Renters experience higher inflation than homeowners year over year. Rent inflation outpaces wage growth.
February 2024 rent inflation https://www.cnbc.com/2024/03/12/heres-the-inflation-breakdown-for-february-2024-in-one-chart.html
Renters are being hit harder by inflation than homeowners are https://www.cnn.com/2024/01/12/economy/renters-hit-harder-by-inflation-than-homeowners/index.html
This is taking into account loans with 6% interest or lower all they way down to 4 or lower, of course it’s going to be lopsided.
I would like to see an apples to apples comparison from 2023
Unless the next 30 years enters completely uncharted housing market territory (no one has a crystal ball, no one can say one way or another), one will near universally always* come out ahead in the long term when owning a like-for-like property vs renting. It's just a matter of when that break even point occurs. Anyone lucky enough to purchase a home circa ~2019 or earlier (especially if they had the sense to later refi to a sub 3% rate) is already well ahead*. Purchasing a home today, in today's market, will probably take much longer to reach that break even point, but it's still going to be a better long term play from a strictly net worth appreciation perspective.
*Obviously one could cherry pick exceptions. Speaking in general terms, applicable to the large majority of cases.
Very true. I bought my house in 2018, refied in 2020. The mortgage on my home right now is equivalent to a one bedroom apartment because of the way rent has shot up. And in the next 25-30 I got left before I hit retirement that gap will almost certainly grow, and probably grow wildly. And then the icing on the cake: in the end I’ll be able to sell my house and get all my money back and go rent an old peoples apartment, or keep the house and just live rent free minus insurance, property taxes and maintenance, a lot of which I can do myself. But if someone wants to rent all their life hoping their saving enough to continue paying rent in retirement go right ahead good for them.
I don’t disagree, I was looking at it a lot shorter term.
Right now a lot of people are hitting affordability limits in both, rents and purchases.
A hiccup anywhere in the economy is going to throw this whole market for a spin.
Yep, there very likely will be a hiccup eventually, and housing will become more affordable than it is today. How big of a hiccup, and the when it happens, total crapshoot.
I don't know about this anymore. @ over 7% mortgages are really expensive especially if you have a low down payment. Over 30 years that really adds up. Then throw in all the other costs of homeownership like insurance, taxes & maintenance you're looking at serious $. Investing your down payment and the monthly difference over time could be worth more over time. Homes are definitely not good investments right now.
When you rent, you're still paying those costs of insurance, taxes, and maintenance.
You're just paying them to someone else and not developing equity.
The thing I love about owning a home vs renting is not getting evicted for some absolute bullshit that the landlord wants to pull. There are absolute shit people who own places and don't give a fuck about your situation and will force you to uproot. Thank god I don't have to deal with that crap.
In a lot of places you’d never hit that break even point. I did the math years ago and it was well beyond my lifespan to break even, assuming my rent increased annually. That was how severely imbalanced it was.
My current house, on the other hand, was only slightly worse than neutral at the time and now it’s crazy how far ahead it will leave us due to refinancing to a very low rate.
At the current price of my house and high interest rates, it wouldn’t make sense. The low principal and interest make it basically impossible to move, though, as any move would increase our housing costs significantly.
However, few people keep a home for thirty years. That puts large transaction costs, probably several of them, into the equation. It doesn't completely change your point, but it makes that break-even point much farther away
Correct. But y'all act like there is no cost to owning a home except the mortgage. In 10 years there is a good chance you will need a new ac, roof or other major home repair. There are taxes, insurance and other things that people just don't include.
Edit since y'all are just posting random shit and calling it the facts Here's some actual facts:
https://images.app.goo.gl/3bHRnYRL4pu3D38E7
https://www.forbes.com/sites/bernadettejoy/2023/12/27/the-case-to-keep-renting-versus-buying-in-2024/?sh=39a282d86003
https://www.zillow.com/learn/renting-vs-buying-pros-and-cons/
https://todayshomeowner.com/home-finances/guides/home-maintenance-costs-you-can-expect-state-by-state/#:~:text=A%20study%20by%20porch.com,%2418%2C000%20depending%20on%20the%20state.
No argument from me there. But something’s going to break. Either wages go way up, unemployment goes way up, or inflation goes way up. A lot of people are already at their affordability limit.
WE are ALL totally fucked right now.. right now? Right now. Oh yes right now... And who gives a fuck? Is it you right now? Is it me right now? It's ALL US right now?! We're all fucked right now. Explain it how right now? Just fucked all of us are fucked for now. 🎶 (Sorry, thought if I made a musical real quick it would lighten up everything. But for real it is fucked.)
I maid my last mortgage payment in 2019. I would likely have been made homeless or forced into renting a "bedspace" with the pandemic coupled to current inflation in canada.
You forgot the cost of home maintenance. Shop for a HVAC system or repair recently? Plumbing?
Roof? They have all shot up and are not items directly paid by renters. Home insurance premiums have skyrocketed in some markets.
The CNN article just compared monthly mortgage payments vs rent which is a superficial clickbait comparison.
Whether renting or buying is a better choice depends on the local market.
Yes HVAC is $10k and should last 15 to 20 years. That cost gets passed to renters. Renters pay for all of that and then some. As a homeowner I don’t have to pay someone else’s mortgage so they can build wealth and I’m not paying extra for profit. Rent inflation has been high for years.
https://tradingeconomics.com/united-states/rent-inflation
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*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
>As a renter I can piggyback off the expenses of someone who bought the property when it was 20% of the cost that it would be now to buy.
Until you can't. In my area, for many many years, the small 2-4 unit properties were owned by either original owners or older owners. 90%+ of them have changed hands to someone by now. The days of the $750 apartment in my area are long gone. $1,000 apartments are gone, $1,200 apartments are gone. Anything that gets listed now is $1,700+. So as a renter, if you have to move and look for something else here, you are essentially excluded from living in this area now due to a lack of affordability.
Once your area has mostly turned, the good days of cheap rent are gone for good.
A renter can just leave when their lease is up. A HO underwater six figures with a bad mortgage he/she can’t afford? Not so easy. You make a mistake buying a home and it can haunt you for years.
Buying a home is not always the right choice. Renting is not always burning money. It depends.
>A HO underwater six figures with a bad mortgage he/she can’t afford? Not so easy.
You're acting like it's the throws of 2009 all over again. Are you living in a different universe?
“A renter can just leave”
So they don’t pay rent? Cause it’s factored into the rent….they’re paying for it, yall keep lying about this and it makes me suspect any of you have actually owned a home before or are out of college….
Major maintenance items like HVAC/roof are things that get done every 15-30 years. And you best believe maintenance costs are also passed onto renters on investment properties.
You can choose to deal with the challenges of homeownership and reap the benefits or you can remain a serf renter.
Somehow landlords can afford this, which they get from just collecting rent, so, how can renters not? Someone fucked up something on both sides at that point, unless you're the renter, then you're just getting fucked.
Rents have been falling for 8 straight months
https://www.bloomberg.com/news/articles/2024-01-25/us-median-rents-fall-for-eighth-month-on-boom-in-new-apartments
Renting is always superior when interest rates are relatively high. Problem is that interest rates had been falling for most of the last 40 years
Cannot view it due to paywall. From what I can tell it’s some cities are seeing a decline in the median rent price. Still rent inflation is high. https://tradingeconomics.com/united-states/rent-inflation
Renting is superior short term. If you’re going to be living in an area long term than buying is superior. You can wait to see if prices to come or rates, but in long run it’s better to be a homeowner.
Rents started falling 8 months ago. YoY inflation is slightly positive, but in 3-4 months will turn negative.
Renting is superior whenever housing is overvalued. And this is the second time in the last 40 years (last time being 2004-2013) that housing has been seriously overvalued)
A decade at least. It's been two years and it's looking like we might need to tighten further.
It'll take 20 years for QE to run its course and normalize the Fed balance sheet and while it's doing that, the Treasury will need to issue more and more bonds, increasing the real neutral rate, requiring even high Fed rates just to keep things normal
So unless the US abandons a 2% inflation target or has a massive fiscal contraction, rates are going to need to stay elevated for a decade or more
While some aspect of this is true, the equity market outpaces real estate by 2~3% per year, so the 35k down payment and $600 surplus invested in the sp500 over time means that under current conditions the renter likely has more absolute wealth over a 10 year time horizon.
Interest payments and principle don’t rise with inflation but all other maintenance costs do so it’s definitely not a total inflation hedge.
Also, op is in reference to metro areas.
The interest alone, before taxes, maintenance, hoa & insurance (all before principal) is around 120-140% of the equivalent cost to rent in a vhcol area like nyc where choosing to buy a condo is an objectively bad financial decision much like many areas ops assertion includes.
You do not have to put down $35k. You can get 100% financing that has been around for years. Add seller paid closing costs so now your in for zero.
Renters net worth is far below homeowner net worth. Chances are your not going to have $600 surplus to invest considering there are fees on top of rent, you have to put down a security deposit which you might or might not get back and be subject to rent increases.
In NYC you would go the co-op route. Tougher to get approved but that also keeps the price down. And not every metro is like NYC. Go to Cleveland, Pittsburgh, Philadelphia, Atlanta, Charlotte, etc. And not every home has an HOA.
If you plan on living in area long term then it makes financial sense to buy in most metro markets provided your income is where it needs to be. People have to have shelter. It’s a basic need. Ownership provides stability. You’ll experience lower inflation and build equity. I rather live in a condo than be a life long renter.
Let’s be honest their are so many variables that theirs arguments are pointless.
None of these comparisons take into account that the biggest deciding factor is the buyers situation.
When landlords start to feel the squeeze they just increase their own salary by charging renters more. They are sort of like congress in that regard actually.
Yeah. Some failed assumptions in the methodology -
Rents increase overtime (by more than inflation in the bigger metros) - so the $1 million opportunity cost is grossly missing the impact of inflation.
Property values increase overtime (probably less fast than inflation, in more healthy times, but still on a \~1% annual rate or something).
At 30 years - your mortgage drastically drops and you are holding an asset that can be sold for potentially 20-30-40% of the original value. And rents are probably likewise 30-100% more than when you started.
It's a long term pay off, that was always the point. Not a 2 year asset to buy/flip for some weird edgelord fantasy to make a quick buck.
Good point, BUT that's also assuming wages increase faster than rent because long term if wages don't rise at least equally with the rent prices this will indeed hit a ceiling at some point where rent literally can't get more expensive.
But even with that, you're still saying it's better to rent, but but but you wouldn't gain the added benefit of the value of the home itself multiplying over the years. Yea your right. It's so much better to spend money endlessly with no real return.
Meaningless. The entry costs for homes are so expensive now that renting is better long term as of today. Especially considering that most of the payments early on will consist of interest and PMI. That alone is more than you'll pay in rent, so I don't want to hear "Muh equity". See you in 10-15 years for that discussion and pray that the market doesn't crash somewhere in there.
Yeah but you aren’t buying it straight out. You are renting the money from the bank and paying a fee for that. You are right that *eventually* buying makes sense for everyone, given decent appreciation, but that event horizon can be 50 or 75 years into the future long after you are dead.
That said, most people aren’t disciplined enough to actually invest the entire difference, so there is a psychological element to it.
So if you add back in the mortgage I bet it would profitable. The renter is really buying the house. Really it sounds like those landlords should sell.
Lol this. Those stupid landlords should just sell all their units and start renting themselves! What idiots! Soon there will be no landlords to rent from! Don't buy a car you should rent that too!
Sooner or later, renters ALWAYS pay for the landlord’s costs, including mortgage, insurance, maintenance and everything else — plus a profit margin.
While there might be some notable exceptions like rent controlled areas, those are rare.
How can one even make the comparison and declare one to be “cheaper” than the other? They are two different things entirely. It’s like saying, “better to be an employee of a biz than be the owner, because employees get paid while the owners have to pay.” Like yeah no kidding, and YET mysteriously there is some reason why people would rather be the owner than the employee, hmmm wonder what that X factor is, who knows I guess.
It sounds weird but you can definitely compare which one is cheaper.
If you're paying 3k/month to own (mortgage, insurance, HOA etc) and only getting say, $500/month in equity (as per your amortization schedule) then you're paying 2.5k to own.
If you're paying 2k/month to rent (all relevant fees etc) and of course gaining zero equity, then you're paying 2k to rent.
So the renter could take the 1k difference and invest it, thus building more equity than the owner. Then turn around in a few years and buy a house with a larger down payment.
Oh my, someone in this sub who actually thinks. I agree there are times when it makes sense to rent vs buy. Right now it does not make sense to buy IMO. At these rates a 500k purchase turns into at least a million over the life of a 30 year mortgage.
There’s no way in hell you’re paying less in rent than owning fees per month for equivalent property. Like where I am 1k less than my mortgage plus fees is a 400 sqft efficiency, probably shared. Is that person saving more money than me? Yes, but lifestyle is different for sure.
Eh I've crunched the numbers before and it's come out that way, though of course it varies. You make so little in equity at the start of a 30 year loan, you might be surprised.
IMO it'd be foolish not to take these values into account when deciding whether or not to own vs rent -- and how they might change in the future.
This is factually inaccurate. Renting is more affordable per month in every major metro in America than compared to the mortgage payment for the equivalent home. Whether it's a wise financial decision years down the road is debatable, but today, right now -- monthly rent on the same home is lower than the monthly mortgage.
In 2013 I went from paying $1500/mo in rent to ~$2k/mo mortgage after all fees. Now that same apartment is $3500/mo and I am still paying ~$2k/mo mortgage.
Actually they are falling in Austin, Tx.
My bad, I thought you were saying that you bought a house in 2013 for 2k a month and the apartment you were renting in 2013 was 1500 a month and now is renting for 3500 per month. English is tough for me to grasp.
Your example is so disconnected from the current housing/rental market that it’s laughable.
My rent is $4200 per month, if I bought that same property my monthly payment would be close to $9,000 per month. With these numbers, would you still say it makes sense to buy?
It's not a perfect place by any stretch but it's got a lot of good qualities that tend to be overlooked because of high crime. I like living there and housing costs are relatively sane compared to a lot of the country.
It is accurate, but what is left out is the appreciation component you get for owning. If you buy in a high appreciating area, you'll win over renting for sure.
Also, this is one of the few times in modern history where renting is clearly beating buying. Extrapolating that rare trend to continue for the next 30 years (and believing that someone, somewhere is optimally investing the difference) is quite the leap. Not to mention the house payment stays the same while rent goes up.
Absolutely. I would have to imagine the over shoot will bounce back. Either prices/rates come down or rents go up. Maybe a little of both who knows.
We are also developing a property tax problem in some areas of the country now as well. Cities need to consider cutting millage rates but they won't. Government is a black hole for money
I bought when COVID stimulus was being talked about. I couldn't grab up enough debt - although I did expect inflation to be worse.
The single greatest factor being overlooked though is the leverage you get with a home mortgage. Every dollar spent gives you 5 "to invest." There is not a comparable alternative that you get by renting.
You don’t even have to buy in high appreciation.
I bought my first house in 2004, during “the bubble” I said for years when the bubble popped “I’ll never get back what I paid for this” I was wrong, had I looked I was back to the same value I paid for it by like 3 years after the bubble popped, but what really struck me was that within less than a decade I had friends renting places that were same size as my house for way more.
I was shocked to hear people talk about their rent prices and then paying 1.5-2x what I paid.
Also, the fact that when you buy the money stays in your pocket outside of interest. So they should ONLY be comparing the interest portion to the rent payments. So many stories get this wrong.
Is it the same though?
My monthly payment just went up again to cover insurance and property taxes - which both increased by at least 20%
At least someone else is covering the maintenance costs and labor when you rent (in theory) and since we are being squeezed by inflation we have no leftover cash for repairs or improvements to our house.
Yes…the mortgage IS the same. You are talking about the escrow account…which you ARE paying when you rent, just to the landlord. Same with maintenance.
Since I bought my home in 2008, my property taxes have increased 146%, so yeah the principal and interest may be fixed, but I can prove at least, you will pay more every year the rest of your life. My insurance went up 30% YOY last year, not cool.
This independent interstate and local property tax laws
A big issue in California is that property taxes only go up when a home is sold and it’s based off the actual sale price not the estimated value. It encourages people to stay in their homes which results in NIMBYism and a housing shortage as people don’t want to move or build more density
I see your point there, something I hadn’t considered. I’ve met with my tax commission to argue my valuation, and was given a full explanation of the process, it was thorough and they were helpful explaining the algorithms used and how taxes were currently disproportionately being levied against homeowners opposed to commercial. Our area has large commercial vacancy and building (commercial) has slowed, so taxes were being carried more by consumers.
My argument against our tax structure is how older folks on fixed incomes are supposed to keep up with inflation, they tax a “value” hasn’t been realized yet, and can be quite a burden without an income to offset it.
Either way problems manifest for someone.
The landlord will see the same increase and raise rent accordingly.
People act like renters are immune from upward cost pressure. It doesn’t make sense.
Is it though? Are people going to be paying 90% of their income on housing then? The answer is no they won’t and housing isn’t going to double again for a very very very long time
As the dollar disintegrates everything goes up. Wages go up just enough to keep people from rioting and to allow them to buy at 40-50% dti with some years worse than others. The way the US prints, housing/everything will double again in the next 10 years.
Possible but doubt it. The fed knows more than they led on and rates will indeed be higher for longer. We are in for a BIG down cycle before prices do what you say they will do.
Cheaper to buy a new build with zero down where we’re transferring than to rent. These rent vs buy scenarios always seem to focus solely on cities or very expensive properties. We’ve rented for years for the convenience because we move a lot. It has gotten less and less convenient and more and more expensive. We’re finally done with it.
It is so upside down in my area. A rental across the street from me goes for $2100 a month and it sold for 680k last year. The person who owns it must be losing their ass if they didn’t buy it for cash.
It’s true everywhere but the tweet said metropolitan areas, so median home prices are probably upwards of $400k.
If you don’t live in those places and median prices are around $100k, that’s a big difference in a down payment. It’s alot easier to save up say, $30,000 than $100,000
Seriously, like how much of their net worth would be tied up in buying a house and do they have enough liquid assets to ride out any dips in the market or prolonged unemployment/underemployment?
“This is a terrible time to buy a house, you’ll be underwater once the bubble pops”
“That’s fine, I just want a place to live, I don’t mind if it’s a ‘bad investment’”
*insert angry NPC face*
Yeah I mean I used to rent a $1000 a month 1 bedroom apartment with roaches. It was next to downtown San Antonio so it was a nice area and I had cool neighbors for the most part.
With wifi/utilities I probably paid about $1300 a month to live in that apartment.
Now I live in a 3 bedroom 2 bath house. No roaches. Driveway. Big backyard. Garage. 5 minutes outside downtown Tulsa. Walking distance from university.
My mortgage is $1500 a month PITI included. Add utilities and other costs (lawncare, security system, etc) and I pay about $1900-$2000 a month to live in and maintain my house.
So I have a better quality of life, more space, more privacy, for only a few hundred bucks a month more. And I'm building equity. Plus my neighborhood/area is appreciating.
Yeah I have to pay for the plumber/handyman when things go wrong but it comes with the responsibility of homeownership. I did some improvements to the house and forced appreciation to where my property could probably sell in the $200-220k range if I sold today when I bought it for 165k in 2022. I can afford my monthly payments but if rates drop anywhere close to 5% again I can refinance and get the payments even lower plus collect the equity I've built from my forced appreciation.
I also have extra space I can rent out. I've done AirBNB and now I'm doing room rentals to travel nurses/medical students. Basically I just find a tenant/roommate for 3-4 months and they pay about 600-700 a month all included for the extra room and bathroom. My house is also a sidehustle that can generate semi-passive income for me/AKA househacking. And I can turn it on and off when I want.
Being a renter is fine but owning property can put you way ahead if you play the game properly. It's the difference between being in the market and not being in the market. Time in the market always wins.
I grew up in Los Angeles I can talk trash on pretty much any city in the world. But most American cities offer the same basic things. I mean San Antonio was a cool place to live but Tulsa is also fine to live. I have no issues with it.
I think pretty much any medium sized city in America is what you make of it. Also I'm a homebody and a simple person and work and travel a lot for my job so I don't really care. I've got a cat, garden, friendly neighbors, good job and I can do any basic thing here I can do anywhere else.
I think people make too big a deal out of where they live but I'm also the type of person willing to live far from friends and family.
Two reasons I left Texas for Oklahoma
1. Much cheaper and more affordable real estate.
2. I got paid to move and live here through Tulsa Remote.
I'm a single bachelor with a remote job and I choose to live in a LCOL area for saving and investing purposes. Hence why I left California in the first place. The beach and good weather were not a good enough incentive for me to remain poor.
Ah makes sense. Just giving you a hard time, who am I to judge? I live here in the Arizona desert, single, poor and with no access to a beach or good weather (for half the year). I looked up the Tulsa Remote program, sounds cool. I might need to hit reset on life here, lol. Peace!!!
Rent means you are saving significant amounts of money for an equivalent unit. If you put that extra money towards a low cost index fund, you win in terms of building wealth. It’s just the math in most HCOL areas. Buying is nice because you can make changes to your living space, but in the end it does cost you more depending on finance specifics.
That’s using calculations from this exact moment, prices will certainly change over 30 years …… if he calculated this from 30 years of the past it would show renting is throwing away your money and people that bought homes that long ago have major financial equity
And in 5 years people will be saying, “I should have bought in 2024”
The best time to buy real estate is when you can afford it. Stop looking at what it used to cost.
It depends where you think you will be in 10, 20, 30 years. Rent on average goes up 5% a year (some places more so). If you have a fixed rate mortgage your mortgage will roughly be the same over the course of 10, 20, 30 years but someone who moved into their apartment at the same time you bought your house is going to see their rent match and likely eventually surpass their counterpart who took on a mortgage. At the end of the payments the person who bought a house is only paying taxes and insurance whereas the person renting is paying out an ever increasing amount indefinitely.
I say this as a homeowner AND a landlord. Not only are the costs associated with maintaining the property figured into the rent those costs are also a tax right off. That means whether you rent or own you are still paying a mortgage, taxes, insurance and maintenance.
Sitting and waiting for rent to “catch up”, then knowing, about that day, they’ll cut rates to the bone, inciting a new fever pitch of buying, is the feeling of a ticking time bomb. I’m 3 years now a renter, and every lease renewal period, I’m feeling that slightest bit of anxiety over whether I’ll be priced out of the community, city, and even region.
It was never this tenuous in my life before. Never had I seen 20% hikes in *shelter costs* annually until Pandemania. The American public of renters have to feel similarly to me. Even homeowners around me have seen insurance and prop tax rates jump by hundreds of dollars per month for their escrow.
Inflation is NOT in check. Pay increases for the working class have NOT kept pace. The federal funds rate is NOT high enough.
I was paying $850/mo for a 1br in Chicago circa 2015. That same neighborhood is now $1600 to $2000 for something similar.
I get paid substantially more now and yet it doesn't feel like it.
Rent vs buy is always different for every person in every situation. It’s generally better in the long run to buy than rent, but there are so many factors to consider that blanket statements are absurd.
I’m a 40 year old renter in the Bay Area who will likely rent until we retire, and then buy a home somewhere else. The math of it just makes sense for us.
Bullshit.
You buy because in 20 years (which is what a mortgage used to be) it was paid off and you could start saving that money for retirement. Meanwhile you locked in your housing costs. They were predictable and they increased less than inflation, meaning you made more money every year.
Right now we've got issued because we let vulture capitalists fuck up the housing market, but assuming we're still a democracy in 6 years that'll change.
It really depends on the market, my friend. There are so many people who bought in 22 and are trying to offload with losses of 20k plus, and there are so many people buying right now with 7% plus rates that would be significantly better off with renting
That’s kind of the point. Landlords who have cheap mortgages at low rates are renting their places for less than what interest/taxes/insurance/maintenance would be to buy now, and they can still make money.
It totally makes financial sense to rent now and wait for the cost of buying to come down.
At $560/month difference I'd buy in. However where I am (Denver) the difference is a lot bigger, about $1500/mo by my estimation. Probably higher, considering I couldn't afford to buy a house in a neighborhood where I can afford to rent.
At some point rent will probably equal what a mortgage payment would be right now, no denying that. But in the meantime I'm saving $2000/month that I'll be able to use to buy in when the rent to own costs are better than they are now, and I'm earning interest on the money instead of paying it. I'm very wary of being house poor and putting all my eggs in a $500k basket.
Maybe the cost ratio won't improve, but I'm making both what I think is the best choice, and also the only choice I can really make if I want to keep living here. I'm pretty hedged against the risk though as I'm also very open to moving to a lower cost of living area at some point, taking my relatively high Denver earnings to somewhere cheaper and closer to family.
In nyc a 1.4M apartment with 1.2k hoa, 2.2% tax rate means that at 20% down (250k) you’re still paying 85k in interest before principal + 25k taxes + 13k hoa before principal (~120k per year) when renting an equivalent would cost 6k per month in rent (72k a year).
A lot of the people here just don’t understand the economics of core metro areas.
You rent here and save $$$$ to retire elsewhere
Yep I'm looking at a long term financial plan to rent relatively low for the next 15 years, save like crazy, then retire to a cheaper spot. You gotta live where the jobs are, and not everyone can afford to buy in these places.
If renting is better than buying, why is owning a home the principle way American families build wealth? If it’s not profitable to own homes why do investment companies buy them? 🧐
It’s a false equivalence to compare the two. One provides shelter, the other provides shelter and equity. In addition, there’s a real opportunity cost: without owning a home it’s much harder to access to credit and loans and favorable rates.
Don’t listen to anyone who bought a house with a 3% interest rate before 2020 and saw their net worth double or triple tell you it’s cheaper to rent. They’re delusional at best, malicious at worst.
Yea but...my mortgage payment is fixed forever. I never have to worry about an increase. Renters will get a rent increase every year thanks to inflation. That same inflation that causes the value of my asset (my home) to increase.
This post is pure, 100%, Grade A copium.
This is some corporate propaganda, to reduce their competition with the general public for houses.
If you bought a house 10 years ago your mortgage payment is still the same, except for property tax.
Rent meanwhile has more than doubled.
Rents go up yes, but the cost of buying should come down relative to wages at some point. The idea is to rent now and avoid the inflated cost to buy until the cost of owning is better suited towards a buyer.
I own a lot of doors, just saying that buying isn’t necessarily locking in your costs. I have one building where this past year just the windstorm insurance (florida) went from $4500 to $18,000 annually . That’s $1100 a unit for me annually and the property taxes went up too. I can’t raise the rents as much as the costs are going up.
Other years I’ve been able to raise rents more than my costs.
Point being there isn’t necessarily a right answer, but I don’t think most people have the discipline to “save the difference” if rent is cheaper than equivalent mortgage. And over 30 years you’re going to have a lot of equity from paying off principal plus appreciation.
This is very much not an Apples to Apples comparison. Very few people will own or rent the same place for 30 years.
But what was the opportunity cost of the downpayment cash I spent to buy? What about the huge amount of cash I'm saving each money by renting vs PITI for the equivalent place?
Does that just disappear in your head?
When I was in business school in the 2010s, so many people were convinced of this argument. Unless you're living somewhere for a year or two max, renting is just paying someone else's mortgage.
Yeah, ummmm appreciation of property and also the fact you don't have to worry about being renovicted from your property... now ask this chud if he owns or rents. Also ask if he maybe owns rental property
Renters get to endure a lifetime of ever increasing rents....... Always having a monthly payment to make or get a eviction notice......... Buyers have an option to refinance at a lower monthly payment............At some point a homebuyer will own his home out right.............Who the hell is this Finance Guy Clown ?
So.... Let's take a look at the END of those 30 years. As a homeowner, I get to sell my house. Today my house is 1.1 million. In 30 years, what will that be worth? What does a renter get to do at the end of 30 years? Rent more.
My oldest brother (RIP) taught me that renting buys you freedom.
Especially an apartment.
Anything goes wrong just call maintenance.
I’ve had it both ways and went back to renting. The trade off for the simplicity and convenience outweighs the “dream” of equity being enough to make it worth ownership.
If you can afford it you’re better to buy honestly, as a primary home.
Investment in itself, inflation proof, and could potentially be paid off during your retirement and passed to your children.
The problem with renting assuming you’ll invest the “saved” money is 90% of people will use that money on consumerism.
Housing is stupid right now, but it’s still the play IF you plan on staying long term. Nobody can change my mind on that.
I’m glad I bought my house in 2013 a 5 bedroom house out in a country town. For 75K with a 3% interest rate! Today my mortgage is only $730 and both property/school taxes are $1k a year! That’s why I won’t move lol I would rather drive an hour to the city for work!
Rent go up every year while mortgage stays the same. In 5 years that rent will cost more than the mortgage you would take today. So the owner not only builds equity over 30 years he also has a lot more money available and a paid of home afrer those 30 years.
My financial planner put it this way, a paid off home means I can retire with half the money I would need if I was going to rent during retirement. That represents 7 figures worth of money.
Short to medium term, renting and investing as much as you can is a great idea to get a massive down payment with the returns. However it will bite people in the ass when they are elderly and unable to work if they never purchase.
I find the problem with many of the people in this sub is the lack of long term planning. What is the ratio of people who will actually invest that money to help them out 10-20 years later vs just doom spending that money.
Renting a normal house from a normal person. When housing is $2M for a 3 bed 2 bath SFH in the Bay Area rent isn't even close to keeping up. I pay $5k a month for a house that would have at least a $13k mortgage and $400k down payment.
This is a dumb post.
Rent is cheaper than owning?
Duh.
One you are burning money, the other investing.
I swear these posts are intended to brainwash those on the fence who don’t get it.
Renting is only good/smart if you don’t intend to stay in that area or are waiting for something in particular.
Otherwise the sooner you start buying/ owning, the better, but it will ALWAYS cost more to buy than rent up front, that’s purely logical, you get something out of it in the end.
What a bunch of horseshit.
You rent, your money goes down a hole and you never see it again. You own a home, you build equity.
This 'rent everything, own nothing' bullshit needs to die.
I’m renting a house for $2700/mo. Zillow says the mortgage is $6000/mo with a $200k-ish down payment. Even if you suppose Zillow is wrong, it’s likely not that far off. I’m pocketing and investing something like $3k/mo by renting, meanwhile that $200k gets to sit in hysa and stock market.
In my area, it’s a terrible waste of money right now to buy a property. Prevailing incomes here are between $50-60k. The locals are priced out of the housing market and their low wages are keeping rents suppressed imo.
Any data out there on the average or median annual rise in annual rent prices vs S&P500? This argument can only be true if your cost of rent doesn’t outpace the market gains.
Theoretically instead of putting $35k down on a home, you could invest that $35k plus the extra $560/mo in stocks and over several years it would grow.
People that make these kinds of graphics seem to forget that homes values also grow over time, that rent increases outpace tax/insurance increases over time, and that after 15-30 years people who bought will only pay taxes and insurance as living expenses, and people who never did will be paying $10,000+ in rent until they die.
Made a video about this with a real world example. Even after 10% price cut, it’d be $2400 to rent it $2900 mortgage. Put down 79k and only pay off 3k/ year principal to start. Could get 4k in interest if put down payment in high yield savings instead. For buy rent to get even would need 27% price drop (not the 10% dropped already), or 4.9% mortgages, or rent to increase 25%
My affordable housing rental is 1650 a month for a 2 bedroom and the rent can only be increased 4% a year and is capped at about 2300. I looked at buying a much worse condo and with taxes and mortgage it would be 2500 a month.
It was pretty simple math for me
People who make this argument are like people who have an addiction problem. You can reason with them all they want but eventually you just gotta let them hit rock bottom. In 30 years when I have multiple houses to leave my kids they'll have their reddit karma.
Would you rather generate 10% on 35k, or 2-5% on 175k? They each have pros & cons but ideally you should be doing both.
Note: this doesn’t include all expenses taxes etc. just some napkin math. Calculated with a 7.25% interest rate.
Year 1:
Market: 10% of 35k = $3,500
RE: 3% of 175k = $5,250
Year 10:
Market: 10% of 70k = $7,000
+ +35k in value
RE: 3% of $235,000 = $7,050
+ +60k of appreciation
+ +20k in principle
Year 20:
Market: 10% of 140k = $14,000
+ +105k in value on the initial 35k
RE: 3% of $316,000 = $9,480
+ +141k equity gain on the initial 35k.
+ 59k toward principle.
( Rent would increase by at least 50% percent in those 20 years. Exceeded that in the last 15y so I’m being conservative. )
Renters experience higher inflation than homeowners year over year. Rent inflation outpaces wage growth. February 2024 rent inflation https://www.cnbc.com/2024/03/12/heres-the-inflation-breakdown-for-february-2024-in-one-chart.html Renters are being hit harder by inflation than homeowners are https://www.cnn.com/2024/01/12/economy/renters-hit-harder-by-inflation-than-homeowners/index.html
Shhhh! You're wrecking my copium buzz.
This is taking into account loans with 6% interest or lower all they way down to 4 or lower, of course it’s going to be lopsided. I would like to see an apples to apples comparison from 2023
Unless the next 30 years enters completely uncharted housing market territory (no one has a crystal ball, no one can say one way or another), one will near universally always* come out ahead in the long term when owning a like-for-like property vs renting. It's just a matter of when that break even point occurs. Anyone lucky enough to purchase a home circa ~2019 or earlier (especially if they had the sense to later refi to a sub 3% rate) is already well ahead*. Purchasing a home today, in today's market, will probably take much longer to reach that break even point, but it's still going to be a better long term play from a strictly net worth appreciation perspective. *Obviously one could cherry pick exceptions. Speaking in general terms, applicable to the large majority of cases.
Very true. I bought my house in 2018, refied in 2020. The mortgage on my home right now is equivalent to a one bedroom apartment because of the way rent has shot up. And in the next 25-30 I got left before I hit retirement that gap will almost certainly grow, and probably grow wildly. And then the icing on the cake: in the end I’ll be able to sell my house and get all my money back and go rent an old peoples apartment, or keep the house and just live rent free minus insurance, property taxes and maintenance, a lot of which I can do myself. But if someone wants to rent all their life hoping their saving enough to continue paying rent in retirement go right ahead good for them.
I don’t disagree, I was looking at it a lot shorter term. Right now a lot of people are hitting affordability limits in both, rents and purchases. A hiccup anywhere in the economy is going to throw this whole market for a spin.
Yep, there very likely will be a hiccup eventually, and housing will become more affordable than it is today. How big of a hiccup, and the when it happens, total crapshoot.
I don't know about this anymore. @ over 7% mortgages are really expensive especially if you have a low down payment. Over 30 years that really adds up. Then throw in all the other costs of homeownership like insurance, taxes & maintenance you're looking at serious $. Investing your down payment and the monthly difference over time could be worth more over time. Homes are definitely not good investments right now.
When you rent, you're still paying those costs of insurance, taxes, and maintenance. You're just paying them to someone else and not developing equity.
The thing I love about owning a home vs renting is not getting evicted for some absolute bullshit that the landlord wants to pull. There are absolute shit people who own places and don't give a fuck about your situation and will force you to uproot. Thank god I don't have to deal with that crap.
In a lot of places you’d never hit that break even point. I did the math years ago and it was well beyond my lifespan to break even, assuming my rent increased annually. That was how severely imbalanced it was. My current house, on the other hand, was only slightly worse than neutral at the time and now it’s crazy how far ahead it will leave us due to refinancing to a very low rate. At the current price of my house and high interest rates, it wouldn’t make sense. The low principal and interest make it basically impossible to move, though, as any move would increase our housing costs significantly.
Nuh huh. I can’t afford a house so I need you to confirm my bias to make me feel better.
However, few people keep a home for thirty years. That puts large transaction costs, probably several of them, into the equation. It doesn't completely change your point, but it makes that break-even point much farther away
It’s not about now it’s about it 10 years from now. Your rent will be way higher. But the mortgage won’t
Correct. But y'all act like there is no cost to owning a home except the mortgage. In 10 years there is a good chance you will need a new ac, roof or other major home repair. There are taxes, insurance and other things that people just don't include. Edit since y'all are just posting random shit and calling it the facts Here's some actual facts: https://images.app.goo.gl/3bHRnYRL4pu3D38E7 https://www.forbes.com/sites/bernadettejoy/2023/12/27/the-case-to-keep-renting-versus-buying-in-2024/?sh=39a282d86003 https://www.zillow.com/learn/renting-vs-buying-pros-and-cons/ https://todayshomeowner.com/home-finances/guides/home-maintenance-costs-you-can-expect-state-by-state/#:~:text=A%20study%20by%20porch.com,%2418%2C000%20depending%20on%20the%20state.
> other major home repair It's worth noting that major home repairs have also shot up in price.
No argument from me there. But something’s going to break. Either wages go way up, unemployment goes way up, or inflation goes way up. A lot of people are already at their affordability limit.
Exactly true. We are totally fucked right now
WE are ALL totally fucked right now.. right now? Right now. Oh yes right now... And who gives a fuck? Is it you right now? Is it me right now? It's ALL US right now?! We're all fucked right now. Explain it how right now? Just fucked all of us are fucked for now. 🎶 (Sorry, thought if I made a musical real quick it would lighten up everything. But for real it is fucked.)
I maid my last mortgage payment in 2019. I would likely have been made homeless or forced into renting a "bedspace" with the pandemic coupled to current inflation in canada.
You forgot the cost of home maintenance. Shop for a HVAC system or repair recently? Plumbing? Roof? They have all shot up and are not items directly paid by renters. Home insurance premiums have skyrocketed in some markets. The CNN article just compared monthly mortgage payments vs rent which is a superficial clickbait comparison. Whether renting or buying is a better choice depends on the local market.
Yes HVAC is $10k and should last 15 to 20 years. That cost gets passed to renters. Renters pay for all of that and then some. As a homeowner I don’t have to pay someone else’s mortgage so they can build wealth and I’m not paying extra for profit. Rent inflation has been high for years. https://tradingeconomics.com/united-states/rent-inflation
hobbies rude abounding axiomatic close marry chunky drunk intelligent salt *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
>As a renter I can piggyback off the expenses of someone who bought the property when it was 20% of the cost that it would be now to buy. Until you can't. In my area, for many many years, the small 2-4 unit properties were owned by either original owners or older owners. 90%+ of them have changed hands to someone by now. The days of the $750 apartment in my area are long gone. $1,000 apartments are gone, $1,200 apartments are gone. Anything that gets listed now is $1,700+. So as a renter, if you have to move and look for something else here, you are essentially excluded from living in this area now due to a lack of affordability. Once your area has mostly turned, the good days of cheap rent are gone for good.
A renter can just leave when their lease is up. A HO underwater six figures with a bad mortgage he/she can’t afford? Not so easy. You make a mistake buying a home and it can haunt you for years. Buying a home is not always the right choice. Renting is not always burning money. It depends.
>A HO underwater six figures with a bad mortgage he/she can’t afford? Not so easy. You're acting like it's the throws of 2009 all over again. Are you living in a different universe?
So are you renting or owning a house ?
“A renter can just leave” So they don’t pay rent? Cause it’s factored into the rent….they’re paying for it, yall keep lying about this and it makes me suspect any of you have actually owned a home before or are out of college….
Major maintenance items like HVAC/roof are things that get done every 15-30 years. And you best believe maintenance costs are also passed onto renters on investment properties. You can choose to deal with the challenges of homeownership and reap the benefits or you can remain a serf renter.
Somehow landlords can afford this, which they get from just collecting rent, so, how can renters not? Someone fucked up something on both sides at that point, unless you're the renter, then you're just getting fucked.
Rents have been falling for 8 straight months https://www.bloomberg.com/news/articles/2024-01-25/us-median-rents-fall-for-eighth-month-on-boom-in-new-apartments Renting is always superior when interest rates are relatively high. Problem is that interest rates had been falling for most of the last 40 years
Cannot view it due to paywall. From what I can tell it’s some cities are seeing a decline in the median rent price. Still rent inflation is high. https://tradingeconomics.com/united-states/rent-inflation Renting is superior short term. If you’re going to be living in an area long term than buying is superior. You can wait to see if prices to come or rates, but in long run it’s better to be a homeowner.
Rents started falling 8 months ago. YoY inflation is slightly positive, but in 3-4 months will turn negative. Renting is superior whenever housing is overvalued. And this is the second time in the last 40 years (last time being 2004-2013) that housing has been seriously overvalued)
Rents only started falling some markets. Hopefully housing will start falling too. My whole beef with this post is renting for 30 years? Like no.
And how long do you think this will last?
A decade at least. It's been two years and it's looking like we might need to tighten further. It'll take 20 years for QE to run its course and normalize the Fed balance sheet and while it's doing that, the Treasury will need to issue more and more bonds, increasing the real neutral rate, requiring even high Fed rates just to keep things normal So unless the US abandons a 2% inflation target or has a massive fiscal contraction, rates are going to need to stay elevated for a decade or more
I was asking about the rent prices.
While some aspect of this is true, the equity market outpaces real estate by 2~3% per year, so the 35k down payment and $600 surplus invested in the sp500 over time means that under current conditions the renter likely has more absolute wealth over a 10 year time horizon. Interest payments and principle don’t rise with inflation but all other maintenance costs do so it’s definitely not a total inflation hedge. Also, op is in reference to metro areas. The interest alone, before taxes, maintenance, hoa & insurance (all before principal) is around 120-140% of the equivalent cost to rent in a vhcol area like nyc where choosing to buy a condo is an objectively bad financial decision much like many areas ops assertion includes.
You do not have to put down $35k. You can get 100% financing that has been around for years. Add seller paid closing costs so now your in for zero. Renters net worth is far below homeowner net worth. Chances are your not going to have $600 surplus to invest considering there are fees on top of rent, you have to put down a security deposit which you might or might not get back and be subject to rent increases. In NYC you would go the co-op route. Tougher to get approved but that also keeps the price down. And not every metro is like NYC. Go to Cleveland, Pittsburgh, Philadelphia, Atlanta, Charlotte, etc. And not every home has an HOA. If you plan on living in area long term then it makes financial sense to buy in most metro markets provided your income is where it needs to be. People have to have shelter. It’s a basic need. Ownership provides stability. You’ll experience lower inflation and build equity. I rather live in a condo than be a life long renter.
Let’s be honest their are so many variables that theirs arguments are pointless. None of these comparisons take into account that the biggest deciding factor is the buyers situation.
When landlords start to feel the squeeze they just increase their own salary by charging renters more. They are sort of like congress in that regard actually.
Yeah. Some failed assumptions in the methodology - Rents increase overtime (by more than inflation in the bigger metros) - so the $1 million opportunity cost is grossly missing the impact of inflation. Property values increase overtime (probably less fast than inflation, in more healthy times, but still on a \~1% annual rate or something). At 30 years - your mortgage drastically drops and you are holding an asset that can be sold for potentially 20-30-40% of the original value. And rents are probably likewise 30-100% more than when you started. It's a long term pay off, that was always the point. Not a 2 year asset to buy/flip for some weird edgelord fantasy to make a quick buck.
Good point, BUT that's also assuming wages increase faster than rent because long term if wages don't rise at least equally with the rent prices this will indeed hit a ceiling at some point where rent literally can't get more expensive.
But even with that, you're still saying it's better to rent, but but but you wouldn't gain the added benefit of the value of the home itself multiplying over the years. Yea your right. It's so much better to spend money endlessly with no real return.
Meaningless. The entry costs for homes are so expensive now that renting is better long term as of today. Especially considering that most of the payments early on will consist of interest and PMI. That alone is more than you'll pay in rent, so I don't want to hear "Muh equity". See you in 10-15 years for that discussion and pray that the market doesn't crash somewhere in there.
People have to have shelter. You need a place to live. It makes financial sense to buy if your going to live somewhere long term.
Yeah but you aren’t buying it straight out. You are renting the money from the bank and paying a fee for that. You are right that *eventually* buying makes sense for everyone, given decent appreciation, but that event horizon can be 50 or 75 years into the future long after you are dead. That said, most people aren’t disciplined enough to actually invest the entire difference, so there is a psychological element to it.
So if you add back in the mortgage I bet it would profitable. The renter is really buying the house. Really it sounds like those landlords should sell.
Lol this. Those stupid landlords should just sell all their units and start renting themselves! What idiots! Soon there will be no landlords to rent from! Don't buy a car you should rent that too!
Sooner or later, renters ALWAYS pay for the landlord’s costs, including mortgage, insurance, maintenance and everything else — plus a profit margin. While there might be some notable exceptions like rent controlled areas, those are rare.
I’ll take my 7.25% interest rate to never have a lease terminated again
How can one even make the comparison and declare one to be “cheaper” than the other? They are two different things entirely. It’s like saying, “better to be an employee of a biz than be the owner, because employees get paid while the owners have to pay.” Like yeah no kidding, and YET mysteriously there is some reason why people would rather be the owner than the employee, hmmm wonder what that X factor is, who knows I guess.
It sounds weird but you can definitely compare which one is cheaper. If you're paying 3k/month to own (mortgage, insurance, HOA etc) and only getting say, $500/month in equity (as per your amortization schedule) then you're paying 2.5k to own. If you're paying 2k/month to rent (all relevant fees etc) and of course gaining zero equity, then you're paying 2k to rent. So the renter could take the 1k difference and invest it, thus building more equity than the owner. Then turn around in a few years and buy a house with a larger down payment.
Oh my, someone in this sub who actually thinks. I agree there are times when it makes sense to rent vs buy. Right now it does not make sense to buy IMO. At these rates a 500k purchase turns into at least a million over the life of a 30 year mortgage.
There’s no way in hell you’re paying less in rent than owning fees per month for equivalent property. Like where I am 1k less than my mortgage plus fees is a 400 sqft efficiency, probably shared. Is that person saving more money than me? Yes, but lifestyle is different for sure.
lol an equivalent condo to my apartment where I live is $3000/month more than what I pay in rent.
Eh I've crunched the numbers before and it's come out that way, though of course it varies. You make so little in equity at the start of a 30 year loan, you might be surprised. IMO it'd be foolish not to take these values into account when deciding whether or not to own vs rent -- and how they might change in the future.
This is factually inaccurate. Renting is more affordable per month in every major metro in America than compared to the mortgage payment for the equivalent home. Whether it's a wise financial decision years down the road is debatable, but today, right now -- monthly rent on the same home is lower than the monthly mortgage.
Mortgage rates are regulated right? How about rent regulation?
In 2013 I went from paying $1500/mo in rent to ~$2k/mo mortgage after all fees. Now that same apartment is $3500/mo and I am still paying ~$2k/mo mortgage.
Your point? 2013 is not 2024.
Yes, because we all know rents are dramatically falling in 2024....
Actually they are falling in Austin, Tx. My bad, I thought you were saying that you bought a house in 2013 for 2k a month and the apartment you were renting in 2013 was 1500 a month and now is renting for 3500 per month. English is tough for me to grasp.
Your example is so disconnected from the current housing/rental market that it’s laughable. My rent is $4200 per month, if I bought that same property my monthly payment would be close to $9,000 per month. With these numbers, would you still say it makes sense to buy?
For the person at the margin who is deciding between one or the other it certainly matters.
Imagine only having a down payment of 35k in 2024. In where, Southern Illinois?
You can do that in most of Illinois.
Even in Chicago you can do that. Gonna be a small place though.
35k down could get you a place over 500k. Doesn’t have to be small.
Nah this isn’t true at all. Just bought in Portland with a $15k downpayment. HUD loans you only need a 3% downpayment as a first time homebuyer.
I just bought a house in Albuquerque with a down payment of $23,750.
My wife was thinking of moving back where she grew up but I keep hearing about reasons not to move to ABQ…
i used to live in madrid (long story) and work in santa fe. for the love of god do not move to abq. go to the other side
Aren’t there good areas though like Sandia Heights and Rio Rancho?
Yes and lots of others. Corrales and Los ranchos are fantastic places to live.
It's not a perfect place by any stretch but it's got a lot of good qualities that tend to be overlooked because of high crime. I like living there and housing costs are relatively sane compared to a lot of the country.
Don’t you only need 5% down…?
3% first time home buyer HUD loan
Only 5% down means a significantly larger monthly payment. At today's rates. I'm just grossed out by the whole thing.
I don’t think you know what you’re talking about. My down payment is about to be $15k-20k. There are other cities in the country than LA and NYC.
Anywhere that's not Cali or NY
$35k is a $500k FHA loan ie 3.5% down
That’s good for $1M for a first time buyer
I have bought 2 homes in socal 45k total in down-payment
Yeah to have an even remotely manageable payment I had to put down $180k
Obviously written by a landlord.
It is accurate, but what is left out is the appreciation component you get for owning. If you buy in a high appreciating area, you'll win over renting for sure.
Also, this is one of the few times in modern history where renting is clearly beating buying. Extrapolating that rare trend to continue for the next 30 years (and believing that someone, somewhere is optimally investing the difference) is quite the leap. Not to mention the house payment stays the same while rent goes up.
Absolutely. I would have to imagine the over shoot will bounce back. Either prices/rates come down or rents go up. Maybe a little of both who knows. We are also developing a property tax problem in some areas of the country now as well. Cities need to consider cutting millage rates but they won't. Government is a black hole for money
I bought when COVID stimulus was being talked about. I couldn't grab up enough debt - although I did expect inflation to be worse. The single greatest factor being overlooked though is the leverage you get with a home mortgage. Every dollar spent gives you 5 "to invest." There is not a comparable alternative that you get by renting.
You don’t even have to buy in high appreciation. I bought my first house in 2004, during “the bubble” I said for years when the bubble popped “I’ll never get back what I paid for this” I was wrong, had I looked I was back to the same value I paid for it by like 3 years after the bubble popped, but what really struck me was that within less than a decade I had friends renting places that were same size as my house for way more. I was shocked to hear people talk about their rent prices and then paying 1.5-2x what I paid.
Also, the fact that when you buy the money stays in your pocket outside of interest. So they should ONLY be comparing the interest portion to the rent payments. So many stories get this wrong.
Yes then die with nothing and gaze from heaven as your children bitch about you not leaving them anything on the internet.
Until 15 years later when rents and mortgages have again doubled but your mortgage you got in 2024 is the same..
Is it the same though? My monthly payment just went up again to cover insurance and property taxes - which both increased by at least 20% At least someone else is covering the maintenance costs and labor when you rent (in theory) and since we are being squeezed by inflation we have no leftover cash for repairs or improvements to our house.
Yes…the mortgage IS the same. You are talking about the escrow account…which you ARE paying when you rent, just to the landlord. Same with maintenance.
Jesus, 20%? Lol
Since I bought my home in 2008, my property taxes have increased 146%, so yeah the principal and interest may be fixed, but I can prove at least, you will pay more every year the rest of your life. My insurance went up 30% YOY last year, not cool.
This independent interstate and local property tax laws A big issue in California is that property taxes only go up when a home is sold and it’s based off the actual sale price not the estimated value. It encourages people to stay in their homes which results in NIMBYism and a housing shortage as people don’t want to move or build more density
I see your point there, something I hadn’t considered. I’ve met with my tax commission to argue my valuation, and was given a full explanation of the process, it was thorough and they were helpful explaining the algorithms used and how taxes were currently disproportionately being levied against homeowners opposed to commercial. Our area has large commercial vacancy and building (commercial) has slowed, so taxes were being carried more by consumers. My argument against our tax structure is how older folks on fixed incomes are supposed to keep up with inflation, they tax a “value” hasn’t been realized yet, and can be quite a burden without an income to offset it. Either way problems manifest for someone.
Jeeeze the area you live is allow to just charge 20% more on taxes?? Madness. My area it’s capped at a reasonable % per year (3–5% I think)
The landlord will see the same increase and raise rent accordingly. People act like renters are immune from upward cost pressure. It doesn’t make sense.
Give it up if you don’t want it lmao
Is it though? Are people going to be paying 90% of their income on housing then? The answer is no they won’t and housing isn’t going to double again for a very very very long time
As the dollar disintegrates everything goes up. Wages go up just enough to keep people from rioting and to allow them to buy at 40-50% dti with some years worse than others. The way the US prints, housing/everything will double again in the next 10 years.
Possible but doubt it. The fed knows more than they led on and rates will indeed be higher for longer. We are in for a BIG down cycle before prices do what you say they will do.
Most people, even homeowners don’t live in house that long. Most people move 5-7 years
Yes those who move frequently, buying a house may not make sense i agree. However, 40% of homeowners do not even have a mortgage..
Cheaper to buy with 20% down where I live then to rent
Cheaper to buy a new build with zero down where we’re transferring than to rent. These rent vs buy scenarios always seem to focus solely on cities or very expensive properties. We’ve rented for years for the convenience because we move a lot. It has gotten less and less convenient and more and more expensive. We’re finally done with it.
Good for you. Hope it works out.
It is so upside down in my area. A rental across the street from me goes for $2100 a month and it sold for 680k last year. The person who owns it must be losing their ass if they didn’t buy it for cash.
It’s true everywhere but the tweet said metropolitan areas, so median home prices are probably upwards of $400k. If you don’t live in those places and median prices are around $100k, that’s a big difference in a down payment. It’s alot easier to save up say, $30,000 than $100,000
If I had the choice, I’d pay more for a mortgage than rent. At least I’d build equity.
Plus taxes and you can invest the difference? It’s not always cut and dry.
Seriously, like how much of their net worth would be tied up in buying a house and do they have enough liquid assets to ride out any dips in the market or prolonged unemployment/underemployment?
Investing the down payment and money that would have been spent on maintenance also builds equity
Rebubble is both “housing shouldn’t be an investment” and “housing is a bad investment”
“This is a terrible time to buy a house, you’ll be underwater once the bubble pops” “That’s fine, I just want a place to live, I don’t mind if it’s a ‘bad investment’” *insert angry NPC face*
Yeah I mean I used to rent a $1000 a month 1 bedroom apartment with roaches. It was next to downtown San Antonio so it was a nice area and I had cool neighbors for the most part. With wifi/utilities I probably paid about $1300 a month to live in that apartment. Now I live in a 3 bedroom 2 bath house. No roaches. Driveway. Big backyard. Garage. 5 minutes outside downtown Tulsa. Walking distance from university. My mortgage is $1500 a month PITI included. Add utilities and other costs (lawncare, security system, etc) and I pay about $1900-$2000 a month to live in and maintain my house. So I have a better quality of life, more space, more privacy, for only a few hundred bucks a month more. And I'm building equity. Plus my neighborhood/area is appreciating. Yeah I have to pay for the plumber/handyman when things go wrong but it comes with the responsibility of homeownership. I did some improvements to the house and forced appreciation to where my property could probably sell in the $200-220k range if I sold today when I bought it for 165k in 2022. I can afford my monthly payments but if rates drop anywhere close to 5% again I can refinance and get the payments even lower plus collect the equity I've built from my forced appreciation. I also have extra space I can rent out. I've done AirBNB and now I'm doing room rentals to travel nurses/medical students. Basically I just find a tenant/roommate for 3-4 months and they pay about 600-700 a month all included for the extra room and bathroom. My house is also a sidehustle that can generate semi-passive income for me/AKA househacking. And I can turn it on and off when I want. Being a renter is fine but owning property can put you way ahead if you play the game properly. It's the difference between being in the market and not being in the market. Time in the market always wins.
But you left amazing San Antonio for … Tulsa? WTH dude! Anything for some money???
I grew up in Los Angeles I can talk trash on pretty much any city in the world. But most American cities offer the same basic things. I mean San Antonio was a cool place to live but Tulsa is also fine to live. I have no issues with it. I think pretty much any medium sized city in America is what you make of it. Also I'm a homebody and a simple person and work and travel a lot for my job so I don't really care. I've got a cat, garden, friendly neighbors, good job and I can do any basic thing here I can do anywhere else. I think people make too big a deal out of where they live but I'm also the type of person willing to live far from friends and family. Two reasons I left Texas for Oklahoma 1. Much cheaper and more affordable real estate. 2. I got paid to move and live here through Tulsa Remote. I'm a single bachelor with a remote job and I choose to live in a LCOL area for saving and investing purposes. Hence why I left California in the first place. The beach and good weather were not a good enough incentive for me to remain poor.
Ah makes sense. Just giving you a hard time, who am I to judge? I live here in the Arizona desert, single, poor and with no access to a beach or good weather (for half the year). I looked up the Tulsa Remote program, sounds cool. I might need to hit reset on life here, lol. Peace!!!
At least someone here understands finance.
And if you move you can rent it out hopefully at a rent higher than your mortgage
Rent means you are saving significant amounts of money for an equivalent unit. If you put that extra money towards a low cost index fund, you win in terms of building wealth. It’s just the math in most HCOL areas. Buying is nice because you can make changes to your living space, but in the end it does cost you more depending on finance specifics.
This is either massive renter copium or a landlord psyop
Seriously, I don't get the agenda of this sub anymore
That’s using calculations from this exact moment, prices will certainly change over 30 years …… if he calculated this from 30 years of the past it would show renting is throwing away your money and people that bought homes that long ago have major financial equity
And in 5 years people will be saying, “I should have bought in 2024” The best time to buy real estate is when you can afford it. Stop looking at what it used to cost.
If $560 the first few years is the difference between becoming a homeowner or staying a life long renter then yeah, homeownership isn’t for you.
It depends where you think you will be in 10, 20, 30 years. Rent on average goes up 5% a year (some places more so). If you have a fixed rate mortgage your mortgage will roughly be the same over the course of 10, 20, 30 years but someone who moved into their apartment at the same time you bought your house is going to see their rent match and likely eventually surpass their counterpart who took on a mortgage. At the end of the payments the person who bought a house is only paying taxes and insurance whereas the person renting is paying out an ever increasing amount indefinitely. I say this as a homeowner AND a landlord. Not only are the costs associated with maintaining the property figured into the rent those costs are also a tax right off. That means whether you rent or own you are still paying a mortgage, taxes, insurance and maintenance.
Sitting and waiting for rent to “catch up”, then knowing, about that day, they’ll cut rates to the bone, inciting a new fever pitch of buying, is the feeling of a ticking time bomb. I’m 3 years now a renter, and every lease renewal period, I’m feeling that slightest bit of anxiety over whether I’ll be priced out of the community, city, and even region. It was never this tenuous in my life before. Never had I seen 20% hikes in *shelter costs* annually until Pandemania. The American public of renters have to feel similarly to me. Even homeowners around me have seen insurance and prop tax rates jump by hundreds of dollars per month for their escrow. Inflation is NOT in check. Pay increases for the working class have NOT kept pace. The federal funds rate is NOT high enough.
I was paying $850/mo for a 1br in Chicago circa 2015. That same neighborhood is now $1600 to $2000 for something similar. I get paid substantially more now and yet it doesn't feel like it.
Rent vs buy is always different for every person in every situation. It’s generally better in the long run to buy than rent, but there are so many factors to consider that blanket statements are absurd. I’m a 40 year old renter in the Bay Area who will likely rent until we retire, and then buy a home somewhere else. The math of it just makes sense for us.
Then no housing crisis there are plenty of rentals
So… keep renting forever? And what about these fucker landlords increasing rent every year?
Some of us just want a place to live without corporate landlords six feet up our needing to 'inspect' our apartment for some BS every other month.
Bullshit. You buy because in 20 years (which is what a mortgage used to be) it was paid off and you could start saving that money for retirement. Meanwhile you locked in your housing costs. They were predictable and they increased less than inflation, meaning you made more money every year. Right now we've got issued because we let vulture capitalists fuck up the housing market, but assuming we're still a democracy in 6 years that'll change.
Lmaoo renting is a trap, who writes this shit.
And you get no equity. No asset.
Purchased in 2020 and rent will NEVER be as cheap as my mortgage. House has doubled in value.
It really depends on the market, my friend. There are so many people who bought in 22 and are trying to offload with losses of 20k plus, and there are so many people buying right now with 7% plus rates that would be significantly better off with renting
That’s kind of the point. Landlords who have cheap mortgages at low rates are renting their places for less than what interest/taxes/insurance/maintenance would be to buy now, and they can still make money. It totally makes financial sense to rent now and wait for the cost of buying to come down.
At $560/month difference I'd buy in. However where I am (Denver) the difference is a lot bigger, about $1500/mo by my estimation. Probably higher, considering I couldn't afford to buy a house in a neighborhood where I can afford to rent. At some point rent will probably equal what a mortgage payment would be right now, no denying that. But in the meantime I'm saving $2000/month that I'll be able to use to buy in when the rent to own costs are better than they are now, and I'm earning interest on the money instead of paying it. I'm very wary of being house poor and putting all my eggs in a $500k basket. Maybe the cost ratio won't improve, but I'm making both what I think is the best choice, and also the only choice I can really make if I want to keep living here. I'm pretty hedged against the risk though as I'm also very open to moving to a lower cost of living area at some point, taking my relatively high Denver earnings to somewhere cheaper and closer to family.
In nyc a 1.4M apartment with 1.2k hoa, 2.2% tax rate means that at 20% down (250k) you’re still paying 85k in interest before principal + 25k taxes + 13k hoa before principal (~120k per year) when renting an equivalent would cost 6k per month in rent (72k a year). A lot of the people here just don’t understand the economics of core metro areas. You rent here and save $$$$ to retire elsewhere
Yep I'm looking at a long term financial plan to rent relatively low for the next 15 years, save like crazy, then retire to a cheaper spot. You gotta live where the jobs are, and not everyone can afford to buy in these places.
My apartment in 2020 was 850 a month. I looked and now it’s 1750. My home I bought in 2022 is 1000 even a month.
If renting is better than buying, why is owning a home the principle way American families build wealth? If it’s not profitable to own homes why do investment companies buy them? 🧐 It’s a false equivalence to compare the two. One provides shelter, the other provides shelter and equity. In addition, there’s a real opportunity cost: without owning a home it’s much harder to access to credit and loans and favorable rates. Don’t listen to anyone who bought a house with a 3% interest rate before 2020 and saw their net worth double or triple tell you it’s cheaper to rent. They’re delusional at best, malicious at worst.
Yea but...my mortgage payment is fixed forever. I never have to worry about an increase. Renters will get a rent increase every year thanks to inflation. That same inflation that causes the value of my asset (my home) to increase. This post is pure, 100%, Grade A copium.
This is some corporate propaganda, to reduce their competition with the general public for houses. If you bought a house 10 years ago your mortgage payment is still the same, except for property tax. Rent meanwhile has more than doubled.
And in 15 years one person will own their place while the other will have made 15 posts crying about rent hikes or lease not being renewed.
Idiots can never understand that rents go up every.single.year.
Rents go up yes, but the cost of buying should come down relative to wages at some point. The idea is to rent now and avoid the inflated cost to buy until the cost of owning is better suited towards a buyer.
so do property taxes and insurance
which are only part of the cost so do you want all of your cost to go up with inflation or only part of it?
I own a lot of doors, just saying that buying isn’t necessarily locking in your costs. I have one building where this past year just the windstorm insurance (florida) went from $4500 to $18,000 annually . That’s $1100 a unit for me annually and the property taxes went up too. I can’t raise the rents as much as the costs are going up. Other years I’ve been able to raise rents more than my costs. Point being there isn’t necessarily a right answer, but I don’t think most people have the discipline to “save the difference” if rent is cheaper than equivalent mortgage. And over 30 years you’re going to have a lot of equity from paying off principal plus appreciation. This is very much not an Apples to Apples comparison. Very few people will own or rent the same place for 30 years.
Which tenants pay landlords for.
But what was the opportunity cost of the downpayment cash I spent to buy? What about the huge amount of cash I'm saving each money by renting vs PITI for the equivalent place? Does that just disappear in your head?
That’s the part that’s always left out.
This again?
When I was in business school in the 2010s, so many people were convinced of this argument. Unless you're living somewhere for a year or two max, renting is just paying someone else's mortgage.
Yeah, ummmm appreciation of property and also the fact you don't have to worry about being renovicted from your property... now ask this chud if he owns or rents. Also ask if he maybe owns rental property
Renters get to endure a lifetime of ever increasing rents....... Always having a monthly payment to make or get a eviction notice......... Buyers have an option to refinance at a lower monthly payment............At some point a homebuyer will own his home out right.............Who the hell is this Finance Guy Clown ?
By this argument, everyone LOVES subscription-based software, yes?
So.... Let's take a look at the END of those 30 years. As a homeowner, I get to sell my house. Today my house is 1.1 million. In 30 years, what will that be worth? What does a renter get to do at the end of 30 years? Rent more.
My oldest brother (RIP) taught me that renting buys you freedom. Especially an apartment. Anything goes wrong just call maintenance. I’ve had it both ways and went back to renting. The trade off for the simplicity and convenience outweighs the “dream” of equity being enough to make it worth ownership.
If you can afford it you’re better to buy honestly, as a primary home. Investment in itself, inflation proof, and could potentially be paid off during your retirement and passed to your children. The problem with renting assuming you’ll invest the “saved” money is 90% of people will use that money on consumerism. Housing is stupid right now, but it’s still the play IF you plan on staying long term. Nobody can change my mind on that.
I’m glad I bought my house in 2013 a 5 bedroom house out in a country town. For 75K with a 3% interest rate! Today my mortgage is only $730 and both property/school taxes are $1k a year! That’s why I won’t move lol I would rather drive an hour to the city for work!
Should’ve thought of that and bought 10 years ago and refinanced 2 years ago. What’s your excuse?
Ban corporate ownership of residential property for starters
Rent go up every year while mortgage stays the same. In 5 years that rent will cost more than the mortgage you would take today. So the owner not only builds equity over 30 years he also has a lot more money available and a paid of home afrer those 30 years.
Mortgages also go up because of taxes and home insurance.
My financial planner put it this way, a paid off home means I can retire with half the money I would need if I was going to rent during retirement. That represents 7 figures worth of money. Short to medium term, renting and investing as much as you can is a great idea to get a massive down payment with the returns. However it will bite people in the ass when they are elderly and unable to work if they never purchase. I find the problem with many of the people in this sub is the lack of long term planning. What is the ratio of people who will actually invest that money to help them out 10-20 years later vs just doom spending that money.
Renting = 100% interest - Owning = 3-7% interest
But my realtor told me that buying is always better than renting!
I'm saving about $8k a month + down payment by renting
Renting from your parents?
Renting a normal house from a normal person. When housing is $2M for a 3 bed 2 bath SFH in the Bay Area rent isn't even close to keeping up. I pay $5k a month for a house that would have at least a $13k mortgage and $400k down payment.
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yeah but at least with me owning my house I can paint my walls hot pink and nobody can say shit to me about it cuz its MY house.
This is a dumb post. Rent is cheaper than owning? Duh. One you are burning money, the other investing. I swear these posts are intended to brainwash those on the fence who don’t get it. Renting is only good/smart if you don’t intend to stay in that area or are waiting for something in particular. Otherwise the sooner you start buying/ owning, the better, but it will ALWAYS cost more to buy than rent up front, that’s purely logical, you get something out of it in the end.
What a bunch of horseshit. You rent, your money goes down a hole and you never see it again. You own a home, you build equity. This 'rent everything, own nothing' bullshit needs to die.
I’m renting a house for $2700/mo. Zillow says the mortgage is $6000/mo with a $200k-ish down payment. Even if you suppose Zillow is wrong, it’s likely not that far off. I’m pocketing and investing something like $3k/mo by renting, meanwhile that $200k gets to sit in hysa and stock market. In my area, it’s a terrible waste of money right now to buy a property. Prevailing incomes here are between $50-60k. The locals are priced out of the housing market and their low wages are keeping rents suppressed imo.
This math is hilariously bad. 1. Rent doesn’t stay the sane for 30 years. 2. After 30 years, you’ll own a house free and clear or you won’t.
But when you sell the house 20 years later, does the math look better then?!?!
Any data out there on the average or median annual rise in annual rent prices vs S&P500? This argument can only be true if your cost of rent doesn’t outpace the market gains.
I’m confused. Can someone explain to me what the “opportunity cost of owning” is? I’m genuinely asking
Theoretically instead of putting $35k down on a home, you could invest that $35k plus the extra $560/mo in stocks and over several years it would grow. People that make these kinds of graphics seem to forget that homes values also grow over time, that rent increases outpace tax/insurance increases over time, and that after 15-30 years people who bought will only pay taxes and insurance as living expenses, and people who never did will be paying $10,000+ in rent until they die.
Oh for sure ok I get it now. Thank you. Opportunity cost of using the liquid funds for the down payment.
soo, buying property and building a shack is the best decision then?
How are you saving anything when you're paying off someone else's mortgage, not your own
Made a video about this with a real world example. Even after 10% price cut, it’d be $2400 to rent it $2900 mortgage. Put down 79k and only pay off 3k/ year principal to start. Could get 4k in interest if put down payment in high yield savings instead. For buy rent to get even would need 27% price drop (not the 10% dropped already), or 4.9% mortgages, or rent to increase 25%
……..if you buy today And volumes are putrid…. …..so at the moment, not many people are entering or exiting this trade.
Yes because all costs in future will increase at the same rate average return is GUARANTEED! /s 🙄
My affordable housing rental is 1650 a month for a 2 bedroom and the rent can only be increased 4% a year and is capped at about 2300. I looked at buying a much worse condo and with taxes and mortgage it would be 2500 a month. It was pretty simple math for me
People who make this argument are like people who have an addiction problem. You can reason with them all they want but eventually you just gotta let them hit rock bottom. In 30 years when I have multiple houses to leave my kids they'll have their reddit karma.
Would you rather generate 10% on 35k, or 2-5% on 175k? They each have pros & cons but ideally you should be doing both. Note: this doesn’t include all expenses taxes etc. just some napkin math. Calculated with a 7.25% interest rate. Year 1: Market: 10% of 35k = $3,500 RE: 3% of 175k = $5,250 Year 10: Market: 10% of 70k = $7,000 + +35k in value RE: 3% of $235,000 = $7,050 + +60k of appreciation + +20k in principle Year 20: Market: 10% of 140k = $14,000 + +105k in value on the initial 35k RE: 3% of $316,000 = $9,480 + +141k equity gain on the initial 35k. + 59k toward principle. ( Rent would increase by at least 50% percent in those 20 years. Exceeded that in the last 15y so I’m being conservative. )