Hacker News Reader

Comment by DamnYuppie | Hacker News Reader

Honest question do you need a home right now? I too have been looking and when interest rates jumped I decided I was going to sit on the sidelines for the next 1 to 2 years and just stack cash/invest in various markets.

View on HN

Good question. And one I've been asking myself as the rates increase. One problem here is rents are increasing just as astronomically as houses. Mortgage/taxes/insurance on a 3/2 house with my downpayment might be 3500-4500 and an equivalent rental might be 3000-5000+ and are very scarce (most rent day of listing). Purely financially right now it prob doesn't make sense, but from other perspectives I def have strong urge to own still.

I did some back of the envelope calculations comparing housing in my area vs market. Taking the long view, accounting for property taxes and mortgage interest payments, housing did not beat the market.

I bought a few years ago and did the same calculation. Despite prices up 30%, my down payment would have produced higher returns if I had invested it.

Plus stocks are almost immediately liquid and have almost no transaction and no maintenance costs and no annual property tax.

Are you accounting for the equity you’re building by paying a mortgage vs paying rent?

I did. Where I live you can rent cheaper than a mortgage payment (plus tax and insurance) by about $1000 per month, so owning has an additional $12,000 per year cost based on that alone.

Did you account for the fact that equity gains in real estate for primary residences in the US are tax free? Your equities, even long-term, are taxed at a non-zero rate.

I did not include capital gains tax in my calculations, so that could impact on which side things fall, but I suspect it all comes out in wash.

Just to clarify the capital gains you have on the sale of your primary residence isn't tax free. You get the first $250k free for an individual and more for a married couple. This is very generous and better than you get for equity investments for sure, but once your gain exceeds those amounts it is taxed at normal capital gains tax rates.

Reply on news.ycombinator.com