and never damaged by a hurricane - why? The roof (with a rub…

I’ve always wondered why the South uses black asphalt shingles. Aside from being the worst possible color, they like neither the hot summers, the hailstorms, nor the hurricanes. The level of stupidity exceeds California homes using sun-baked wood shingles that can be torched off from the suggestion of a single spark.

Job security for roofers. Individual home buyers are too dumb to understand or too busy too think about tco.

There's a reason you don't see shingles on commercial buildings.

Re: The real cost of owning a home

#795

Post by xnx »

shrubble wrote: post #686
dividefuel wrote: post #315

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 main…

The frustrating thing is, that for not much more spent at the time of construction, we could have nearly maintenance-free homes for 80 years or more. Like, why use wood in an climate like the American South, where there are multiple species of termites that like to eat wood? I was a member at a maker space - the building has been around since the 40s or 50s and never damaged by a hurricane - why? The roof (with a rub…

Exactly. I daydream about building a simple house to commercial standards that is optimized for low total cost of ownership and easy cleaning.

Re: The real cost of owning a home

#797

Post by mancerayder »

There are pros and cons to home ownership - this article is both U.S.-centric and focused on the cons.

Obviously maintenance costs are high, maintenance is time-consuming, and transaction costs buying and selling are insane. I'll add one - property tax will turn that high income tax (especially in an expensive blue state like CA or NY) and add a massive additional tax, easily transforming that 35-45 percent of income into 55-60 or more, a math absolutely no one does when comparing taxes with W European ones which are supposedly much higher.

Here are pros and why you should probably buy:

If you want a house in a low density but in demand area, you won't find anything for rent. Because appreciation goes up, because renting gets more expensive every year, because lease renewal every year is a stressful waiting game and decision point, because renters subsidize owners via interest tax deduction.

And most importantly, you are free to do what you want inside your house. Just avoid HOAs.

Re: The real cost of owning a home

#798

Post by mancerayder »

lesuorac wrote: post #576
iteria wrote: post #380

Earlier quoted context omitted.

A house is an inflation hedge. Any calculation about investing the difference has to subtract the rent you are paying and rent goes up every year. There is no where where you can pay a rent anywhere close to what I'm paying for my mortgage in my area and I'm only 5 years into this. Of course I lucked out by locking in that sweet sub-3% rate, but still, I find it hard to believe that over time if you took the money yo…

> A house is an inflation hedge. So are Stocks ... > I find it hard to believe that over time if you took the money you'd put into a house and subtracted out rent, you'd end up winning in the long term. You are not alone. The thing is this is such a common argument that there are a zillion rent vs buy calculators [1]. That said, yeah sub 3% the math often does work out in terms of buy (assuming you don't sell before…

Stop - have you also accounted for 750K loan amount in mortgage interest tax deduction, and the SALT cap of 40k?

Are we looking at markets where we had massive appreciation in real estate values in the last 5 years? Because while you might say they were outsized and abnormal, the stock stock market was, too. The years of ZIRP made everything nuts.

Re: The real cost of owning a home

#799

Post by wink »

dividefuel wrote: post #315

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 main…

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

Kinda depends on the prices. Where I live you can be lucky to find anything resembling a living house for under 1m EUR. First you'd have to be able to do a calculation and say 'I can afford that', only then it makes sense to ask the lifestyle question.

FWIW, my parents had to spend the first 1-2 years renovating a lot in their house (in the 90s) but after that it wasn't really that much of ongoing stuff. Small garden helps a lot though.

Re: The real cost of owning a home

#800

Post by mancerayder »

alistairSH wrote: post #375
wwweston wrote: post #365

Earlier 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,…

The one thing missing from that calculation... the rent goes up over the 30 year period while the mortgage is fixed (subject to changes in tax rate and insurance as value hopefully increases). 9 years into my current home and my 20 year mortgage is substantially less than renting a similar house in the same subdivision. And because it's 20 year, the interest rate is lower, and when I retire, I'll only have to cover t…

And people aren't including the interest deduction on income - up to 750K loan amount worth. This is a form of subsidy that renters are handing over to mortgaged owners.
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