Comment by lanerobertlane | Hacker News Reader

Comment by lanerobertlane | Hacker News Reader

I think part of an overlooked view is many millennial aren't interested in owning a property and more than happy to rent for life.

I know that in some countries renting is the default mindset and it seems like within the UK priorities are shifting among that age bracket. I'd assume that's partly due to them not seeing property ownership as a realistic goal thanks to the price of them.

As a Guardian opinion piece [0] points out: "Abandoning the hope of home ownership represents freedom for many millennials: it frees up cash that would otherwise go towards buying an asset into living in the present. That can mean renting a more comfortable room (or flat) in a nicer area, it can mean the difference between having enough money to go out or not, and it can even mean hiring a cleaner to make the overpriced rented flat a good deal nicer.

Home ownership is almost universally seen as a life goal, or a milestone of success. It needn’t be – not owning a home can be a real benefit for many younger adults. It gives us the freedom to move with work, and try to build savings for other purposes – insurance against getting laid off, for travel, or even for a 'fuck-off fund'."

[0] https://www.theguardian.com/commentisfree/2018/jun/20/millen...

> it frees up cash that would otherwise go towards buying an asset into living in the present.

I'm really skeptical of this claim without good market data, because whenever I've looked at this for my own personal reasons the headline monthly cost of renting is 10-20% higher than mortgage payments.

You have to allow for emergency expense, yes, but if you rent you also have to allow for emergency moving at 1 month's notice (assured shorthold tenancy, yay) and you can't modify the house or have pets.

Not to mention the pension aspects. If you don't own a house when you retire you're going to have to pay a big variable expense from a fixed income, so buying housing is a volatility hedge. Also you have to take pension income, pay income tax on it, and then pay rent.

> I'm really skeptical of this claim without good market data, because whenever I've looked at this for my own personal reasons the headline monthly cost of renting is 10-20% higher than mortgage payments

In sane markets, yes. However, in markets experiencing property bubbles the opposite is often true.

I recently moved to a new city where prices have doubled in the last 10 years as a result of foreign buyers sending prices skyrocketing, and we currently rent a house worth $1.8m (valuations are public here). Assuming 20% down and a 30 year mortgage at 4% interest, we'd be looking at a monthly mortgage repayment of ~$6.9k with ~$4.8k of that being interest if we were to buy the house. Instead we rent it for $3.2k a month and happily save the $1.6k we'd otherwise be paying to the bank.

Friends look at me crazy when I tell them I have no interest in buying, but until the math is flipped and I start losing money by renting I'll happily let the landlord worry about maintenance and continue to enjoy my free time.

In short, abandoning the most important engine of wealth creation and savings in exchange for consumption that many of them will not be able to sustain in the elder years. Don't get me wrong, surely you can save and rent, but it takes much more discipline and it's not a choice I would say is appropriate for all young people.

Houses do not "create wealth". They go up in price about as much as inflation, but you still end up with just as many houses as you started with.

Sure, it's a figure of speech to describe accumulation of personal wealth. "Wealth building", rather.

With how easy it is to get a home equity line of credit and/or refinancing, owning a house is not nearly as good a way to "force" savings as it used to be.

You misspelled stock market.

The US median mortgage payment is around $1,000/mo. I can comfortably invest much more than that each month while renting a satisfactory apartment and spending freely. I just can't get anywhere near owning an equivalent condo.

That math is a bit funny. Rent is pure consumption while mortgage is consumption plus equity accumulation. Of course, owners have less left for investment, but they are already investing a significant part of their mortgage payment. With 15 years left on the mortgage at a 4% interest rate, about 60% of your payment goes to principal and only 40% to interest.

And since most people prefer the flexibility of rent to the headaches of ownership, rents tend to be significantly higher than the non-equity part of the mortgage, so ownership is a more efficient way to invest and live at the same time, precisely at the cost of that flexibility of consumption.

Sorry I wasn’t clear: I can invest well more than the home equity people are building in normal markets. Just not enough to own in my local, extremely expensive market.

I think many people don't want to invest in an asset that gets handed down, if they plan on having no children.

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