Is homeownership truly better than renting?

[IceBergSLiM]

interest will drive the cost of the home to 2x the list price, and the interest gets paid mostly up front on your mortgage

so even if you sell at a profit, you are going to be at a loss overall

when you consider inflation, your home is a liability on the balance sheet almost every time

but if you consider the well being that you get from owning it and having your own space, then it may be worth it if that is what you value

i hated living in apartments, being cramped, and having loud neighbors, so it is worth to me to pay more for a home

This doesn't make any sense in the bigger picture. 30 years paying a mortgage is going to always be better than 30 years paying rent. Eventually you can own the house out right. Renting is literally throwing money away, no chance of return or recovery ever.

of course this assumes you didn't buy in an inflated market and aren't upside down on your house.

 

[Genx87]

Owning a home is really only worth it if you see appreciation. If the house stangates or depreciates renting makes more sense. Even then under typical conditions you will most likely only see 1-3% return on your house over the course of owning one due to most people having a loan on it for 30 years. The house will appreciate but the total cost of the loan will be close to what it appreciates. Then you have to tack on maintenance and property taxes.

 

[2Xtreme21]

I will be the first in line to laugh at you when I see the interest rate starts to raise. guess what is the relationship between interest rate vs house price?

You mean like how I would lock in an interest rate and having them skyrocket wouldn't affect me in the slightest?

K, laugh away...

 

[JS80]

Just put an offer in on my first house yesterday. I'm really excited to get out of the "throw $750 into the furnace every month" thing. With a house, even if it's small for the first few years, every dollar I put into it increases the value of it. That is, should the world not END in the next few years, and should I keep up with the house, I should be able to sell the house for more than I paid for it and use the extra money to put a bigger down payment on a nicer house.

If I were to rent for the next 5 years, I would pay $45,000 into the apartment and not see a dime of it in return.

Edit: For those saying I could keep renting and just put a set chunk of money into a high yield savings account, that's still money on top of what I'm spending to live there. Wouldn't you like to see a return on just the money you spend to live somewhere?

Fail post is fail.

 

[dullard]

You mean like how I would lock in an interest rate and having them skyrocket wouldn't affect me in the slightest?
K, laugh away...

I think DaWhim is referring to this bolded part of your post:

That is, should the world not END in the next few years, and should I keep up with the house, I should be able to sell the house for more than I paid for it and use the extra money to put a bigger down payment on a nicer house.

When interest rates rise, housing prices typically plummet. Why? Because people shop by how much they have to pay a month, when their interest goes up, how much they can pay for the house falls. Meaning they won't buy your house unless you drop the price. Since interest rates are near record lows, there is a good chance that they will be higher when you want to sell.

Your interest rate has nothing to do with what he was talking about. It was the buyer's of your house who would have the important interest rates (and you have no control over that, you can't lock in their interest rates). He was predicting that your first starter house price will fall. This may be true, but we don't have a crystal ball yet. Will you still be laughing if that happens? Just 3 years ago people kept posting here that housing prices can't fall. Then look what happened to housing prices: the national average fell 29%.

 

[radioouman]

Owning a house is great as long as you have a plan to pay it off quickly.

 

[IceBergSLiM]

Actually thinking about it. If you pay off a house in 30 years and then sell it for a 20% loss you are still 80% ahead of where you would have been throwing the some cash down the tubes on rentals for 30 years. So realistically the only time you would lose is if you were selling your home after 30 years at more than 99% loss. Which I don't really see being possible.

 

[DaWhim]

I think DaWhim is referring to this bolded part of your post:


When interest rates rise, housing prices typically plummet. Why? Because people shop by how much they have to pay a month, when their interest goes up, how much they can pay for the house falls. Meaning they won't buy your house unless you drop the price. Since interest rates are near record lows, there is a good chance that they will be higher when you want to sell.

Your interest rate has nothing to do with what he was talking about. It was the buyer's of your house who would have the important interest rates (and you have no control over that, you can't lock in their interest rates). He was predicting that your first starter house price will fall. This may be true, but we don't have a crystal ball yet. Will you still be laughing if that happens? Just 3 years ago people kept posting here that housing prices can't fall. Then look what happened to housing prices: the national average fell 29%.

Thanks, you explain a lot better than I could do it myself.

being said that, this is just not the right market to buy a house at least to me.

 

[Svnla]

I think it depends on several factors.

First, how long are you going to stay in a particular location. Don't bother to buy if you only stay in a place < 5 years IMO.

Second, how stable are you job and job/economy outlook of your area.

Third, you have to be sure you are ready to be your own landlord.

I am renting right now and I am still on the fence due to the fact that I am not sure I want to live in the next 5 to 10 years. But the $8,000 credit for first time home buyer sure are tempting.

One more thing, need to compare the sq ft of an apartment vs. sq ft of a house. In my case, 700 sq ft apt for about $600 or less vs. 1800 sq ft of a brand new home for about $1100.

 

[Hacp]

If home prices rise, then yes. Otherwise, you can put the money into Tbills and end out ahead.

 

[DaWhim]

Actually thinking about it. If you pay off a house in 30 years and then sell it for a 20% loss you are still 80% ahead of where you would have been throwing the some cash down the tubes on rentals for 30 years. So realistically the only time you would lose is if you were selling your home after 30 years at more than 99% loss. Which I don't really see being possible.

there is a flaw in your thinking, you are assuming mortgage payment and rent are the SAME. is it really?

there is a difference of the mortgage and house related payment(property taxes, insurance, maintenance) vs rent. the former will be higher than your rent. now, assume that you bank the differences, you are not exactly throwing some cash down the tubes. How well you do depends how well you invest the money you saved for not owning a house.

 

[IceBergSLiM]

there is a flaw in your thinking, you are assuming mortgage payment and rent are the SAME. is it really?

there is a difference of the mortgage and house related payment(property taxes, insurance, maintenance) vs rent. the former will be higher than your rent. now, assume that you bank the differences, you are not exactly throwing some cash down the tubes. How well you do depends how well you invest the money you saved for not owning a house.

Assuming you will want to rent something of equivalent size for a wife and kids for 30 years, its not out of the question for the rent to actually be more. but yes lets assume its the same.

If you are living alone or with out kids it probably doesn't make sense.

 

[spidey07]

there is a flaw in your thinking, you are assuming mortgage payment and rent are the SAME. is it really?

there is a difference of the mortgage and house related payment(property taxes, insurance, maintenance) vs rent. the former will be higher than your rent. now, assume that you bank the differences, you are not exactly throwing some cash down the tubes. How well you do depends how well you invest the money you saved for not owning a house.

The problem with that thinking is the mortgage/taxes will most often be LESS than rent for similar property/space/location. Remember the landlord is paying the mortgage/taxes so he's going at least cover those expenses and make some money on top.

 

[Suspicious-Teach8788]

I think a lot of people are living in mediocre areas when they say "Bleh forget buying." You're right. There are some neighborhoods that after 20 years have only seen a 20&#37; appreciation.

We bought a house when I was going to elementary school. This was 15 years ago? 16? ~300-400k. We built a new house after tearing the old one down. New house worth about ~900k. I know during the real estate peak a few years back it was well over 2 million. Today it's at least 1.7 or so according to Cyberhomes.

We didn't build it till about 11 years ago, so in 11 years we've just about doubled the value.. EVEN with this recession. Now, if you live in some craphole, this recession screwed you over. If you bought 3 years ago in many places, you're screwed. In many places in CA if you bought 3-5 years ago you might be breaking even still, or just slightly under at the moment.

In the end you pay pay interest up the ass, but here's the key. If you bought in a decent location, you can sell that house and move up. My uncle bought for $400k around when we moved into our house. He sold for $800k a few years later and moved into a better area. He took that $800k and sold it for a little over $1 million and moved to LA. They had a $1.8 million house. He had to take a loss selling it last year because his job brought him back into the Bay Area but he's a director so it's not like he's got money issues anyway. But the point is, you can move up.

AND if you live in a good enough area and you want to save for that 2nd house, you should. Silicon Valley is a prime example. If we saved our old house it could easily cover our current mortgage with rental income.

 

[OCGuy]

If home prices rise, then yes. Otherwise, you can put the money into Tbills and end out ahead.

Huh? After 15-30yrs paying on a mortgage, you can have no payments other than property tax, and you are sitting on a paid off house that can be borrowed against/sold in emergencies. If you rent for 15-30yrs, you will still be renting, and have nothing to show for it.

 

[PieIsAwesome]

I don't see how renting could be preferable aside from financial reasons, but that depends on the area. In some areas it doesn't make sense at all to rent.

I like the idea of being able to modify and maintain your home. The only thing I hate is yard work but I would just pave all that shit over.

 

[coloumb]

My wife and I (5 years ago) used to live in a 1br apartment for around 600 a month or so. I now own a house.

Please make a big deal about home ownership, if you own a home you have more freedom, it's supposed to be cheaper in the long run, social standing etc... But, I'm starting to think it's probably about the same, if not, it probably cost more.

In most fixed term mortgages you pay interest, many people don't sit down and calculate the amount of interest they are actually paying v.s. the principle. It's almost like a rip-off. Second, you pay property taxes, improvments to home, and the possiblity of losing equity based on what has happend recently.

Own a house = long term investment [sort of like 401k] and a bargaining tool to obtain more money if you need it [credit cards, bank loans, etc]..and you can basically do whatever the hell you want [to the inside]. If you live in a neighborhood with an HOA - then you have to get permission to modify the exterior.

Rent an apartment/house = leasing a car.

 

[DougK62]

I think it depends on several factors.

First, how long are you going to stay in a particular location. Don't bother to buy if you only stay in a place < 5 years IMO.

Second, how stable are you job and job/economy outlook of your area.

Third, you have to be sure you are ready to be your own landlord.

I am renting right now and I am still on the fence due to the fact that I am not sure I want to live in the next 5 to 10 years. But the $8,000 credit for first time home buyer sure are tempting.

One more thing, need to compare the sq ft of an apartment vs. sq ft of a house. In my case, 700 sq ft apt for about $600 or less vs. 1800 sq ft of a brand new home for about $1100.

Don't do it, man! Choose life!

 

[DaWhim]

Assuming you will want to rent something of equivalent size for a wife and kids for 30 years, its not out of the question for the rent to actually be more. but yes lets assume its the same.

If you are living alone or with out kids it probably doesn't make sense.

you turn the question into a subjective one. how big of space you need for a family is really down to individual preference.

if you want to go with that direction, let see:
in the first few years, you don't need a bigger space when the kids are smaller.
then you can go for an upgrade until you kick your kids out when they are 18 y/o.

when it comes to renting, you have the flexibility. sure you can buy/sell a house just like you rent, but do you know how much it cost to sell/buy a house?

 

[RaiderJ]

There IS no definite on which is better. Entirely dependent on your situation.

 

[edro]

Renting a stand alone house may be worth it, but they are usually more expensive than a mortgage.

 

[lsd]

Renting a stand alone house may be worth it, but they are usually more expensive than a mortgage.

I live in FL and pay $1000/m rent for a 3bd 2ba house in a gated golf community. The owners pay about $1600/m for mortgage/tax/ hoa fees.
Over here rent a house > buying a house.
FL has no state income tax but in reality the homeowners are the ones who really do pay the state tax...

 

[edro]

I live in FL and pay $1000/m rent for a 3bd 2ba house in a gated golf community. The owners pay about $1600/m for mortgage/tax/ hoa fees.
Over here rent a house > buying a house.
FL has no state income tax but in reality the homeowners are the ones who really do pay the state tax...

Landlords losing $600/mo is not normal.
You are obviously leaving details out of the story.

 

[Acanthus]

Yes, equity.

-finance major.

 

[tallest1]

Homeownership was great until the day I realized that I just had spent 25&#37; of my annual income replacing the windows. Replacing windows instead of.... I dunno, buying a car, and knowing that the home's value is still lower than the day I bought it. I think it was then I died inside and just gave up.

I want out but, I can't afford to fix the house up completely, I can't afford to put it on the market and I definitely can't afford to pay the bank the difference between the loan amount and house value. So, yeah, go homeownership!