66% of renters say homeownership is ‘hopeless’ | Hacker News Reader

66% of renters say homeownership is ‘hopeless’

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114 pointsdonsupreme125 comments

Definitely agree with this sentiment! Houses are affordable only in low cost of living areas where folks don’t want to live for a reason. Some of those reasons are subjective (not a lot to do in Ohio), and some are very objective (certain rural areas are extremely hostile to other groups of people).

In major cities where people want to live (slash where well paying jobs are), it is very difficult to justify ownership. For example, a $600k house at 7% interest will loose money over 5 years even if you sell for $650k. And not just loose money, but loose even more money than renting for like $4k/mo. (And this accounts for a $100k down payment!)

There is basically no way to justify ownership in these areas financially without coming into a significant amount of capital. And while you could afford it with a high cashflow (two high income earners, which is doable in major cities), you can get a nice apartment for $4k/mo that might have even more amenities than your house would have (like a hot tub).

I think this is a huge bummer, especially because owning an apartment or condo is becoming more rare as well, since renting is more financially attractive to property owners. This basically makes it much more difficult to build wealth, and allows large developers to make off with a huge amount of money.

So it does feel kind of hopeless in these large cities, even if you make a ton of money. You basically either have to accept taking a huge loss on ownership (unless you stay there for decades or get a great deal), or settle for renting.

If you’re comparing it to renting you still come out on top no matter

that's just mathematically incorrect as a generalization. it depends on the market, the price-to-rent ratio, interest rates, transaction fees, maintenance fees, taxes, and how long you're actually living in one place.

if your burn as a renter is substantially lower you could invest the difference in a non-real-estate asset and make a lot more return, in many cases.

There are a lot of factors, but if you don't move, then I can't see any realistic scenario where renting comes out ahead in the long term.

In my area, the price-to-rent ratio is nearly 1:1. When I bought my house in 2015, my mortgage payment (30 year fixed) was about $1,500/month (Plus ~$400/month property tax). Zillow estimated the rental value at $1,700/month. From the listings I've seen in my area, Zillow's rental value is pretty close to what people are paying.

In my case, I would have been insane to choose to rent instead of buy. The thing to remember is that rent always goes up. 30 years from now, the rent could easily be anywhere from $4,000-7,000/month. Meanwhile I'll be making my final $1,500 mortgage payment.

Yeah, if my water heater explodes, I'm on the hook for it. But a single month of savings in the difference between renting and buying years from now would cover the cost.

In Wisconsin where I live the rent is like half of what it would cost in monthly costs to buy a house.

Renting is so much cheaper in the long run as I can earn so much more on that money difference with various investments like multi-family realestate.

If you live a stable life at the same place for 40 years, yes.

At current astronomical prices, "buying" means "renting from a bank" and volunteering as unpaid landlord.

The numbers I shared in my post are from some basic math! Over 5 years, you spend more money, even if it appreciates by 5% when you sell it. This is because $170k of your mortgage payments went to interest alone, not to mention HOA fees, property tax, mortgage insurance, and maintenance.

Unless the house appreciates a lot very fast, or you have very low interest rates, it’s very unlikely that a house in these cities ($650k, for example) will make you money at all in the mid-term, let alone beat renting.

And even renting at times feels hopeless. I just received my rent increase notice yesterday; my rent has been going up every year since COVID started. I’d love to be able to have a fixed-rate mortgage so I don’t have to deal with rent inflation, except I can’t afford to buy anything near Silicon Valley (where I work), so I’d have to contemplate a move to the Central Valley or even further away (like working remotely from Las Vegas or Phoenix) if I want to purchase anything.

Hey, it could be worse; I’m in a privileged position compared to many other people where they can’t afford the rent. But this inflationary environment feels demoralizing where everything goes up faster than what you can earn in raises.

You could also rent further away and save more for a house, get roommates, or beg your parents for a downpayment.

Not really an option near; or in Silicon Valley.

You pay the savings in sanity points when you get roommates or family. No amount of savings is worth it.

Downpayments for houses in that area with a 740+ credit score is at least 200k and only goes up from there, don't know many parents that could help that much given the high amount taxable event, that's also not taking into account most homes have significant maintenance the first year, you never know what you'll find.

I've seen some places where they found out they had to fix the foundation after opening up to do some safety fixes, ended up costing around 120k. Involved a hillside sliding too so geotechnical engineer had to come in, no clue how much that cost after all was said and done. Wasn't found during the normal pre-sale inspection.

What is a “high amount taxable event” in this context?

Presumably a misunderstanding or misinterpretation of the gift exclusion rules. It’s a common misunderstanding that gifts over the annual exclusion limit ($17K per donor-recipient pair, so a couple could give a person $34K or a couple could give a couple $68K in a year) incur tax. They do, but only after exhausting the lifetime gift exclusion amount (currently a little over $12M per donor). There is also a process for designating that you’re gifting 5 years’ worth of gifts all at once (so 5x the amounts above before even touching the lifetime exclusion amount).

It would be exceedingly rare for a $200K gift to actually incur a gift tax payment (though it would require a Form 709 gift tax disclosure filing).

My understanding of the comment is the way the parents would get the money is to liquidate something which would incur taxes, which will be a lot in taxes on $200k even with long term capital gains treatment.

Yes, this was the general sentiment.

There may be loopholes and financial engineering that can be done, but its generally not available to the average joe.

I looked into this as a possibility not too long ago, and the professionals we spoke with basically said you'd either need them to take care of the taxes or be co-signer.

Co-signer rights effectively negate the point of getting 'your' house, and can lead to a lot of drama.

Best bet is probably to have them own the house and step up in basis when they move on, if you're really worried about taxes.

If its on a hill, get soil tests before purchasing.

Some people unfortunately have no choice regarding living alone versus taking on roommates or moving back in with family (and this isn’t an option for everyone). Thankfully in my situation I can shoulder my upcoming rent increase without needing to contemplate roommates or moving back with my parents.

For me the big problem is the purchase prices. I’m not going to get a six-figure windfall; my parents are low-income and can’t provide down payment assistance, and I don’t work for FAANG and thus I have no RSUs, instead relying on salary and annual bonuses. It will take me over a decade to save even $100k, which isn’t enough for a down payment. Then there are the actual mortgage payments.

I see the writing on the wall. I will need to leave Silicon Valley eventually, barring either a major drop in housing prices or a major rise in my compensation. I have no idea where I’d move to; I’m a lifelong Californian who was raised in Sacramento and whose only significant periods of time out of state were in Tokyo (eight months) and Seattle (one summer). But a move is looking inevitable.

As a Silicon Valley resident since 1997 I would advise young people starting their careers to not move here in the first place, unless perhaps they get an exceptionally good job offer that requires being physically present. I am kind of stuck here due to personal circumstances but if I had fewer attachments I would would have left years ago. The combination of broader macroeconomic and technological circumstances plus the negative effects of authoritarian leftist state and local governments has really driven the place downhill. There are many better places now to launch a career and build a life.

For example?? Without practical answers this reads like an old fart complaining about good old times. Texas might be the only reasonable alternative for home ownership, even then salaries are lower and we all know about their current situation especially in smaller localities.

Texas is hardly the only reasonable alternative. Several other states make it much easier to own your own home. Look around and find somewhere you like.

https://ipropertymanagement.com/research/homeownership-rate-...

I agree, its a tradeoff wherever you go and takes careful planning.

You can either have high overall income taxes, or you have high property taxes (and low overall cost of living).

Ironically, for those who won't retire before 2030, we'll probably never see social security benefits despite paying into it for most of our life (15% tax).

You will see some Social Security benefits. There will likely be some benefit cuts and perhaps a further increase in retirement age, but there is no political appetite to eliminate the program entirely. As long as you survive to retirement age you will receive something but it might be less than what you paid in.

While it is true there is no political appetite to eliminate it, that has little to do with whether you'll get a reasonable amount of benefit from it.

Currently, mandatory spending which includes Medicare and Social Security go over a cliff where the interest exceeds projected GDP ~2032 (before factoring in inflation; it gets worse with inflation).

There was a congressman trying to bring attention to the issue for newly elected politicians who did a C-SPAN presentation on it.

Link: https://www.youtube.com/watch?v=6ut1yQg2qA4&ab_channel=Forbe...

One thing to keep in mind is even with a fixed-rate mortgage you're still facing increasing costs throughout the loan in the form of property taxes, insurance, and maintenance costs. Based on the housing market appreciation, I believe my future property taxes will be about the same as my initial mortgage payment by the time I finish paying off the loan. Then factor in the increased costs to fix and update things? I think I was better at saving money back in the apartment days.

I mean yeah, renting is cheaper from a cashflow perspective. But you don’t end up with a multi-million dollar asset in 30 years.

If you keep investing in something like multi-family realestate you should easily have well over a million in assets after 30 years.

These assets would be generating cash flow, but you could sell them for a lump sum if you are OK with all the taxes.

Selling and buying another property allows you to do it without incurring such taxes.

Prop 13 in CA caps the taxes: they grow at 1% as long as you own

I think you mixed up the numbers. It's capped at growing property value evaluations to 2% a year and counties may only set a property tax at 1% of assessed value. Of course that's only for the ad velorem portion of property tax. My city has fairly high fixed tax components (one of which scales by property square footage) which puts me currently 1.4%, and I expect that to increase over time as the fixed components to my property tax don't seem to have any restrictions. For homes of lesser value I'm sure the fixed costs dwarf their ad velorem components.

A 1 bedroom condo in the neighborhood I've shared a basement with my partner in for going on 4 years now, is ~$750k CAD. I didn't even want to own something before, even when it was theoretically in the cards, but now it's so unbelievably unreachable and not-worth-it, I just think wtf

Anything we could pay for even if we really stretched irresponsibly would be twice the price and likely not provide anything we don't have except a shit ton of debt, stress, and an extra closet

> (not a lot to do in Ohio)

Cedar Point and King's Island would like a word. ;-)

Obviously, roller coaster's aren't everyone's cup of tea, but I've often heavily considered moving to Sandusky, Ohio after I retire just so I can spend all day every day at Cedar Point.

Are those up wind or down wind of all the burning toxic chemicals?

Or the river that catches on fire?

True, one of the biggest highlights of the state!

There is no logical basis to agree with that sentiment. Have you actually spent much time in Ohio? Lots to do in Cleveland.

But the home ownership rate isn't even particularly high in Ohio. Based on home ownership rates it appears to be easier to buy in other states like Minnesota, Maryland, and Utah. Lots of options depending on what you're looking for.

https://ipropertymanagement.com/research/homeownership-rate-...

Which sentiment? I grew up in Ohio; lived there for 18 years. It makes financial sense to buy a home near Toledo, for example. (E.g. not so expensive that you’d loose money vs renting.) Not a ton to do, though.

> So it does feel kind of hopeless in these large cities, even if you make a ton of money. You basically either have to accept taking a huge loss on ownership (unless you stay there for decades or get a great deal), or settle for renting.

Isn't this kind of how it should be, though? The idea that owning a house is some kind of guaranteed investment is strange to me. It's not "losing money" per se, it's "spending money" so you have a place to live.

In a healthier market I feel like owning versus renting should be a choice people can make without any obvious financial winner.

That said it seems like both owning and renting are too expensive relative to median wages in desirable areas.

I almost agree, but I do think that ownership is better for society because that it distributes wealth more widely.

And at 4k a month for rent I would say life is just hopeless which might account for the mass shootings, suicide, homelessness, drug use...

65.8% of Americans live in their own home. That's a higher percentage than the UK, France, or Germany. We aren't talking about there not being homes, it's that the youngest aren't able to. It's also a higher percentage of ownership than the US in 1940,1950,1960,1970, not 1980, but also higher than 1990.

What it isn't higher than is the peaks of home ownerships hit during the low the low interest rate booms before the recessions of the '80s and 2000's.

I don't think the current housing crunch will be forever - we've seen shortages like this several times before in US history. While some cities are fighting new housing furiously, other's aren't. Over time, the population migration to the places that are building will continue as it has over the last decade. Building houses is a boom and bust phenomena, and I've seen nothing to say that it's never coming back.

I'm an early-90's "millennial" in one of the ten biggest cities in the United States and am unfortunately in a position where I couldn't even afford to move.

It's not so much "the economy's" fault as it is my [yearslong] attachment to a company where there's been no wage growth (hopefully I'm out by September!).

Altogether very much not what I ever thought "30"+ would look like for me.

Don't be too discouraged. Not a soul correctly guesses what their 30s are like. Just keep making good moves.

Worst part is moving to smaller places is usually less culture but moving to bigger places is more expensive

I moved out to the rural countryside, paid $120k for my house. Work remote, and meet my collogues 5-6 times a year in person.

It's not for everyone, but I'm happy. Not being a slave to the bank (mortgage) feels incredible.

Do you mind if I ask what state/region ?

I seriously doubt there's a $120k countryside house within 500 miles of me.

Challenge accepted. Share your general area / zip code.

ooooo oooo do me.

Northern VA: 22030

I've got 3 kids, so no bungalows, and nothing that's in the ghetto, cuz SE DC almost certainly has cheap real estate -- and the highest murder rates in the US.

Pittsburgh, PA has plenty of houses under 100k. Here’s one that’s less than 250 miles away from you. Although this particular one is not a countryside house [1].

[1] https://www.zillow.com/homedetails/1401-Cresson-St-Pittsburg...

I think it's really all that other stuff that spikes your cost up no matter what. However, I am the same way.

I'm looking for 100 acres with a new construction house that can't hear the road for about 400k, any takers? This was possible 10 years ago.lol we all missed out

I'm actually happy that what you've done is more viable than ever for the people interested in that. Theoretically, it enables a bit more demand spread, and people who would otherwise go suburban if they don't care to be around many other people can now just go rural.

My family has a pretty rustic piece of land quite a ways out of the city, and it's nice to go out there for a bit of quiet time when I get the chance; tranquil. I'd love it if there were more viable ways to get out there though, and better connection possibilities, the latter of which I'm optimistic for in the near future.

Congratulations. That seems like a peaceful life right there. Enjoy it.

I feel like there's also a middle-ground of medium/smaller cities that may still have a nice downtown, amenities, etc, and be affordable, without being a national culture hub

They should be affordable, but the inflation and housing shock is affecting pretty much the entire market. Even the run up to 2020 was making housing more unaffordable as prices were rising faster than salaries for nearly a decade.

One of my close friends did this. Moved a few hours out of town to the countryside. Bought a nice house (still with a mortgage, but at a fraction of the price of houses in the city). His company went 100% remote during covid, so he had full job flexibility.

Then a few months ago they mandated return to work, with no exceptions. He tried to negotiate, but just got an ultimatum – move back or get fired. He has had his resume out for months but in the current job market fully remote jobs have all but dried up.

So, the situation you mention is all pleasant until it isn't. Our lives are still tied to our corporate overlords, and very few have the luxury to pack up and get away from the grind.

> Our lives are still tied to our corporate overlords, and very few have the luxury to pack up and get away from the grind.

then find ways to change that. it's painfully clear your incentives -- and those of society on the whole, honestly -- don't align with theirs.

push for some changes, or watch as each generation gets poorer and poorer.

But why do you censor yourself?

A few years ago the local university did a study and found that 30% of my town could not afford to live in this town. Last year it was 75%. There are not jobs locally which can support the housing cost. Huge influx of people who seem to be purchasing multiple homes. 600 registered vacation rentals just in city limits (estimated closer to 1500 counting unregistered). Entire neighborhoods that only have 1 or 2 full time residents.

My rent went up 20% last year (5 years in the same location) with no improvements made. My parent's house had their tax assessment go up 65% (they are retired, same house for 40+ years).

I know of several companies that all just shut down due to someone purchasing the building where many small shops were operating from and doubled the rent.

It is a shame being able to watch the destruction of the town I grew up in...even worse to know that I won't be able to live here much longer. Granted it is a vacation destination now...but when I was a kid it was the middle of nowhere where nobody wanted to live, downstream from a superfund site.

Building more houses won't help if they are all used as investment. More developments need to have rules about the housing being used as primary housing, no rentals (short or long term), no flipping the house after 2 years. Focused on people who want to live and build a community long term.

Turning all the affordable housing into hotels while turning vacant hotels into homeless shelters is an insane proposition...but it is currently the reality many cities are facing (see Spokane, WA as example of this exact thing).

"building more houses won't help if they are all used as investment"

Supply and demand applies to housing as well. If many new units are constructed, both rent and prices go down, even if they are used as investment.

In theory yes, if they build enough housing so that supply exceeds demand then eventually prices will drop. In practice though in popular vacation areas building smaller amounts of new housing often induces additional demand that drives prices up at an even faster rate.

But we're talking about small towns here not Lake Tahoe

Well...My town is Coeur d'alene, ID. So not far off from Tahoe. Although, just 20 years ago people laughed if you told them you were from Idaho. This was the place in the middle of nowhere that nobody wanted to live.

The majority of apartments are owned by commercial entities. Smaller individual rentals are being converted to vacation rentals. Commercial rental collusion on a massive scale (empty high priced commercial units all over) causing issues with running a small business.

The local real estate people and the newspapers were saying there have been housing prices dropping by 10k/month...but somehow Zillow shows my parent's house gaining 20k. Clearly someone is not telling the truth.

June 2020 we had investor groups knocking on doors buying houses at 40% over market value...I spoke with more than one.

What will happen when people start to realize that these investments are not panning out? What happens when the large corporate investors (REITs too) start dumping their positions? Maybe it will never happen...

Biggest issue is that the illusion people live by is that rents follow market value...but the reality is that rents are set by what people can pay. Most who rent in the area cannot afford increases of 20%/year. If they could...they would be homeowners already. There are not local jobs to support the type of cost of living increases that we are seeing. Not sure there is a solution.

Western leaders had better start coming up with radical solutions to housing market driven inequity or there'll be ructions.

There is a single solution for this – build more housing. Yet that option still remains unpopular, even among people who cannot afford housing. Blaming leaders is pointless. Instead organize and convince your neighborhood NIMBYs to change their minds.

"Just build more houses", yet alone when framed as "it's up to you to convince your neighbors to let you to build more houses" just doesn't cut the mustard any more.

We need serious changes that are actually going to make a difference, along the lines of (for residential property):

* Outlawing mortgages for non occupiers.

* Sharing of capital gains with tenants.

* A complete end to no fault evictions.

* Universal right to buy for tenants.

* Putative tax for rental income.

That would basically kill the entire rental market and force everyone who wants to move to a new place buy a place instead of having the option to rent which would make changing jobs super painful.

I moved across the country after college for a job and my brother has done that like 5 times changing jobs. Buying and selling a place is a huge pain and has an extremely high transaction cost compared to renting.

Many people seem eager to screw over tens of millions of renters if it means they think they’d get a better chance to buy a place.

Many people think landlords are really just slumlords and yeah, it isn't hard to see why.

If there's a problem with a slumlord, you address that problem.

We don't ban restaurants because some of them have health code violations or food poisoning outbreaks; we get the individually offending restaurants to fix their crap.

There's an inherent power disparity though. There's a high probability the slumlord has more resources than you, and he's not beholden to his 'opponent' providing his housing. So it's not likely your average renter has the capability to address these kinds of problems, which means you need some sort of power structure that has a mandate to enforce such things. Thus, laws and bans on certain behaviours and actions.

Yes, there are already laws against slumlording in most places already. It's not on an individual renter to hold the power, but on a licensing or health/building code enforcement government agency to prevent uninhabitable or sub-standard housing from being rented without recourse. The tenant just has to complain to them and the government comes down with the power.

Not counting college, I've rented at 7 different places, representing about 13 years in total. None were slums. All were far better than me having to buy an entire place each time I wanted to move somewhere.

Remove slums? Hell yes! Remove rental properties? Hell no!

We are. Tons of new SFH and apartments.

The problem is lack of diversity of housing. There are no more rural suburbs and there's no urban housing centers. There's suburban SFHs, townhomes, and apartments, and nothing but. And no one likes it, but we all have to live with it.

Not to mention the potential walkable areas might as well just be a open door prison with the amount of crime and drugs.

Why do residents of potential walkable areas keep voting for politicians that tolerate high levels of crime and drug use?

Lol seems like you have never tried to do it in real life, easy to say impossible to do. This is a complex problem that has many stakeholders who want to maintain status quo. Don't forget all the tax evasion and money laundering it supports.No one is asking questions till the market goes up. Only way for a serious change if prices dropped overnight by 30-50% and people realize a house is just a place to live and make memories in, not a money machine.

Do you think it's any better in "the East"? It's not a 'western' problem/.

Singapore has become so expensive for non-multi-millionaire foreigners to live in that many are now forced to leave.

70-100% rent increase in a year. Starting from already a several thousand dollar base.

https://www.channelnewsasia.com/singapore/housing-rent-price... https://sg.news.yahoo.com/singapore-tenant-slapped-75-rent-0...

The increasingly well funded and empowered militarized police forces seem to be the solution they're going with.

Previously the problem was that you had to have access to credit and enough money for a down payment to buy and then you’d quickly come out ahead vs renting. So it was a real problem not being able to get access to that advantage.

But in the current situation you actually pay more to buy than you would to rent in most/very many cases, unless you’re counting on things like appreciation or planning to hold for 20+ years (if you are rent controlled/stabilized you may never come out ahead).

So while homeownership is unaffordable in both situations, the repercussions and solutions are very different. Because policies like providing downpayments (which CA is considering/doing) will just exacerbate the situation in this case. And the negative impact is more qualitative like being established in a community or wanting to own a home as a right of passage, vs actually materially making you better off.

So 66% say homeownership is hopeless and 59% say they are focused on the goal of owning…a car? Yes, if you’re currently unable to own a car, I can see why home ownership would appear hopeless.

I’m sorry, but I just don’t have the empathy. I see the horrible financial decisions, and advice, all around me. I suppose this means the bulk of the 59% are financing their vehicles? If you have nothing to your name except debts, and want to change that, you should drive a POS. If you would like to own a home, but currently rent and have $40k in car debt, you’re not doing it right. I make quadruple what many of my friends and family make, and most of them have nicer vehicles and a driveway full of toys, like campers and motorcycles and boats. I went from making $65k in the Midwest to owning a million dollar home in Seattle in about 6-7 years and paying off all student debt, on a single income, while having multiple kids. I didn’t do anything crazy, I just saved more than I spent, invested in index funds, and never took on debt.

The point is that your average person that might prioritize a car, a less expensive endeavor over a house cannot afford to do so. Financing a car isn’t the issue, the fact that owning a home somewhere where jobs are is hopeless means people are going to spend their money elsewhere.

That’s incoherent. If you want to buy a home, but cant right now, financing a vehicle is an issue. You’re not “spending your money elsewhere”, you’re taking major debt to drive something you can’t afford, and paying dearly for it at the cost of your real goal, which is now further away than it otherwise would have been.

In my experience/opinion, a major problem is people think in terms of monthly cash flow when trying to decide if they can afford something. That’s the fast lane for ending up in a place where you’re breaking even with monthly payments and never having much to show for it. Or, “the average person” I think you called them. The very same person that can’t come up with $600 in an emergency or whatever.

> In my experience/opinion, a major problem is people think in terms of monthly cash flow

Bingo bango friend. People's thinking is rooted in how they think the economy is moving. It's irrational but here it is, if they feel hopeless about ever become homeowners, they will spend money on smaller things because...why wouldn't they? There is no greater expense than a home.

You decided people want to finance expensive cars to serve your conceited view. Financing a modest car or getting any car is unfortunately an obvious goal for many because the U.S has designed itself to make it as hard as possible to get around, especially for people without cars.

If you have to finance it, in what way is it a modest car? It’s not as if people are financing $2000 junkers. I’ve paid cash for every car I’ve owned, including when I was a teenager flipping burgers. Why aren’t these 59% buying junkers instead of going into debt and paying interest on a depreciated asset? Are you just going to blame America and society, or do we blame the people signing the loan papers at some point?

Congratulations on buying every car you've had with cash, I don't really see how that's relevant, everyone is dealt a different hand. Dealers are horrible, definitely blame them, but if the job you get is 30 min away by car and 1.5hrs any other way, then financing a modest ~6-12k car that's somewhere between rust bucket and new is not an unreasonable idea. That's what I did, paid it off in relatively short order, it helped me make money, seems pretty rational.

Wasn't there another report that indicated most people don't even have $500 saved for emergencies? Seems like a much more manageable few hundred a month on less of a practical liability would be wise.

Lastly, we should absolutely blame 70+ years of car-centric development and cultural propaganda on people desiring one so badly. There's always going to be people who would get themselves into a giant $50k+ truck to drive around the city with a 10%+ loan because they're morons, but it's malicious thinking to attribute stupidity to a majority of people wanting a car

and making >$200k a year while adding to the necessity of needing an extremely high salary to live in an otherwise normal city like Seattle.

Rich people with low empathy are something we could use less of.

I don’t even understand why owning a home is something so many people want.

It’s generally not a good “investment” at all and renting is better.

Plus all the upkeep and chores you need to do for a house.

That’s the thing. A home should not be an “investment”, it should be a “home”, a home to live and give safety/security, not land, bricks and mortar someone purchases to make a capital gain or rental yield.

Why do people want a “home”? It provides a security renting doesn’t, you can make it your home.

Renting can be more flexible if you are nomadic, it can also be a huge pain dealing with leases, rental increases, dodgy landlords, a lack of security so can’t truly settle on a 12 month lease.

I agree buying a home should not be seen as an investment. I just mention that because it feel like everyone I talk to treats it like or talks about it like it’s a good investment.

It’s totally fine to buy a home if you want to own a home. Sure there are plenty of reasons to want to own a home. But because it’s a great investment is rarely one of the reasons.

I bought my house for under 300k in 2015 and could list it today for over 700k (good investment). Obviously I am not going to do that because of the interest rate increases which will keep mine and a large amount of the supply off the market but that is a different topic. I like owning though because I know no one will kick me out 12 months or significantly increase my monthly payment based on demand.

here's a poser for you: if you live at your mom's house, but earn a good salary, that allows you to quickly build up a nest egg, that you can use as a downpayment on your first house.

You buy the house with a mortgage, tying up your downpayment and obligating you to make monthly payments on the mortgage (which in the initial period go mostly to covering interest)

Before moving in, you realize that you could keep living at mom's house and rent the house you bought out at market rates. Let's say the market rate for your house is $5K a month, money that you can put toward your mortgage or building back up your savings/nest egg. (if you are renting your house out, some other benefits accrue to you, depreciating it, etc, but we'll ignore those, keeping that in mind in case you start thinking it also has some costs associated with it)

Now you have the thought... hey, wait a minute, does this mean that if you move into your own house, that act will cut off the $5K per month rental income, which makes it the equivalent of you having to pay the $5K rent yourself? Cuz, you could keep the rental income flowing if you rented another property, but if that one costs $5K too, the cash flow nets out to zero.

Could this be true? owning your own house doesn't save you on rent? Because investing in a house entitles you to the rent from the house, so consuming the housing yourself costs you the monthly rent whether or not you are the owner?

Yes, that's what it means. Buying a house does not save you money on rent, does not save you money on "housing consumption".

We need to give our kids a better financial education, there are so many myths that keep people on hamster wheels they don't know that they are on. This is the reason that housing seems "unaffordable"; why should it be any more affordable than rent?

I mean you still need a place to live right? And if you're going to pay for a house, you may as well be paying for it in order to own it later and sell it if you'd like? If you always rent, you never get that money back.

you completely didn't read what I wrote, you are not following along. you are wrong.

read it again, if you reserve a private piece of real estate for yourself, whether by leasing it or buying it, you pay the same rent every month. Buying a house does not save you rent.

The rent that you think you are not paying is rent that somebody else would be paying you. Not receiving that is the same as getting it and paying it back out.

Yeah I'm lost.

Please read these statements and tell me if you agree or disagree:

1) Paying actual rent helps someone else pay off their house and that money is never able to be recouped by you.

2) Buying a house and living in it requires you to pay for it.

3) Buying a house a paying for it eventually ends when the mortgage is paid off.

4) when the mortgage is paid off, you now can choose to sell your house for money.

5) you can now use that money to buy another house in the future and live in that one.

6) you could rent out your house to others in which case they'd be paying down your mortgage.

7) when you rent out your house to others, you yourself need somewhere to live.

8) wherever you live you will need to pay for. Either through renting yourself or buying another property and paying down it's mortgage.

Renting is generally just about enough to maintain a mortgage. The premium if any can be though of as option value should you need to move in near ish future, or otherwise from appreciation.

A renter who rents the equivalent property and puts their savings into the stock market can generally expect the same or better risk adjusted returns though real estate generally alows you to take on more leverage than with equity bc of lower volatility and there are some tax advantages if you're in a high tax bracket bc interest can be deducted.

Well what has happened is that asset price increase go up faster than what a person can save. I lived at home and saved money, then the covid house bubble came and doubled the prices. Now i would have to save for another decade.

Nope sorry, I'm out. Everyone who thinks they have decent equity in their house is going to feel pain when no one can afford their million dollar condos in a few years

all what you're talking about is priced into what I'm talking about.

housing prices and rent go up at the same rates, their prices compete in the same market, and if you want to rent a place out, you have to buy the places first. How much rent does it take to pay for the place you bought? It's all linear math, it's proportionate.

Stock market investments go toward value creation, housing market purchases do not. Stock market better, it goes up faster.

> housing prices and rent go up at the same rates,

Naive expectation is that they should, but in practice they don’t.

https://www.sfchronicle.com/bayarea/article/rent-own-housing...

your article says what I said, not what you are saying. It points out:

The “rule of thumb ideal” is 15, he said: “It tends to correlate with a mortgage payment that is roughly affordable for most households, and a rental rate that is also roughly affordable for most renters.” That's basically saying that there is a linear relationship as I said. (yes, short term prices can move independently from long term because liquidity, menu prices, etc, it's why economists always say "in the long run")

and the article asks "How long can it last?", i.e. they are admitting that the prices will come back into alignment, which wouldn't happen if there was no alignment to be had.

The article does not mention "naive expectation" at all, you made that part up. Would it surprise you to meet somebody on HN who knows more about the math of finance than you and the SF Chron put together?

> your article says what I said, not what you are saying.

No, it says what I said: they don’t, in practice, move together, though ideally they should.

Here’s an article with a national chart since 2000 against a year 2000=100 baseline, again note that they do not, in fact, move together, though they usually (but not always) move in the same direction:

https://seekingalpha.com/article/4583749-house-prices-vs-ren...

> (“yes, short term prices can move independently from long term because liquidity, menu prices, etc, it’s why economists always say “in the long run”)

Yes, that’s what economists say when they need an excuse for making statements that are non-actionable and not predictive of real behavior on any meaningful timescale. “But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.” John Maynard Keynes, The Tract on Monetary Reform (1923)

> Would it surprise you to meet somebody on HN who knows more about the math of finance than you and the SF Chron put together?

It would not. Neither would it surprise me to find someone who claims that while getting basic facts wrong and failing reading comprehension. HN is quite diverse in that way.

I pointed out where your article said what I said, and you didn't refute it, and now you are linking seekingalpha (which is a completely unreliable amateur opinion site, but) where it again reinforces my position, they call discrepancies in rent-vs-buy prices an "incredible disequilibrium", i.e. a condition that is not stable, i.e. one that will correct completely compatible with what I said.

You have gas stations sprinkled around your town: are their price variations more correlated, or uncorrelated? Stop being silly.

I'm trying to educate people about a meaningful economic phenomenon that affects their pocketbook and you're trying to win a silly point on a minor technicality that's not of use to anybody. Quoting Keynes as being anti-economics is a joke. People don't buy houses because they think it's short-run cheaper, they believe it is short-run more expensive, but in the long-run cheaper. You think they are making a mistake differentiating between the short and long run, and Keynes has your back? No you don't, so just stop. Your reading comprehension of the material you are digging up is laughable.

I agree that you are paying the $5000 rent whether or not you own the house - but with ownership you have also levered your downpayment through the mortgage no? Is it better to use your downpayment to get that leverage or to invest in the stock market with no leverage (assuming some fixed positive return on each asset)? How much higher do stock market returns have to be over real estate for stocks to come out ahead? Has someone modeled this out or written about it? I've been wondering about this for a while and considered trying to model it myself but I don't understand all the other factors so not confident I could do it correctly.

You probably own a house or would want one if you could purchase it, disclosing your personal stand tells a lot more than boilerplate advice.

Rent's are affordable but are a waste since you have a lot of restrictions and can be kicked out anytime. Housing is long term in general.

In most places the numbers worked out few years ago, with low interest rates so people kept buying.

Now that money is no longer free flowing folks are realizing what sort of sham they were participating in and both parties are feeling stuck with what they have.

As long as prices go up, no one if going to heed advice as rents jump all the time but mortgage remains almost the same and most folks can't see beyond it no matter how much education they get.

So the goal is after 30 years of ownership to sell for more than you paid over the life of the mortgage so that your total cost amortizes to at least zero or a negative number (you made money).

Wonder why so many Irish flee for the States in modern times?

Go to Ireland, then complain about rent and home ownership.

Care to expound on that?

In the future, only investment firms will own homes and everybody will be renting their whole life. At the end of their lives, they will have no inheritance to pass on to their children.

You will own nothing.

Yep, corporate feudalism. But feudalism tends to end in (violent) land reform.

not feudalism, because these corporations can be well regulated and renters rights protected by law.

Not if the corporations write the laws.

"not feudalism, because these lords are men of God", etc.

lords claiming some rights supposedly ordained by god is quite different from a democracy that enacts laws that protect the rights of its citizens, especially the weaker ones. just because that doesn't happen in the US doesn't mean it can't happen, because it actually does in most of europe and other countries too.

They really aren't that different. Laws are twisted and changed and ignored by powerful people, whether those laws are divine or constitutional.

Feudalism didn't end in violent land reform, it largely ended after a pandemic that killed off a significant number of the workforce and it became a sellers market for the serfs. Turns out we just crippled the world economy for decades avoiding the sequel.

There is more to human history than Western European history. Feudalism has emerged and failed in many places.

https://en.wikipedia.org/wiki/Land_reforms_by_country

renting from a big company is way preferable to having a landlord who is renting you their only property and is picky about every little thing you do to their house.

the big business only cares about getting their rent in time. if there is something damaged, the maintenance department takes care of it. at least in germany responsibilities and rights are regulated by law, and the businesses know what they can and can't do. a small landlord takes every issue personal, and you have to negotiate.

i don't live in the same city as my parents, and i'd have no use for any property i would inherit from them.

so yeah, your future is my preferred reality.

> if there is something damaged, the maintenance department takes care of it.

I saw some of these properties (Progress Residential) and the properties were not maintained in the slightest. These were move in ready propeties that haven't had an ounce of cleaning or maintenance.

They'll take your rent, ignore your maintenance beyond the required minimum and evict you if you don't pay.

i was talking about germany, you are talking about the US. the US has weak protection for renters, and that's why something like this is allowed to happen. the "required minimum" is quite different in germany, so this is very unlikely to happen in there, because renters would have the right to reduce the rent they pay until such issues are resolved. as i said, laws to protect renters are a necessary part to avoid this.

Well, most of us are talking about the US because the article is about US renters, not German ones. And the reality of renting in the US would treat your opinion fairly unkindly if you were to apply it here.

obviously. what i am trying to show is that it can be different, and that the problem is not renting or big companies, but lack of legal protection for renters. fix that, and many problems will go away.

A lot of the news I see related to Canadas property issues is related to pension funds owning a large amount of property so using their size to constantly rotate tenants then increasing prices for new tenants.

rotate tenants? looks like another case for weak renter protection. in germany you can't terminate a renters contract unless you evict them. time limited rent contracts are only allowed if the property is not available for rent after the time limit ends.

My (also anecdotal) experience has been the complete opposite. Any time I've rented from a large company (or have spoken about this to people who do) I have dealt with frequent rent increases, lack of responsiveness to issues, and many other problems.

> if there is something damaged, the maintenance department takes care of it.

In 3 weeks. At 11:15 AM. On a workday that you have an important meeting at 11:30 AM and cannot miss. Oh, you need a different date? Well, how about in 2 months at 11pm on a Sunday? Of course, we won't be able to actually do any of the work that late because of noise issues, so you'll need to schedule a follow-up maintenance appointment. (I'm only roughly paraphrasing what happened to a friend when their dishwasher broke.)

On the other hand, renting from a private landlord who's renting out their old home or similar has been much more fruitful for me. Perhaps it's because I spent the time to vet the landlord a little bit as well.

There are good management companies, and there are bad ones. There are good private landlords, and there are bad ones. Companies, and more specifically the people at those companies, also take things personally.

USA brand tax objects must deploy hypersonic nuclear drone bombers to ruthlessly enforce absolute maximum economic compliance immediately!!!

“Whether you think you can, or you think you can't – you're right."

Henry Ford's words ring true. Sure, there are some that can't afford to buy-- always have been-- but many can.

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