> unless you want to throw your money away renting.
You're not always throwing your money away when you're renting; I'm pretty sure that housing prices are rising faster than rents, due to a culture of housing speculation.
You're not always throwing your money away when you're renting; I'm pretty sure that housing prices are rising faster than rents, due to a culture of housing speculation.
When we moved into an apartment in 2012, rent was $1200. By the time we left in 2016, rent was $1700. Our mortgage was $2200 including PMI, taxes and insurance for a house we had a built. By 2020, rent at the same apartment was $2400. Our house is three times the size.
The rent you are paying now is the least you will ever pay where you live. Besides changes in property taxes, our mortgage is the most we will ever pay.
> Still, rents rose by double-digit percentages in all size categories in July compared to a year ago, with monthly rents for studios up 14.3% to $1,555; one-bedrooms, up 12.2% to $1,745; and two-bedrooms, up 11.7% to $2,103.
> The South and Northeast have seen the largest rent increases. Miami, where rents were up 26.2% from a year ago, saw the biggest increase among the 50 largest US cities for the 10th-straight month. Miami was followed by New York, Boston, Chicago, and Orlando.
https://ipropertymanagement.com/research/average-rent-by-yea...
If not in the principle building (mortgage payments are commonly less than rent and 20+% goes to principle year 1 - assuming 0 price increase over your term).
But also in the US + state tax code and credits - first with "homestead exemptions" - but especially if you make over $100k (yes, roughly 2x median household income, but applies broadly to hacker news and it's a home worth the "average"city price as you get to deduct the property tax and the mortgage interest (so rough savings of 25% on the remaining 80% year 1). For icing on top, you also get credits on energy efficient upgrades.
but I'm living in a 1BR apartment that comes with a garage parking spot, an ideal setup for me personally. a mortgage for an entry level home in the same neighborhood is comparable to my rent, but it would be a strict downgrade to my QOL, as I don't actually benefit from the extra sqft and would have to put in more work to maintain it. obviously a house with a garage would be much more expensive. I've looked at 1BR condos, but the condo fee generally means it takes much longer to break even vs renting a similar property.
In Atlanta, I was renting in a 1br condo for 7 years; when rent went up 15% in one year, it was free (after principal subtraction) for me to buy/move to a 2br in the same building in 2017. (Even more advantageous as a friend moved in). By 2019 comparable rents for a 2br were 2x my total payments.
Even at the maximum rate it’s allowed to go up, it would take 5 years for that to change. But that isn’t happening, because California prices dropped 30% yoy already, and it isn’t stopping there anytime soon.
Landlords haven’t had positive cash flow on a property in California in at least 5 years (based on ‘purchase now’ numbers).
What you are talking about is the ‘sane market’ behavior, but that hasn’t happened anywhere in the country (near as I can tell, from real estate investor friends) for years.
Hold onto your butts.
You are paying for a service (somewhere to live). Unless you can afford to buy outright then you’re either “throwing money away” renting or on interest payments.
Of course, the situation is more complicated in areas like the SF Bay and Seattle. Housing prices vs rent basically assume 5% year over year growth forever, so if you think housing prices will be flat, it's economically advantageous to rent
There's a good calculator without a ton of BS here on this old page: https://michaelbluejay.com/house/rentvsbuy.html
sure you'll be paying less, but you'll also be buying a lot of risk. You don't own anything until it's fully paid, and if the interest rates skyrocket good luck with bankruptcy
What kind of lunatic doesn't get a fixed-rate mortgage?
To put things in perspective, my parents had a mortgage of $600/month in 1978. It wasn’t too much of stretch for them then. But it did sting. They were a teacher and a factory worker. By the time they paid the house off in 2008, $700 by then was laughably small.
I wouldn’t go that far. I don’t know what my parents made in 1968 or for that matter 2008. But from the time period I mentioned 1978 - 2008, if their income just kept up with inflation, it would have gone up by 650% according to the official CPI calculator (https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=1968...).
Well actually, they retired in 2002 at 55 and 57 respectively - from teaching and factory work - and have been retired since then.
They’ve taken two 5 month long cross country trips and have only slowed down their shorter road trips in the last couple of years because they were worried about Covid
If your parents started working in '78 they have likely had a nearly miraculous wealth transfer from owning a home in a world with declining real interest rates. As you noted, their income rose 650% due to inflation - and their housing cost was likely fixed.
About the same.
If one of those moves happens and the markets down, things get interesting. Especially when someone is upside down.
Either way, transaction costs tend to eat up any potential gains unless one is really lucky or you stay a long time, which is hard to do during high change times.
If, in the future, I can find a place in a good location/part of town, with plenty of room, and is convenient to earning income, etc. and that doesn’t require me to get loan payments at some crazy multiple of my income, then yeah I’ll probably buy.
But that hasn’t been a thing in the Bay Area since about ‘15 or so. And with everyone running for the rural areas for a multitude of reasons and remote work becoming the norm, the rental markets are crashing hard here.
Even before COVID however, housing prices had started to flatline or decrease as even with historic low interest rates, payments were very high, and even with increasingly risky financing, very few people could afford them.
Even if you go by historical norms of prices housing rising with inflation and you consider selling costs of 10% (a bit high of estimate), you only have to be in a house 5 years to come out ahead.
> If, in the future, I can find a place in a good location/part of town, with plenty of room, and is convenient to earning income, etc. and that doesn’t require me to get loan payments at some crazy multiple of my income, then yeah I’ll probably buy.
I’ve been in the same metro area since 1996. My last job was 30 minutes away. My current job’s headquarters is on the opposite coast and the official location of my division is on the same coast but about 15 hours away by car. I doubt I will ever work in an office again.
> But that hasn’t been a thing in the Bay Area since about ‘15 or so
There is a whole big old United States outside of the Bay Area.
I wish you luck, I hope that is true!
I ran the math when I rented in SF. I was paying about half of what my place would cost to own.
Even with housing doubling in price, the returns from the market were 3x (though not leveraged).
Assuming 20% down and the cumulative monthly difference, maintenance, transaction costs, and what equity I would have gotten back, I pretty much broke even to owning.
Kinda true kinda not.