My thoughts on renting versus buying | Hacker News Reader

My thoughts on renting versus buying

milesbarr.me

116 pointsmilesbarr312 comments

> The Flexibility of Renting Is Undervalued

And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.

As a renter who has recently been given notice that I must vacate my apartment in 90 days, you'd think I'd agree with you.

However, I think this depends highly on the personality of the renter/owner, and that is the point this article misses.

If someone is, like myself, comfortable with risks, I'm ok with changing neighbors, locations, and I've lived on 3 different continents and 9 cities?

If you're someone who craves stability, then this isn't for you, and you're proably better off buying a house.

Values stability.

You crave an addictive substance. By choosing the word “crave”, it sounds like you are pathologizing the choice to buy a home, perhaps from a need to validate your personal life choice to rent in spite of facing a forced vacation of your residence. Or perhaps you have financial interests in real estate companies that manage apartments.

I think that's somewhat appropriate. I live in Australia where buying a home does seem more of a pathology than a smart economic choice.

Homes are not low-risk or stable at all - you transfer the risk to your job.

If you lose your employment and you have a home, that's a much riskier situation than if you're renting. Because, if you cant find a job in time or in a very small location radius, you must sell.

The mobility of renting lowers the risk associated with extraordinary life events which requires relocation.

If you live in a non-rent-stabilized apartment in a market where annual rent increases are the norm, then by renting you condemn yourself to permanent downward mobility unless your income increases by more than your rent every year.

8-10% annual rent increases are not unusual at all in NYC/LA/SF - maybe you can get a 10% raise every year, but I'd wager even most HN posters can't.

For this reason alone, it makes sense to grind to homeownership as quickly as possible if you live in a top tier market. Those locations also de-risk homeownership a bit since they have the largest job markets and highest real estate demand.

If you live anywhere else in the US then I agree, renting starts to look a lot more attractive.

Not this simple: for early career software engineers, 10% pay raise per year is pretty low. I would expect 20% per year if you move companies.

Can't really move companies easily if you're owning a home, ergo, about 10% potential loss per year over renting, not including the difference in investments you could achieve by having more liquid income w renting vs buying.

Buying DOES make sense. I think it almost never makes sense if you're early in your career. The ceiling is just too high to give up potential earnings that early. The closer you get to the ceiling though, the more sense buying a home makes.

> the stability of buying

It depends.

Personally, after witnessing both sides of the coin second-hand, I am not leaning in the direction of either buying or renting in absolute. It is highly dependent on the context and circumstances of a specific situation/market.

I am aware that this is just an anecdote (i.e., it isn't going to say much about the overall state of things across all states in the US), but there is a specific example I'd witnessed myself, which led me to believe that this is a bit more complicated than just "renting is the move" and "buying is the move."

TLDR: one of my former coworkers bought a condo in Queen Anne neighborhood of Seattle (which is a highly desirable and expensive neighborhood in that metro area). Within the first year of his ownership, the pipes behind his laundry machine burst due to no fault of his own (while he was at work), and it ended up flooding the apartment of the neighbor below. It decimated the flooring of both his own unit and the unit of the neighbor below. He ended up was facing the costs of unfucking his own condo AND the unit below.

I don't remember the numbers off the top of my head at all (as the whole thing happened around 2018-2019, and I wasn't really involved in any direct way at all), but I remember that he did the math and (based upon the numbers, reasonably) ended up selling his condo as soon as he'd finished fixing his own unit + paying for the fixes to the unit below.

Meanwhile, I am currently renting, and if the pipes in my unit burst and end up flooding the neighbors below, it would be mostly the problem of the property management company running my building to deal with, not mine. This alone make me feel way more stable than if I'd owned the unit I live in atm.

Buying a condo is half buying and half renting.

A condo somehow combines the worst aspects of buying and renting.

That would be an HOA moreso than the features of a condo, although a condo tends to imply an HOA in the US. The irony of my experiences with an HOA is that its actions tended to suppress my property value rather than preserve or grow it.

I don't know how a condo building could operate without some kind of shared ownership structure for the common areas and shared infrastructure. What are the alternatives to an HOA in a condo building?

actual laws about such things, I presume.

hoas only make sense to me in condo situations - but even then you’re at the mercy of others

As a non american I have no idea what a "condo" is. Is it like an apartment? Or a big house?

Condo means an apartment that you own (vs rent).

Interesting.. I would never think Condo described the financial relation you had with the house but not some intrinsic quality of the house itself.

Technically it doesn’t (as it means condominium which in theory could be single family homes) but practically it almost always means an “apartment you own” though sometimes “half a duplex” or similar proportions of a quad or six plex style.

But in the US it usually implies neighbors above and below and on the sides.

I'm more curious now: what sort of apartment does not have neighbours nearby?

It’s the above and below; most people in the USA will think “condominium tower” when you say condo, but some (rarer) are much more like duplexes or single family homes.

As an approximation, condo fees make explicit a number of recurring costs that are only implicit when you own. E.g. heating/cooling, maintenance, landscaping, accumulating an emergency fund, etc. Thus, if a condo is half-renting, so is buying a house.

My condo owning friend got a special assessment of $40k to replace the siding.

There are A LOT of costs which are not explicit when owning a condo.

Some condo corporations are poorly managed and lack sufficient emergency funds, or proper maintenance, and thus resort to special assessments that are not funded in advance. The same is true of many homeowners.

As a homeowner, that is 100% in your control whereas with a condo it isn’t. I have seen so many times in the local news about condos who are underwater because the board decided to not proactively save and fix things which was a democratic decision made by the board.

Honestly I have such low trust in the ability for humans to plan for the future over the now. It is like a bug in our psychology.

>As a homeowner, that is 100% in your control whereas with a condo it isn’t.

As a homeowner I have definitely had some 5 figure costs over the years that were totally unexpected and several in the low 5 figure range that really needed to be done. Doesn't mean I couldn't cover them in some way shape or form but they happened.

Nothing keeps the condo owner from realizing how underfunded the association is and saving that amount each month for the inevitable emergency.

Most home owners don’t do this either, but it’s pretty much the same thing short of an association leaving stuff so long it ends up being more expensive overall.

Stuff like siding isn’t really all that hard to predict - it typically has a useful life and easy to calculate like a roof. Might get lucky or unlucky but it all averages out in the end over time. If you’re not saving/spending about 2% of your property value each year for maintenance you are almost always running on hopes and prayers.

Granted, the outlier cases a condo owner has far less control over the situation- including neglect to the point of building collapse.

Any good realtor will look into the maintenance history of the building and let you know if a special assessment is likely soon, and any good condo board will be transparent with you about this as well.

If you're renting, getting the landlord to deal with an acute issue is pretty clear cut. They usually get it done. It's the slow burn neglect shit that's almost impossible to get fixed.

Anecdote of my own: The last place we rented before buying had a minor roof leak. Minor, but still a roof leak. The landlord was old, her daughter was responsible for a lot of stuff, and they were both remote for at least part of the year. It took 3 years for them to finally get the roof replaced, evidently about a year after we left.

And these were good landlords. They took care of a bunch of minor disasters in good time: dishwasher, washing machine, thermostats for the baseboard electric heat, stack vent got clobbered by ice coming off the roof? All dealt with promptly. But the roof, important though it was, wasn't a big enough problem to merit quick attention. The place was a log home, and by appearances, hadn't been subjected to any kind of refinishing for a good while too.

> It's the slow burn neglect shit that's almost impossible to get fixed.

There are definitely tons of pros that come from renting from small/individual landlords (e.g., potentially tiny/non-existent monthly rental cost increases over the years; I have an acquaintance who managed to keep the same lease price [which was already extremely low for the neighborhood] for about 3 years now in LES neighborhood of Manhattan).

However, what you described is precisely one of my biggest personal concerns, hence why I tend to stick with larger/property-management-company-run properties+buildings that are, in general, newer. I discovered that it is much easier to get property management companies to get things like that done. In fact, after some of my current neighbors complained enough about elevator outages over the past month (for context: the building is 30 floors tall and has 3 elevators, but we recently had multiple weeks where only one elevator was functional, which led to large elevator lines and slow service), everyone automatically got a $500 credit applied to their next rent payment.

In our condominium building (42 floors) the rule is that every apartment owner is responsible for any damages to their apartment, even if they are caused by an apartment in an upper floor. This is because otherwise the owners of the upper floors would have to have million-dollar insurance premiums to cover the possibility of a leak in their apartment causing damages to multiple floors below. We had an event where a burst pipe in the 28th floor caused damages all the way down to the 8th floor.

This seems like something where it would make sense for the condo to self-insure with mandatory premiums for everyone, so then everyone pays an equal amount for leaks rather than only those who get unlucky.

I don't know many homeowners who formed "local communities" with their neighbors. I know a few, but not many. And I know renters who know all their neighbors well. Seems more like a personality trait than something enabled by owning where you live.

100% this - it is exception, small exception that communities can be formed with neighbours. take home-owners associations into the equation and there is higher likelyhood you’ll punch someone than have a beer with them

0% this - neighborhoods with single family homes are more likely to have families, and kids often create friendships that carry over to parent friendships. And if anybody in the neighborhood takes the initiative to plan block parties, dinner parties, etc., that really helps a community take root.

This just doesn't happen as often with apartments, where people are more transient and more likely to be single and/or childless.

Only in places with non family friendly apartments.

80% of Eastern Europe, for example, would disagree with you.

I am strictly talking about USA and I believe this entire thread is. I am originally from Eastern Europe, grew up in a 12-story building and can still recipe names of pretty much everyone that lived in the building when I left in 1992. Not only in that building but also a 10-story adjecent building :)

This really just depends on the city. These kinds of generalizations just don’t hold for different cities with different cultures of community. I, for one, spent my entire childhood living in apartments, as did everyone I knew (and probably almost everyone does in large cities) and now am raising my own family in an apartment in a neighborhood with lots of other families. This kind of living is the norm in many places.

Having kids (and being in a neighborhood with kids) also helps a lot.

I don’t know. The effect of many families with young children all going and buying a house at roughly the same time is absolutely a thing. My street was filled with children when I was young (newly built neighborhood), and the same thing is true again now that I’ve bought a house. The street is filled with parents and children at roughly the same place in life. It’s nice when the only thing you need to do to find playmates is make noise in the street.

I'm confused... How do young families coordinate where and when to buy a house with their cohort?

Subdivisions of starter homes (defined both by size and price) tend to attract young families

I think it’s more that that cohort is very likely to be looking at houses at the same time, and value the same kinds of things, so naturally they end up in the same place.

Our place is ‘far’ (10m walk, this is Tokyo) from the nearest supermarket, a bit small, but it’s also connected to a tiny street that allows kids to play safely, 20s walk to the kindergarden, 5m walk to elementary school, and there’s parks around everywhere. Apparently those are things that a lot of young parents value ;)

My building has a building association and we have meetings and also group events. When we were robbed our neighbours were there to help us. I definitely feel part of my community in my building. I think partly it is Dutch culture. I didn’t feel welcome at all by my neighbours in Norway in any of the neighbourhoods I lived in. I don’t think it’s just a personality thing.

Much of this is location dependent. I’ve rented (and owned) in neighborhoods with really strong communities where everybody knew each other; and I’ve rented in neighborhoods where no one knew each other and people got suspicious if you tried to talk to them.

Absolutely agree with this!

We need, as a society, to bring back generational communities.

Our workplaces are not our families!

I'll also add, that once you have children, owning your home is a very welcome level of stability.

Nothing worse than looking for a new rental and potentially being forced to upend all your routines and find new schools for the kids as you cant rent in the same area anymore!

I know three families that owned and had to move cause they could not afford to live in the house they own (gerrimandering- related…)

owning does not shield you from shit like that, maybe in rural america but definitely not in/around the cities

Almost everyone I know has a significant portion of their wealth in home equity. The renters I know tend to have much lower wealth. This is reflected broadly in the US wealth distribution.

You brought up a good point though, and that’s the trap of being house poor. Too many owners fail to look / have not been taught to factor local property taxes and maintenance costs into their homes. My network definitely has people caught unaware by escrow shortages, siding costs, roof costs, HVAC stack costs.

Despite it all, US homeowners seem to edge out renters, but it doesn’t have to be causative, either.

https://www.aspeninstitute.org/wp-content/uploads/2024/11/AS...

It is way better to be house poor than to be a renter, because at least the house is generally an appreciating asset

this is a fantasy people have bought in the last X years because government has done everything imaginable to get people to own homes.

It would help if they didn’t buy a home that required them to sustain the same level of income indefinitely? I certainly didn’t buy the largest I could afford.

> I know three families that owned and had to move cause they could not afford to live in the house they own (gerrimandering- related…)

And this is why, despite some negatives, Prop 13 (California) is so valuable. People don't get priced out of their own homes.

> once you have children, owning your home is a very welcome level of stability

I think this is the biggest factor if it applies. If we want to be utilitarian about it, the benefit to your kids of having the same school to attend, same neighbors to play with, same room to call their own and paint the walls as they desire, etc. just dwarfs everything else. Kids just do well in stable, predictable home environments.

I live in a traditional middle class neighborhood and half the houses are rentals for college kids and people who can't buy. I'm not sure who to agree with here.

I owned for the last 25 years (3 houses, 8, 8 and 9 years) and am very social person. I do not have a single neighbour friend in all these years. what you are describing is (in vast majority of cases especially in urban areas) just wishful thinking.

yes, because he forgot about the car. The reason we don’t befriend our neighbors is because as soon as we leave our home, we put ourselves in a metal cage, ensuring no one will talk to us if we don’t want them to.

Befriending your neighbors kind of works in a city but only REALLY works in Amish communities.

Disagree that it's wishful thinking. Making friends with your neighbors requires a commitment to community - it has less to do with being a social person and more to do with recognizing the mutual benefits.

Making friends with your neighbors requires a commitment to community

I can make all the commitment I want to date Beyonce but at the end of the day it takes two to dance :)

This was also our experience while owning three homes in single-family neighborhoods over a 35-year period. We knew our neighbors enough to say "hello", but that was it, and we never associated with them. However, 13 years ago we bought an apartment in a large high-rise condominium building. To our surprise - because that was not a consideration when we moved - we have made many good friends among our neighbors. We go out to dinner together, we invite each other to our homes and to family celebrations. The downside is an aspect of communal living. For example, we needed a new carpet in the building's lobby, so all the owners voted on the color. The majority chose green and we hate green, but we have to live with it.

Counterpoint in Seattle - We talk to our neighbors regularly and are good friends with a few. Having kids helps.

No doubt there are many counter-points. My Godfather lives 4 miles from me and lives in a community where 3-4 of his neighbours have his house keys, take care of each other’s kids, dogs when out of town… I just don’t think - in general - that there is a statistically significant correlation between home ownership and living in a community like OP and you are describing

I don’t think renting or buying makes a difference in communities. I had a much better relationship with my neighbors when I rented vs now where I own my own home.

I chalk up the difference to the fact that a lot of people my age couldn’t afford to live where I moved so my neighborhood is full of wealthier older people who I have nothing in common with.

I'd argue it's not undervalued, lots of people are aware of this benefit and that's why so many people want to own their own home despite renting being the better financial option on paper. It's strange the article doesn't mention it though.

Befriending is a weak argument, unless there’s something I am missing. Growing up my family kind of befriended one neighbor, and we just know what they’re up to and who bought and demolished their home.

So like… Is that really that important?

It seems like the position in this article pops up frequently among the FIRE crowd... anyone know why this is? It does seem to square with the objective function of maximize financial outcome as much as possible (perhaps ignoring other goals).

Because it's an easy "hot take" to post for people hungry to change their lives?

Arguing the actual optimal approach would require crunching numbers, which would take time by authors and readers, ergo the surfeit of "Here's why you crunching the numbers doesn't matter" popular content.

Also, just to call out one of the many gaps in this particular post: buying a home is a double hedge against inflation.

Given that (1) your debt is denominated in buy-date currency, while your real property value will be inflation-adjusted & (2) in the US at least, buying a home is the easiest way to borrow to invest with, given low mortgage rates (compared to other loans) + <100% down + fixed-rate 30 year mortgages with refinance at buyer's discretion.

Yep, owning gives you a lot more control over your living situation. I do think the financial case is really overrated, especially if you get hit with some expensive repairs, but that's not what I like about owning a house. A lot of people, including myself, have had some really nasty scrambles when a lease didn't get renewed like they were expecting and suddenly had to move in a hurry. That can really suck, especially if it happens at a bad time like with a new kid or sick relative.

Owning also lets you invest in your space a lot more, and I'm not really talking about fancy remodels that cost tens of thousands. More like smaller projects like adding a nice catio, buying workout equipment that fits your space, or setting up a nice home office in a dedicated room. My partner and I held off on all sorts of purchases and projects like that while we were renting because each would have been a huge hassle to move, and might not have fit in the next place we lived. The costs are manageable for a long term improvement, but I wouldn't want to toss one out in a year. Now that we own a house we have have gone ahead with a lot of those additions and they make our living situation much more pleasant.

I've seen these critiques for years.

and while its not necessarily wrong, I believe it under weights a few points:

- Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment.

- Leverage: I can't get a $700k loan to put into equities but I can for a home.

- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.

- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit

- Stability: No one can evict me into a hot rental market to suit their needs.

I wish more people talked about these points, selfishly so I didnt take so many of these articles at face value because in hindsight I wouldve bought earlier.

You're not taking into account that housing prices can fall, not just stay flat and there are always things to fix and deal with in a house that you own.

Renting it out is also not always gauranteed or easy if you are not nearby or don't want to deal with being a landlord, so imho that flexibility is not really there in many cases.

> No one can evict me into a hot rental market to suit their needs.

The bank can, if you take out too many loans against your house that you can’t pay back. When you barrow against your house you’re increasing your risk.

“Rational people don’t risk what they have and need for what they don’t have and don’t need.” - Warren Buffett

My house is paid off now and I can’t think of anything that would make me barrow against it. Setting aside variable maintenance costs, with only having to worry about property taxes now, I could work at Costco and make ends meet now. That gives me some peace of mind against an uncertain job market. A loan against the house would change that equation wildly.

It’s true over leveraging seems to be the American way, but GP was saying, I think, that homeownership does not have the risk of a landlord ending an otherwise mutually accepted relationship.

If this is still accurate, a third of renters could theoretically be told the rent is doubling or learning the lease is ending. Depending on the health of the market, that can be a major risk, and not everyone can or wants the flexibility of a rental at all times.

https://www.bls.gov/spotlight/2022/housing-leases-in-the-u-s...

Minor: borrow, not barrow.

>- Fixing your housing costs against inflation:

Any sort of serious buy vs rent calculator already takes this into account, for instance the one on nytimes

>- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.

That feels absolutely insane to me, especially when you consider that by the time you built up significant amounts of equity you'll have significant commitments (eg. college age kids) and/or be close to retirement. Going 3x on S&P500 might be justified when you're a new grad, but not beyond your 30s.

>- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit

How is this more flexible than the counterfactual of renting?

> How is this more flexible than the counterfactual of renting?

I read that as "similarly flexible" not "more flexible".

> That feels absolutely insane to me, especially when you consider that by the time you built up significant amounts of equity you'll have significant commitments (eg. college age kids) and/or be close to retirement. Going 3x on S&P500 might be justified when you're a new grad, but not beyond your 30s.

I don’t know about the US situation, and while I generally agree with you, home loans (in Canada) are nice for a couple reasons 1) the rate is better than you’ll get anywhere else, so you can significantly cut down on an emergency fund to stay invested (or even savings in general - e.g. you can keep invested in the market to drive your old car until it dies, get a dealer’s best price with their kickback from a bank on a new car, pay off the bank loan with a low-interest HELOC, then pay off the HELOC over the next several months) and 2) the interest on home equity lines of credit is tax deductible if used in various circumstances when you’ve already exhausted your other tax-advantaged options. (Conversely, mortgage interest is not tax deductible here.)

> Leverage: I can't get a $700k loan to put into equities but I can for a home.

Exactly, and most people wouldn't even be able to get half of that for investing in a business that turns a profit and employs local people. So that's why all money is rushing into real estate and the industrial world is dying now. And death is forever.

> Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.

Paying perpetual interest on a non-productive asset doesn't sound like a good idea, to me.

The house is just the security, the thing you got the loan for is the asset (hopefully).

As opposed to paying perpetual rent to someone else and never owning anything?

Also: Taxation and government subsidies.

Many countries tax systems give home owners preferential tax treatment for the primary home. I'll give an example from Australia:

The Australian age pension is means tested - there's a test of both income and assets. If your income and/or assets are too high, you get no age pension. But homeowners benefit from special treatment: A retired couple who own a home are eligible for the full aged pension if their assets excluding the value of their home are worth at most AUD 481.5k. A retired couple who are not homeowners are eligible for the full aged pension if their assets are worth at most AUD 749.5k.

For the purposes of getting a public funded aged pension or not, the value of the home is deemed to be about AUD 270k regardless of its actual market value -- contrast that with the median price of a home in Sydney being about AUD 1.6m!

Back of the envelope comparison:

Retired couple with paid off house worth $1.6m in Sydney, budget of $5k / yr for council rates and insurance + $16k/yr (1% of $1.6m median home value, say) as budget for home maintenance. Suppose our couple also have $481.5k in financial assets outside of the home generating a 4% real return, the max amount they can have as homeowners for the full age pension. Gross income from financial assets and full aged pension is $60,470. Housing costs are 35% of gross income, leaving 65% of gross income -- $39,470 to pay non housing living expenses.

Compare with a retired couple in Sydney who have the same net worth -- $2081.5k -- except all in financial assets, not home owners. Suppose they rent a 2 bed apartment in Sydney at $900 / week. They are not eligible for any age pension as their non-home financial assets exceed the means-tested assets cap of $1.37m for a part pension for a couple who don't own a home. Their gross income from financial assets, assuming a 4% real return, is $83.26k. Their housing costs from renting are $46.8k / yr, leaving them with $36,460 to pay non housing living expenses.

So, of the two couples with identical net worths, the couple with most of their wealth concentrated in the $1.6m sydney house has about 8% extra cash to spend on non housing living expenses, and gets to enjoy the benefit of living in a house vs a 2 bed apartment, and also enjoys the additional stability in their retirement years with no way a landlord can suddenly force them to move.

The calculation above ignores income tax. But - if we assume both couples have their financial assets parked in tax advantaged retirement accounts (Australia's superannuation system), then their retirement income streams from these financial assets is tax free, and although the age pension is taxable income, the couple receiving the age pension wouldn't expect to pay any income tax, due to the tiered progressive tax rates and additional tax offsets for seniors and pensioners.

Yep, and in the US add the mortgage interest deduction, which is a regressive tax cut for people who can afford homes :-)

> If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip.

This is so often missed by those who compare rent today vs. mortgage today. Of course the mortgage will be higher. Today.

Look into the future. Rent will only ever go up. Mortgage will only ever go down, both in absolute terms (due to opportunistic refinancing), and due to inflation, and proportionally due to your earnings increasing over your career. These three factors will erode a mortgage into nothing.

When I first bought my 3br house, my mortgage could've rented a 5br luxury house with a pool, so yes it was painful for a few years. A couple decades later now, my mortgage is about a fourth of the cost of renting a small studio apartment.

As you age, do you want to face ever-increasing housing costs, or decreasing costs?

> Mortgage will only ever go down, both in absolute terms (due to opportunistic refinancing)

If you bought a home during ZIRP, this doesn't apply. Even now, you're looking at cutting your rate by what, 2-3% max? And if rates drop by that much, the economy is probably bad. Hope you're still employed.

> and due to inflation, and proportionally due to your earnings increasing over your career. These three factors will erode a mortgage into nothing.

You must live in California and benefit from Prop 13, congrats. In the rest of the country property tax makes up a significant part of housing cost that only gets larger as your mortgage decreases. Property tax also increases over time in proportion to housing cost inflation and the local government's fiscal policy. Any improvements to your home increase your assessment as well. (Not sure if you have noticed but the quality of governance in the US is...not great, and many markets can expect double digit percentage increases in property tax over the next decade.)

Now you might say "yeah but this applies if you rent as well." Not as significantly for a few reasons:

- Smaller landlords will often eat the tax increase given the cost and risk inherent in switching tenants. Any rent increase incurs the risk of needing to find a new tenant.

- Larger landlords have access to sophisticated tax advice that you won't have as an individual homeowner. They also probably have a real estate law firm on retainer to contest changes in assessed value.

- When your locality jacks up property tax by 20% because they can't fund gold-plated public employee pensions for boomers, if you rent it's a lot easier to just move.

> If you bought a home during ZIRP, this doesn't apply.

No, but if you're holding a 2% or slightly less mortgage, that's a nice place to be.

But of course it's not only the mortgage interest. Over the years your income goes up also, and inflation eats away at the real cost of that mortgage even if the monthly bill is exactly the same for 30 years.

> Smaller landlords will often eat the tax increase given the cost and risk inherent in switching tenants.

This can be true sometimes but not in the long run. Unless you're exceptionally lucky, you're not going to find a lifelong rental where the owner perpetually takes a loss.

First of all, I fundamentally disagree on the notion that buying a home should be considered an investment (I would go as far as to argue that this attitude is part of the reason the real estate markets are so broken in many places of the world). I don't want to be rich and I don't need to be - I just want a place where my kids some day can grow up, where I can enjoy the sun in the garden and invite family and friends over to spend a nice evening. I do not care about the financial aspect of it beyond "can I afford this without overstretching and putting my family into financial danger".

From a purely financial perspective, I think you could say: the more protections you as a renter receive, the more renting makes sense.

Living in Germany, I do have quite a few protections as a renter. My landlord can't arbitrarily hike prices, etc. In my current city, it would be absolutely impossible to get a mortgage anywhere close to my current monthly rent (even with substantial equity)

When I bought me house what I eventually decided is you can't use ordinary financial metrics for owner occupied housing. The reason is buying a house on credit is essentially the only investment you can make with the money you have available for housing.

My opinion is the issue with renting and housing in general is the world wide financialization of real estate. It's being treated as a primary investment instead of the secondary investment it is. Some fraction of people are getting exceedingly wealthy but there are deep negative effects.

My bet is the crashing fertility rates are likely what's going to put a stop to it. Notable every 15-20 years we have a bigger than the previous financial crisis. Once populations start to decline the bottom will fall out.

>> My bet is the crashing fertility rates are likely what's going to put a stop to it.

Crushing fertility rates will not drive real estate prices down. It will create ghost cities, but business centers or any other desirable to live place will have high prices, maybe even higher as people are going to escape from dying towns.

> Living in Germany, I do have quite a few protections as a renter. My landlord can't arbitrarily hike prices, etc.

A few years ago, I became quite interested in buying an apartment in Germany for rental income. My German friends thought it was a terrible idea. After reading more about it, I realized it would have been a huge mistake!

> I just want a place where my kids some day can grow up, where I can enjoy the sun in the garden and invite family and friends over to spend a nice evening.

This quote makes real estate "investors", banks and the government tax revenue service drool over how hard you would work to guarantee your children's future. You're up against soulless, calculating cowards who are more than willing to live themselves in misery for the chance to suck your blood.

Buying in Germany seems widely considered as a bad idea, both for renting and for living in. It's more of a lifestyle decision, if it really makes you happy.

> Buying in Germany seems widely considered as a bad idea

This is nonsense. If anything, it is too convenient, because you pay taxes on gains from everything, but you don’t pay them if you sell your property after 10 years or if you use it yourself for the last 2 years. If you have the money, buy, wait 10 years and cash out - you will not find a better deal in a tax-heavy country such as germany. And, as everywhere, your rent will increase, but your mortgage will decrease over years. Now, guess who will likely be better off in 20 years…

> People obsess over granite countertops, open floor plans, stainless steel appliances, and walk in closets. These might make you happy but they don’t make you rich.

Money is a means to an end, and being happy is a fine end. I only live once and if I can be happy, well then I've pretty much won. Also you're not going to "get rich" by renting, if (and it's a huge if) you can somehow make renting work in your financial favor compared to buying, it's going to be a tiny bit better. You're not going to 10X your income renting.

He also completely discounts the cost of moving constantly (aka "flexibility"), movers, deposits, furnishings... it's not cheap. Yeah you can move yourself (add in the cost of vehicle to make that happen) but it's going to take time, and time is money.

This is not a well thought out article.

That’s absolutely not true. In NYC, I can get rich by investing the difference between a mortgage and my rent, and there’s literally no period over which it makes financial sense to buy. People still buy if coursed but it’s not because it makes them rich (at least in this market with this interest rate).

> I can get rich by investing the difference between a mortgage and my rent

After just a few years into ownership, mortgage becomes cheaper than renting so it is the homeowner who will have extra cash to invest for the rest of their life, not the renter.

Not in New York.

Rents in New York are notoriously high.

That's because real estate is notoriously high.

Also, if you're buying in NYC you WILL get recurring and increasing monthly costs.

That $800/month HOA? Yeah, it's not gonna be $800 in 5 years.

Buying is not the same everywhere.

Yes and they’re still much lower than buying an equivalent place. I’ve looked. Almost twice as much for a mortgage of a similar space for what I rent right now after putting 20% down. Only reason it makes sense to buy is if you really plan to keep the place for decades.

> Yes and they’re still much lower than buying an equivalent place.

Of course renting will be cheaper than buying an equivalent place. Most of the time in most places that's the case.

My point was this is true in the year of purchase and for a few years later. Over time (and you'll need to live somewhere your whole life) it will become cheaper. And then a lot cheaper. Rent will only ever go up.

To each their own: https://www.militaryonesource.mil/moving-pcs/housing/renting...

Counterpoint: buying is always better, people just can't afford it.

Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage.

But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your retirement. If you rent you're left with nothing.

Then why is not everyone buying? Because few people can afford the 20% downpayement needed for mortgage. In reality it's even more because you have to furnish and/or renovate the place.

Renting has it's charm for youngsters, but once you get older and you start acummulating things the lack of stability and the danger of your landlord having a change of heart and breaking the contract (either because he decided to sell it or give it to a child) becomes a pain in the ass. Even having a pet is troublesome and many property owners will refuse to rent if you have a dog or a cat.

> If you rent you're left with nothing.

Well, no. You're left with the cash you would've spent buying a house.

Whether that's financially better or worse, depends entirely on the mortgage interest, taxes, and maintenance costs of the house, as well as the money you could have earned investing the cash elsewhere, compared to the rent you would have spent over the same time period.

that's true only if you were homeless

When renting a 1br costs as much as my mortgage on a 3br, I don't think that really tracks.

Depends where you live though. In the SF Bay Area, buying requires a monthly payment several times larger than the rent for an equivalent place.

The Bay Area market is a bizarre one because of how Prop 13 and extremely thorough renter protections lead to perverse incentives for everyone.

Denver is like it too, what's your prescription there?

"If I set up a scenario largely in favour of buying, then buying makes more sense"

I have never seen a 1br costing anywhere near as much to rent as a 3br costs to buy. In what markets is this even remotely close to accurate? Or are you just ignoring the cost of ownership entirely?

But a mortage isn't the only cost of owning. Property taxes, maintenance, possibly utilities.

Sure, but this is not universal.

I could have bought 15 years before I did. But because rent was less than half a mortgage (not even including maintenance), I was able to put that extra money into the market and save enough for more than a down payment on a forever home vs starter home when I was ready.

It’s certainly not like for like, but it would have been a poor financial decision to buy vs rent.

Where I live now this math is more or less inverted. Makes more sense to buy vs rent.

In the end your primary residence is a lifestyle decision, not a financial one. It’s not an investment in the traditional sense. It’s speculation at best.

I've ran this simulation a number of times through my head:

When I left my parents I could have bought a small, sordid 40sqm for 80k in my home town. Before I left my home town few years later a friend of mine bought an absolutely awesome 70sqm for 200k. Then I moved to the capitol city and I was looking at either somehow decent 70sqm for 550k or absolutely stunning 70sqm 850k. Precovid we were looking at the best apt I've ever seen, 85sqm for 950k. But the offer was shortly taken down. It came back few months later at 1.2M and owners called us back. I should have took it on the spot, but I decided play slow only to learn that the price went up to 1.5M. At that time it seemed too much. Post covid gets me a sordid place in suburbs.

Point is - if I was told when I was a kid that "investing" in real estate is the best thing you could do and mortgage is nothing you should be afraid of I could have 7 to 9 apts by now without streching too much. I'm fully aware of multiverse - if I got that first apt my life would probably went slightly differrent route, but still.

I'd get that first apt when I was earning 5k/mth in 20y mortgage and just in few years I'd be earning 20k/mth.

EDIT: I've rent a number of places and went out to see a countless ones. Here it's pretty standard that when you go out to check a place for rent and speak to landlord it turns out he has ten more. If you don't like this one he may have another one that suits your needs better.

I have a friend of mine with which we spoke about investing in real estate from time to time but he was hesitant - too much hustle, legal uncertainty (we leave in communist EU mind you), etc. But once his mother died and left him an apt he decided to rent it. He felt too attached to sell it and it needed a renovation anyway. So he decided to rent it as it was, just to keep it and not having to think too much about it. Fast forward two years later he has two more apts he's renting.

And his thought process is really simple - I have savings so I can afford to buy these places, random people will pay for the mortgage, I will get some extra cash in the process, and when all is done his daugher will inherit all this apts and be able to live of it.

Rents are pretty much always going to be higher than a mortgage for the equivalent housing. It's why people are landlords. He dances around that in the article by saying that people buy "nicer" places than they rent, but that doesn't have to be true.

Rent only has to exceed the property's operating costs -- things like mortgage interest, property tax, paying a manager, insurance, repairs and maintenance -- for the landlord to come out ahead. Paying off the principal is a capital expense.

Landlords charge market rate, which includes mortgages.

But a mortgage isn’t the cost of owning a house. Rent payments are the cost of renting.

If you want to compare the costs of renting and buying, you need to compare renting=(rent payments + renter’s insurance) vs. owning=(mortgage payments + property taxes + insurance + maintenance and repairs + equity appreciation / depreciation)

Landlords bake those costs into the rent price.

Too hand waivey and doesn’t tell the whole story - even with the carry costs “baked in”, renting is generally cheaper in the short run because those costs are lower anyway.

> Average rents are cheaper than average mortgage payments (homeowners insurance and property taxes included) in all 50 of the largest U.S. metros in 2025, with the cost difference between the two growing in all but 12 of those metros since last year, according to Bankrate’s Rent vs. Buy Study.

> Over the last year, the study found average mortgage payments (including principal, interest, homeowners insurance and property taxes) increased while average rents either declined or remained stable in nearly all the metros we analyzed.

> Housing experts said the fact that it’s cheaper to rent in all 50 metros in 2025 is a broader reflection of rental and housing market conditions across the country.

[1] https://www.bankrate.com/real-estate/rent-vs-buy-affordabili...

That compares average mortgage and average rent, but the average house you buy is going to be much bigger (and include a yard) than the average rental. They’d need to compare equal properties to have a meaningful study.

The average home is also going to be in a very suboptimal location.

If you compare homes and apartments in the same location, the gap grows even wider. Yes, $4,000 a month in Manhattan is expensive.

But $4,000 might be JUST the HOA cost for buying in the same area. Never mind the 10 million dollar mortgage.

(Spoiler: fake numbers, actually do the math for your city)

> Average rents are cheaper than average mortgage payments

The average mortgage is for a family, the average rent is for a broke young worker or student living in a much smaller and worse accommodation.

Renting is always more expensive than a mortgage for the same housing unit, because the landlord needs to make a profit from his tenants.

Cooking the numbers won't change reality. The truth beats all the lies, no matter how many lies.

The median renter is 42 years old.

Even a basic Google search would have saved you needing to post that comment.

[1]https://www.zillow.com/research/renters-housing-trends-repor...

Age doesn't matter. The median renter has smaller and worse housing than the median mortgage payer.

For the same accommodation, renting is always more expensive than owning.

> The median age of a renter is 42 years old and about half (46%) of renters are under the age of 40; only 10% of renters are in their seventies or older, and 15% are in their sixties. In other words, the age distribution of renters trends younger than the overall US population.

Which tells us exactly what the GP brought up: renters are younger than buyers.

No, this really is not always the case when controlling for location. (That is, if you're comparing apartments in the middle of the city to houses in the outskirts, you're obviously comparing apples and oranges.)

If you compare equally sized places, rent is pretty much always higher. At least it has been in every city/town I’ve ever lived in. Renting is not cheap, you’re paying a premium to the landlord.

Not all landlords min/max for peak financial outcome.

My landlord for 15 years raised rent exactly once when property taxes had a large jump one year, and was already under market when I started the first lease.

His mortgage was long paid off and he optimized for least hassle vs max money. Worked out for both of us - I called him maybe once a year at most, and he had a decent passive income stream reliably come in without worrying about 2am phone calls because a $50 thermostat broke. He had a nicely appreciated property to sell in his eventual retirement.

It was a 3BR place with a yard larger than I own now. Granted fit and finish is nowhere comparable, but I pay about 4x in mortgage and taxes than what I was paying him for about 1.5x the space.

Such arrangements are increasingly more rare as everything becomes a finance game, but they can still be sought out and developed.

> Not all landlords min/max for peak financial outcome

An enormous number if rentals are owned by private equity not by individuals, so rental markets are pretty dominated by landlords min/maxing for peak financial outcome

The carrying cost of a landlord is completely different than the carrying cost of a buyer with a mortgage. A landlord can charge a profitable rent on a property that doesn't even pay the mortgage interest if you were to buy it.

This is a common case. I recently sold a house with a mortgage where my carrying costs were far below that of any buyer of the house, meaning I could break-even renting at a rate that would leave a new buyer losing thousands of dollars per month. You'd be an idiot to not rent in that market but there is no shortage of buyers.

Landlords charge market rate. It has little to do with their costs. The

Of course. But as several people have pointed out, the market rate can be far below the equivalent purchase cost and landlords can still make a profit in those markets.

There are many markets where the rental rates are far below mortgage costs for long periods of time.

You’re right, the math is slightly more complicated than rent v. mortgage payment.

Ben Felix, a popular financial YouTuber, made many a video about the math:

https://youtube.com/watch?v=j4H9LL7A-nQ https://youtube.com/watch?v=lBG-g1CKfgs

What? That cash goes to the landlord.

In the same way the interest payments on a mortgage go the the bank. And the interest is often the majority of the payments people make on a mortgage. If you're renting, in a market where rents are about the same or lower than mortgage interest, then you keep the leftover cash that the buyer put into their house and you can put into whatever investment you choose.

> In the same way the interest payments on a mortgage go the the bank

Yeah, but at least you own something at the end of it

> And the interest is often the majority of the payments people make on a mortgage

Only if you're stupid and only ever pay the bare minimum. Of course many people unfortunately are

No you don't own something at the end of it. Interest is the cost of having use of the house. If you sell the house and settle your mortgage, the bank won't give your interest back. It's lost for good.

Paying rent is the same as paying 100% interest. You lose everything you have paid, it counts towards nothing for you.

Paying a mortgage, you pay part amortization and part interest. Even if only 10% of your monthly payment is amortization each month, it's better than paying rent.

> If you're renting, in a market where rents are about the same or lower than mortgage interest, then you keep the leftover cash that the buyer put into their house and you can put into whatever investment you choose.

Such a market doesn't exist anywhere on this planet. Rent is always higher than mortgage + interest.

The main difference is that you can invest the difference in renting vs owning, and you might come out on top in the long run. It depends on the housing market, the stock market, and where you are.

How do you invest a negative amount of money into an asset? Because the difference between renting and owning is always a net loss, a negative value each month.

No, it's not, not always is my point. We don't count the asset of having the home because we're comparing that part to the stock market investment.

Made up numbers: consider:

Mortgage: 2,000 Home price: 200,000 Difference from rent: -500

Rent: 1,500 Home price: 0 Difference from mortgage: +500

If (500/month invested over 30 years) > (200,000 appreciated home price over 30 years) then you came out on top by renting.

It might be or it might not be.

Also, the type of asset matters. Stock might be a more flexible asset than real estate, in which case you should probably rent depending on your location.

What I'm trying to say is that there is nowhere on the planet where the rent is less than the mortgage. So your situation is impossible, it simply does not happen. If it happened for 10% or 20% of properties, then I agree with your considerations. But it happens for less than 0% of properties.

For most places in the US rent is lower than a mortgage. Primarily because:

- multi-unit buildings are significantly more efficient in cost per-unit.

The cost of a 1500 sqft apt and 1500 sqft home is not the same, the home is going to cost a few times more. Because it's on its own lot, with its own land, and it's on the ground, and it gets its only municipalities (gas, water, steam, electricity), and then it also has its own road requirements.

Basically with, say, a 12 story block you can get hundreds of units for the same amount amount of land (and associate cost) as a few homes. And then you can spread the cost of municipalities, too.

Even with just a duplex or dingbat you're looking at the same land costs and the equivalent accomodations as a few homes. But it doesn't scale linearly, meaning a duplex != the cost of 2 homes.

Also large landlords (corps) can spread the cost of price across all their units. Meaning, like Walmart, some are loss leaders for competitive reasons and some make more money than they need to.

Interestingly, the cost per unit continues to go down until about 12 stories. Then it goes back up, because of building requirements. Which is why commie blocks were historically 8 to 12 stories tall, it's the cheapest way to build housing.

You are totally comparing apples to oranges. Rent is never lower than a mortgage, not in any single place in the US or in the world. For the same unit.

What is the rent for a 1500 sqft apartment compared to the mortgage for a 1500 sqft apartment? The rent is always higher.

What is the rent for a 1500 sqft house compared to the mortgage for a 1500 sqft house? The rent is always higher.

Right, I'm just telling you that's that's simply not true.

And, if you really want to compare apples to apples, you have to compare properties in the same area. Its easy to make housing look cheap when you compare upper Manhattan to New Jersey.

Suddenly that 4,000 dollar apartment looks pretty competitive when the alternative is 5 million mortgage + 3000 a month HOA.

How do I get my point through? You can not compare houses to apartments. You can not compare between different regions. You have to compare the exact same unit, the exact same property. Why are you trying to shuffle the cards? Rent is always higher than a mortgage for the same unit.

You can't get anything through because you're simply incorrect.

No, housing is not always cheaper, feel free to do some research. Its highly dependent on your city.

If you truly think buying is cheaper in Manhattan then I don't know what to tell you. You're just wrong, period.

What's happening here is youre comparing suboptimal housing to THE ABSOLUTE most expensive apartments you can find.

My parents do the same thing. "Oh housing is so much cheaper, imagine renting in Dallas!"

But... We're an hour and a half outside of the city.

The reason the housing is cheap is because nobody wants it.

https://homes.co.nz/address/auckland/mangere-east/16-fleming...

Estimated rent: $600/week Estimated mortgage repayment: $1000/week

If you get a 30 year mortgage, more than $600 of that will be interest near the start.

I didn't cherry pick this. I just clicked randomly on a big city until I found one with both estimates available.

That's an estimate from a third party with nothing to say on the matter. Now show me a real offer, where the rent is less than the mortgage for the same unit.

No. Too much hard work for something that's going to give the obvious result.

You show me your source of information saying that it's never the case.

This is not true, because of timing, and mortgages with lower interest rates versus the current interest rate.

If I bought a house in the year 2000 for 200k, and still own it now, I might rent it out for $1200 per month (after refinancing in 2020 for a 2.8% loan on 50k or whatever is left on the mortgage), and still make a gross profit.

If the house were to be sold and purchased now in 2025, it may be valued at $600k or more. The mortgage on this house with 20% down would be like 3500 or 4000 per month after taxes and insurance.

So there is a huge plausible gap between renting and owning a property.

If you are arguing versus some potential mortgage in the past… sure. But you don’t get the mortgage of the past value, you get the mortgage of the current value with the current interest rates.

Here in EU rent is much higher than mortgage.

We have less space, cities are clutered, and many people live in apts that are smaller than your garages. The main reason why everyone is not buying is 20% down payment on your mortgage. Plus auxilairy costs. And in most cases you have to finish/renovate/furnish the place, so it's more like 30-35% of the sticker price.

When you're young or not working in IT, and avg price for sqm is 12k while you're getting 6k/mth and you can barely save anything buying a house sounds like having holidays on a moon.

How much is the premium I have no concrete data, but I have an anecdote. I once found a lovely 65sqm apt with great layout but it was abondonded in the middle of renovation - the bathroom had two sinks, but only one was installed, the other was in the cardbox, shower had no walls, the living room was full of cables sticking out of the walls where lights should be, etc.

I went twice to see that place that's how much I loved it, and I told the landlord I'd be willing to finish the place if we split the cost between. We sign a deal that I pay for the renovation out of my own pocket, and she'll pay half of it by lowering her price for the next three years. If she'd break the contract before three years she would have to give my money back.

I thought it was very clever and just deal. Landlord gets their apartement done, a tenant that will stay there for long time, and everyone will be happy.

Instead she thought about it for a while and told me "look, the offer was for 4k, if we go your way I'd have to lower the price by 300, that means I'd be only getting like 500 above what I'm paying for mortgage, and that's not enough for me".

You may say that's an anecdote about stupid landlord/tenant but I've been renting a lot and I've seen that sentiment a lot: I've bought this place so I could rent it for profit and if I have to pay the mortgage that means I'm losing money.

Which is stupid, because at the end of the day she'll pay the morgage and can sell the whole thing.

>Counterpoint: buying is always better, people just can't afford it.

>Renting has it's charm for youngsters

You're sort of contradicting yourself. So long as you think you're sort of settled in an area, buying is probably better.

But, if it's your first job out of school, even if you have a nice bunch of money you could put towards a down payment, it's not clear that buying is a great idea except maybe if you're in an area with lots of jobs for your chosen profession.

Once I bought, somewhat belatedly, I was in an area that offered enough possibilities in my (broadly speaking) field even if a couple commutes were on the long side.

If you're young and you buy, you could get roommates and have them pay rent. That would definitely tilt the benefits heavily to buying.

Obviously the risk of this is significantly higher than just renting.

If you have your first job and therefore little to no liquid cash, and then on top of that you require tenants to make your mortgage, you're in a pretty risky position.

That means that if just about anything goes wrong you can be absolutely fucked.

You require a job and you require tenants or you're not going to be able to pay your mortgage.

Not really. If it's viable for you then buy your first property as soon as possible and keep saving. When you want to move just buy another and rent the previous one.

In most cases people will need to get a half decent job and save for a few years first but they can keep saving and have enough for another property in few years.

And if you really have to move - then you can still sell that property. People are getting new cars every 2-3 years and it's not that different from swapping real estate.

>And if you really have to move - then you can still sell that property. People are getting new cars every 2-3 years and it's not that different from swapping real estate.

Of course it is. I think the average American car age is 11 years or something like that. But, if I wanted to swap cars like that, I can go into a dealer and basically transact it in 30 minutes. Good luck doing that with a house.

Well, it depends on whether it’s a buyers or sellers market.

https://www.axios.com/2025/06/03/homes-buyers-sellers-redfin

https://fred.stlouisfed.org/series/ACTLISCOUUS

When it was a sellers’ market, I knew people who sold in days, and buyers who lost out offering 50, 75k over asking price. Today, not so much.

This presumes that the value of the property doesn't go down. I had more than one friend who bought before the 2008 financial crisis who was pretty stuck with their home. And who the hell has a second down payment for a home after a couple years of mortgage payments, upkeep, and fixing the "surprises" one finds after buying a home?

> Because few people can afford the 20% downpayement needed for mortgage.

Current state of the British economy is the state is looking to allow 40yr 5% deposit mortgages. We're not quite there yet but it's heading that way. Be very thankful if your country isn't that bad!

Interesting. Down here in Australia our economy has been doing OK, we've had a great run of dodging recessions, but due to house prices appreciating so much since the 90s, there's similar problems with house down payments being far out of reach of many people.

Recently, our government is making a change to allow first homebuyers to purchase properties with only a 5% deposit.

Historically the Australian government set up the Housing Loans Insurance Corporation in '67, to provide insurance for banks against the risk of borrowers defaulting, to support home buyers. In 1997 the Howard government privatised the HLIC by selling it to GE, and we've had a private sector for mortgage insurance since, compulsory if borrowers are borrowing more than 80%.

Now in 2025 the current Albanese government is rolling out a scheme where the government will act as a public mortgage insurer again to allow first home buyers to buy with only a 5% deposit.

I'm not quite sure what to think. I heard an economist interviewed who reckoned this was a great idea to make it easier for young people to get into the property market, arguing that Aussie homeowners historically hardly ever default on mortgages. But naively it seems like this is yet another change that is going to push up house prices even further by increasing demand, without doing something to increase supply.

I also wonder if systemic mortgage default risk appears like it is lower than it actually is because Australia has been lucky enough to escape a major recession for so long.

There's some pretty poor economists out there, and don't underestimate ethe ability of journalists to find someone conforming to their biases.

I think giving the government an interest in keeping house prices high is an awful idea and we should get over this obsession with homeownership.

problem is, politically it is feasible for government to support policy that superficially appears to help home buyers, but also props up housing prices. like all these "give the first home buyers more money / access to loans / reduced stamp duty" policies

a government with an actual serious policy to increase housing supply, which should cause housing prices to fall, might have a lot of trouble getting elected or staying elected (only 1/3 of australian households rent, but that'll increase over time due to wealth inequality)

Problem in the UK is the economy is held up by the housing market, foreign students and pandering to the boomers who hold most of the liquid assets. Maybe the fourth leg on the stool is the London economy but that's more generational and systematic wealth than consumer or liquid assets.

Renting is expensive because people can’t buy, driving up prices. If buying were cheap because of increased supply, rent would be cheap too, and much more appealing for the practical benefits. The problem is housing supply, not buying or renting being expensive, that’s a consequence.

> Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage.

When you own, the mortgage payment is the floor on your monthly cash outlay. by contrast, when you rent, the rent is the ceiling on your monthly cash outlay. So even when they are identical, homeownership is way costlier because of all the other costs one "forgets" to consider while making this comparison. HOA dues, home insurance, property tax, maintenance, etc. add up to thousands of dollars each year. As a renter, you don't have to consider any of these beyond your rent.

Sure, but on the other hand, when you have a mortgage (generally fixed interest rate for 20+ years), your biggest expense is guaranteed to stay static. What will your rent be in 10 years? Who the heck knows?

> As a renter, you don't have to consider any of these beyond your rent.

As a renter, all of these are baked into your rent :/

Not ALL. Besides, apartment management operates on a different scale altogether. Individual homeowners will never be able to match that.

As a renter I don't pay property tax, but I do pay maintancene, insurance, utility bills and whatever else can easily attached to the monthly bill. The rest is baked into the cost.

It is baked into the cost and you know it up front. That's the ceiling I am talking about.

Rents increase over time though.

It's not just being able to afford it. It's also how easy can you sell it. Basically, how liquid is the house, and how many expenses are there on the transaction, impacts how much it's worth to buy.

My thought experiment is basically: If I get a new job in a new city, is it smart buy a house right away? And if the answer is not always "yes", then obviously buying is not always the best option.

Where you live doesn't generalize.

Where I live, interest payments alone exceed the rental rate for the same property even if you could afford a 20% downpayment. Those interest payments are a total loss. No amount of contortions can make those numbers pencil out where ownership is beneficial to the buyer. As it happens I now rent but I recently sold my house because it didn't make sense even though my carrying costs were far lower than any new buyer.

By the time you pay off a mortgage, a renter could afford to buy the same property for cash with money left over.

In NYC, an already expensive place to rent, a mortgage for a similar spot that I rent would be around double the monthly payment plus the 20%+ down.

The home buying process seems to have been thoroughly corrupted, at least in the US. The transaction costs are high, parasitic HOAs and paying over ask have been normalized, new homes are built as cheaply as possible, investors are driving up costs, etc. etc. The investment aspect is a bit overrated. You can't get that money 'back' because you still need a place to live. Most folks just flip their equity into the next place, so it never really comes back to them until they downsize or die.

I've been a homeowner for 30 years and am now renting a temporary apartment in a new location. There's a lot of upside of renting. I don't like apartment living at all, but I don't feel anchored to the location at all and have the freedom to live wherever without a bunch of overhead. I'm definitely spending more money per square foot renting, and obviously none of this is coming back to myself or my family, but that's ok for me right now.

I think my main takeaway is that there is no rule about what is best. It's what's right for you at that time of your life. A house is nice when you have kids and want some stability. Renting is nice when you want freedom and flexibility.

Also would add that the vast majority of realtors are just middlemen who take their cut and add little to no value.

My biggest regret as a first-time homebuyer was not hardballing every realtor in the city to see who would facilitate my transaction at the lowest cost.

It's interesting to paint the homeowner as an emotional person and the renter as the pragmatic, however both are roughly equally emotional.

As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.

They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.

its a unique math problem for the individual, but if you ARE buying, that likely means you have a down payment. so if you rent instead, you can then utilize that down payment for other investment opportunities.

this touches on something the author sorta hinted at, mortgage as a forced investment. Some buyers/renters won't view the down payment as an investment opportunity if they go the path of renting, they decide to rent and suddenly theyve got a new car loan and all new furniture or whatever, and that down payment is gone, instead of compounding year over year in an attempt to make renting a financial advantage

you can usually napkin math investing the down payment and it makes more financial sense to rent, but from a human perspective its just not gonna happen like that for so many people. they are gonna mess with that money instead.

How about the act of buying itself? Here where I live, you need to pay 12% on top of the home price simply for taxes and notary service. IMO it's one of the biggest obstacles and why most Swiss people prefer to rent.

Switzerland is a bit different from the US. From what I understand, property ownership entails paying the imputed rental value in taxes, which makes property ownership much less desirable. In the US, mortgage interest is tax deductible up to a certain limit, property taxes are deductible, and there's an amount of capital gains that's excluded from taxation when selling one's primary residence. Compared to other places in the world, the benefits of property ownership are pretty bonkers.

Wow that's quite unreasonable. In the UK it's not the case, there's some amounts to be paid if the property is in higher ranges of price, but there is a tier where that's zero.

As the owner builds equity it produces more and more drag on their finances, basically like a big cash pile.

The renter doesn't have to deal with this.

When my computer was getting too loud, I took a drill, made a hole to the closet, and moved it in there and ran the cables through the hole.

When I didn't like mowing the hill behind my house, I had a retaining wall put in. Also preserving the elevated deck.

When I found i didn't like the elevated deck, I build a new ground level one with my father in law.

I'm not sure I like entering into the kitchen so I'll probably put a door into the porch instead.

I'm not saying I couldn't just rent a new place to find better digs. But I hate moving, hate shopping for new houses, love this yard and house in general, and am not paying more month to month than I was when renting (and get much more space for the dollar).

I don't want this place to make me rich, in the above you might get a sense that I already feel content. That's my decision criteria and I don't know why that's incorrect. You don't have to run a household like an investment company.

The key is to make that decision based on your preferences, and not simply by going with the generic advice to buy a home from a purely financial perspective. Many people do this (take the generic advice). Many people in this comments section by their own declaration (explicit or implicit) haven't done the math. It's really kind of shocking, at least to me it was. I was stressed we could not afford a home in our area, then I did the math and realized by renting, I'd come out _very_ far head. For me it's not about wealth but financial independence and stability. At our current earnings and rent, if we continue renting, and I were to lose my job, I could cover our expenses in our area _for years_ (even if our rent increases 50%). If we buy, I'd need to sell within 6-12 months and if the home had dropped in value (like, at all), I'd be potentially underwater. So the bit that sounds more stable (buy the home) can easily be less so, and in practice _is_ less so for many people.

While I would absolutely love to purchase a home (for your reasons), the reality is I have more stability for my family (particularly my kids / school) by renting for at least the next 5 years, but very likely throughout their school.

Reminds me of https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terri...

“Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?”

Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:

- It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.

- It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.

- It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.

- It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.

- It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.

- It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out."

This is written from the perspective of someone who doesnt have kids or other ties that reduce flexibility (and from that perspective I agree a house is a huge liability in term of being able to make big life changes). It also sucks if you have neighbors you can't stand.

The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.

Fully agree on this. If you have kids, stability is important so that can be a good reason to buy, regardless of whether it's an optimal financial decision.

In what possible scenario is burning cash vs keeping a fraction of it a bad financial decision?

I can only imagine it makes financial sense to rent if you live somewhere where you're not paying off someone else's mortgage and are paying a fair renting price. (Otherwise paying your own mortgage just makes more sense)

As an actual honest question, where in the world is like that any more?

In most HCOL cities it's cheaper to rent than to buy

not in the UK.

Which is why I asked.

I can name 4 cities easily where you're paying mortgage+extra driven by the "buy-to-let" craze over here. I'll assume you mean the UK is a phenomena in that case.

I think the difference for the UK is it’s HCOL but low pay, so people there can’t afford the mortgage down payment as much, which is not normal for say American HCOL cities.

> the UK is it’s HCOL but low pay

_sigh_ don't remind me...

This is one persons opinions on their own situation. It’s written too broadly, but does a reasonable job representing one side of the tradeoffs that people should consider. It is not particularly balanced or overly insightful for anyone who has spent much time thinking this stuff through, and a lot of statements that could be backed by data are not and are simply asserted as fact. (For example, the idea that renters are more likely to pursue promotions is a very non-serious argument unless backed with some actual data)

If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)

As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.

All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.

Property taxes and insurance go up pretty much every year.

Not faster than rent. You can always challenge your property taxes and shop your homeowners insurance. If your rent goes up, you can only move, which isn’t really an option when all landlords are raising rents in lockstep.

Half of American renters are cost burdened, for example.

https://news.ycombinator.com/item?id=43119657

(own my primary US residence free and clear, my housing savings goes into investments, which grow faster than inflation)

i guess it will depend a lot on where you bought

some parts of california have been affected by insurers more than others, but in those more minimally affected? prop tax is suppressed via prop 13 (for better or worse), and the cost of insurance is a drop in the bucket relative to what id be paying for a roof over my head otherwise tbh

Which has the exact same impact on rental properties. In many jurisdictions it is worse for rentals (no homestead or occupancy reductions)

Presumably those go up roughly the same for rental properties as well. So while your payments may still go up, you're paying it either way on top of interest/rent.

Where I’m at there is a limit on how much property tax can increase. It is reassessed when a home is purchased by a new owner.

This is done to allow people to age in place, and not price someone out of a neighborhood they’ve live in all their life.

yep

my life cannot be uprooted based on the whims of a crummy landlord or because my obligation has crept out of my budget

i bought conservatively and now have a tiny payment relative to what i’d otherwise have to pay to live in the bay area. peace of mind is hard to put a price on

Something I've noticed is that some cities are better for renters, and others are better for buyers.

My current city in central Europe is very renter-friendly. A nice apartment would cost $600k, but rents practically never exceed $1500/month. Under such circumstances an apartment doesn't seem like a great investment.

I've also lived, briefly, in Canada -- where rents were often extremely high relative to home prices. (I have a friend who pays $300/month on a mortgage and rents the place out for $2000/month. At the same time, the house has nearly tripled in value over the past ~7 years.)

I saw this when I lived in the Chicagoland area. A co-worker was giving me the business for renting instead of buying something. The he let it slip that his property tax alone was $35k/year, almost 2x what I was paying in rent, and that didn’t even include the mortgage.

Surely this must not have been a like-for-like comparison, unless your landlord is very charitable or somehow secured a much lower property tax rate than your coworker did (as is possible in California through various Prop 13 mechanisms). Have you looked up what the property tax bill is on your apartment?

He had a nice house in an expensive area. I think his wife was someone important at a bank.

I was in a one bedroom apartment, so not like-for-like, but I didn’t need or want anymore space than I had. I was also in a nice area, and in the nicest apartments in that area, as far as I could tell.

A couple people who moved out there when I did bought places, and I heard nothing but regrets from them a year later.

That's an enormously high property tax bill for Chicagoland. I live in Oak Park, famously one of the highest-taxed areas in the county, in a relatively large house, and my taxes are not close to that (more than $10k less).

I don't doubt you or your friend, but their situation was unique.

I think he was in Oak Park. I drove by his place once. He has a pretty good size corner lot.

That said, he was often trying to show off, so who knows.

Good for you, but it's not true for everyone.

Here a variable rate is norm and has been since I remember.

I was eyeballing a particular house with specific financing in mind just before covid started, and if I'd pull a trigger on that transaction my monthly payement would more than double at some point.

Sounds like you're stuck there forever. Golden handcuffs, real estate edition.

The more positive spin is that you've bought into a huge bias to stay put in exchange for pros (and cons).

Well, not really but I really like where I live so I don't consider moving.

Who are these people who can afford $6k/month for a rental? It has to be a very small percentage of the population, yet I see these kind of numbers thrown around a lot.

Statistically, I’m in the top ~5% of income earners (from the data I can find), with no debt, and I couldn’t afford $6k/month.

I bought a house because I don't understand the rental market anymore. I don’t really like being a home owner, but the rent prices these days are so out of hand. I think the most I ever paid for rent was $1,680 and I felt irresponsible doing that. I don’t know how all these rentals are full with the prices they’re charging. Does everyone have roommates?

The $6k number is a touch high, but the answer is realistically 30-something DINKs and up. I make $150k a year, let’s say, and if I have a spouse with a corporate career let’s say it’s similar so maybe $250k-300k per year in income? Well that’s about $12,000 in income after taxes, medical, and a 10% retirement contribution.

So, yes, $6k per month is house-poor numbers, but it’s workable for sure. If you’re even better off, good for you, it may fall into affordable range.

Making that much, I wouldn’t want to put anymore than 25% of my take-home toward rent. That would mean making $312k take-home… after taxes, retirement, etc.

Maybe I’m conservative, but being house poor while making $300k is insane.

I’m thinking someone would need to be pushing $400-500k for household income. That would put them in the top 3%. I don’t get the supply and demand curve on it. Making that much, and renting. It’s an even smaller market than the full 3%.

I wouldn't want to purely out of the waste, but from a risk perspective, why not? Your other costs don't scale with housing or income, so if you're spending $70k on housing, you might be at $100k overall expenses. Add another $50k for income taxes and $50k for retirement savings and you're still at 50-100k left over for whatever you like (using 250-300 household income).

6k for a mortgage would be scary in case of job loss, but for rent, whatever, just move.

The lease terms would be important. Not all leases let you out whenever you want.

Plus, if a sizable portion of that household income is in the form of stock or a bonus, that isn’t showing up each month in the paycheck, lowering the monthly cash flow. If there is a layoff early in the year before the bonus pays out, and you can’t exit the lease, that would be a bad spot to be in.

There is still risk on the table, depending on how some of this is structured.

With the numbers I had it only takes 1-2 years to save 1 year of runway, so just do that first (presumably you've had a chance to save before getting your 250-300k income anyway). I suppose that the type of people to spend 6k on rent probably aren't saving much, but they could if that were their goal for some reason.

> I’m thinking someone would need to be pushing $400-500k for household income. That would put them in the top 3%. I don’t get the supply and demand curve on it. Making that much, and renting. It’s an even smaller market than the full 3%.

I know a couple in that range of HHI (doctor/lawyer) who sold their house and moved to a rental in that range.

Their take is that their time is very valuable to them, and dealing with their house involved a bunch of time spent on management and administration that can’t be made to adequately go away without effectively hiring a house manager.

House in the north bay. https://tinyurl.com/bdhzx9xd

People who live with roommates.

Unfortunately, a bit of a one-sided article.

The most convincing argument for buying housing is that it hedges you from potential large future cost of living increases. If you can’t afford repeated rent increases then the consequences will ripple through your life.

I’ve heard this pithily stated as “you are naturally short housing”.

https://thezikomoletter.wordpress.com/2012/12/10/you-are-nat...

Another newer argument is that if you think inflation could be much higher in the future, then a 30-year fixed-rate mortgage is a very attractive instrument; it’s a government-financed option. May as well benefit from it while it lasts. (If rates go down you can just re-fi.)

It hedges the cost of living _in that particular house_. However, housing costs are driven by the area's income, so your hedging against something that's likely to benefit you anyway.

Otoh renting hedges you against collapsing local incomes, because your rent would then go down, and you could move without being a forced seller.

The prevalence of luxury apartments flies in the face of the overbuying section. People overbuy on apartments as well.

Every time I see someone arguing about minimum wage, their benchmark seems to be having a 2 bedroom apartment, not a studio or even a 1 bedroom. I find this wildly unrealistic.

Apartments also sell people on amenities that almost no one uses, but justify higher rent prices.

These luxury apartments are used in the same way people use their over-bought homes. It’s a way to buy into a different class of neighbors, feel like you’re not sacrificing with a rental, signal to others that you’re doing well, ideally have better management/maintenance, and live in a place that out-classes the home they may otherwise buy… all with no maintenance or investment.

I’ve seen some crazy rent prices. I’m not sure who is renting these places, but someone must be, because they keep building them.

I prefer renting, but I ended up buying a house because rent prices starting going up beyond what I felt with reasonable.

Where I live, any rental building from this century will be marketed as luxury. There is in fact absolutely nothing luxury about them. Everything is cheap and crummy, just not too dirty/smelly/with rats (yet). Rents are 5-7k for a 2b and being luxury or having amenities have nothing to do with this. Supply and demand do. There are enough people who make this kind of money and value living in a place that is half-decent + easily commutable to the city more than the 6k.

The framing makes it seem as if valuing stability is somehow inferior while elevating financial growth. This makes me think our financial and housing systems have become so distorted that it has infected our thinking. Adult humans are often super resilient, but kids aren't. Moreover, even adults have limits. I don't want to live in a system filled with chaos just because it makes some intangible number go up. We're all going to die one day. What will we leave behind, material or otherwise? Stability seems very underrated.

The stability comes from the wealth, not the house.

In current market, owning dozens of properties is not a good investment. Owning thousands is. And, in my opinion, which does not mean much, is one of the problems. I have a friend living somewhere in the UK. He wants to buy an apartment. He has the conditions for it, but he cannot because every single building in his city belongs to the same company who keeps them to inflate the prices.

Why there is no exponential taxes for owning that many properties after they are finished?

> Buying a Home Isn’t Really an Investment

That's... really not correct. And the section that follows the heading doesn't talk about (or even try to define) "investments" at all.

A home mortgage is a heavily (!) subsidized, very safe, easily-acquired and extremely leveraged investment in an asset class that tends over long terms to grow as well as anything else.

A young professional looking at a putting $100k into stocks or as downpayment on a $500k (!) mortgage is just a no brainer. Fast forward 20 years and the 5x is applied to all the appreciation.

Buy homes, folks. Worry about renting only when you're old and are making the decision as to whether to by your fifth home for cash or to finance and put the money into another asset class. The only time you decide not to is when you know a priori you can't hold the property long enough to cover the purchase overhead.

(That said: there are lots of macroeconomic and environmental reasons to think a culture where everyone should buy a home is a bad thing. But in our culture, everyone should buy a home.)

If renting doesn’t make sense economically, how is it profitable for the landlord? Because it’s almost always profitable for the landlord.

Because of the price, and the market willing to pay that price. If nobody was willing to pay $2500 for an apartment, nobody would rent it, and the landlord wouldn't have any money. For one person that can't afford a place, there are 10 who can. So landlords quite naturally match the market demand.

In theory rental prices are just the market price. In reality there is a very high pressure on the price to be above whatever the landlord’s mortgage is. I understand why, but i’d still rather pay my mortgage than my landlord’s.

Landlords who rent at their cost and not the market price won't rent.

I don't see how your statement follows at all. I'm sure landlords would prefer rents to be higher than their mortgage but that will be determined by supply and demand, not their desires. The housing market is huge, with lots of alternatives and competition, so you can't exactly price fix it either.

You can choose to not see it, and I can struggle to explain it, but i dare you to find a landlord in a city larger than 100k who is renting at a loss.

I suspect it’s some kind of uncoordinated price fixing. E.g.

1. landlord buys property, optimistically sets rent at $mortgage+30% even tho that’s above the market rate

2. Everything cheaper is rented, or highly sought after, so renters are forced to take the higher rent.

3. Other landlords see places renting for higher than their current rent, and raise prices accordingly.

But i’m no economist. I’ve just never seen a landlord take a loss except as a result of special circumstances. Economic crashes, fire, etc.

they bought it ( or refied it) at lower interest rates.

It currently only profitable only of ppl who got super lucky during covid .

Longer time horizon -- mortage inflates away. In the short-term, only need to beat the property tax bill, especially if the interest rate is <3% and the property is increasing in value faster than that.

Real estate can make sense as an investment but most people aren't in a position to treat their primary residence like one.

I’m pretty sure my landlord’s family trust owns our 100 year old home outright. At this point, any rent is “free” for them, modulo repair and maintenance costs.

I have owned a few homes over the years and have also had many landlords. The house we rented in Lafayette, Ca in 2010 was in a nice hood. At the time it was 2 years past the financial crisis and homeownership was not something I wanted to do for a while. The land lady we rented from wanted to sell the house for 650k. That house is now 4.3 million on zillow. Granted it has since had a renovation and an addition, but still. We also rented a townhouse in Encinitas, Ca. The rent was 3k a month in 2017 and now a similar townhouse in the same complex is renting out for 6500. The problem with renting is that eventually you get priced out of the nicer hoods. The problem with not buying a house when a deal shows up in a decent hood is that eventually that hood will never be affordable to mere mortals again. Maybe these rules only apply to California.

The argument the author makes about the returns in stocks being higher than returns in real estate does not really hold when taking leverage into account.

In my country, buying a home is the only way to get cheap debt for the vast majority of people.

> does not really hold when taking leverage into account.

Detailed analyses exist, e.g. https://www.youtube.com/watch?v=j4H9LL7A-nQ .

Ben is fantastic.

As Ben notes the tax advantaged status of primary homes has more capacity than most tax sheltered alternatives.

But a lot of this depends upon income.

This reminds me, I need to buy more DFA. :)

Where do you buy DFA from? Here in Canada I think you can only buy it through brokers?

I want to buy some small/medium CAP ETFs but there is nothing really in Canada you can buy off the TSX.

(This is not investment advice)

Several companies (including major ones like Blackrock, and TD Bank) offer US equity ETFs denominated in CAD available for purchase by Canadians. This includes some basic sector and factor options, and even some leveraged and other derivative ETFs (but expect MER >1% on these).

Your bank can most likely set you up with a "direct investing" or similarly named option (after doing some KYC stuff of course) that allows you to buy ETFs directly in a TFSA or RRSP. Or you can try a third-party service like Questrade, WealthSimple etc. It's even possible to hold options in a TFSA if you have the right paperwork, as long as you don't give the CRA the impression that you're making a "business" out of "day trading". Once you're set up it should be easy to find "some small/medium cap ETFs", for both Canadian and American (and maybe international) holdings.

tl;dr: talk to someone at your bank. Make sure it's clear you aren't looking for investment advice and want to make the decisions yourself. Or look up those third parties. (If you hold registered accounts at multiple institutions, to my understanding you will be held fully responsible for observing a total contribution limit etc. across all of them.)

you are forgetting that ppl have to take lower paying jobs ( or stay unemployed longer) because they are now tied down to that particular location

The returns to real estate are only remotely competitive _after_ leverage. Unlevered returns are extremely pathetic.

Also, there's leverage baked into most stocks. Corporations will lever up.

I'm currently in the bay area in a 1950s home with no AC, no insulation, and single pane windows. Do you think that's what I want? No but I can't change it because that's what is mostly available on the rental market in the peninsula. If you go into buying, you can find all kinds of well appointed homes (even brand new homes). No one updates rentals here. So, at a certain point, if you want to live like you're not in the 1950s anymore (and lord knows - we are not living in the 1950s climate, holy shit it's way hotter) then you have to buy.

I think a better take away from this article is that if you aren’t buying your home like an investment (looking at cash flow and prioritizing financial outcome over all other factors such as distance to work or functionality), then you shouldn’t consider your home one. You’re paying for a place to live and if it happens to be financially sound, great. Otherwise you need to accept that you might lose money on it. Somehow this has been normalized for cars but not homes.

Median first time home buyer is 35. Median first child birth age is 27. Most people buying their first home aren't looking for the flexibility to move every year.

The comments here are making some odd assumptions:

1) That buying implies owning your own top-to-bottom house, with no adjacent neighbors.

2) That renting necessarily comes with arbitrary rent increases and risks of eviction.

3) That mixed communities of buyers and renters are uncommon.

None of these is necessarily true if you live in a city, depending on the city. It sounds like a lot of people are actually comparing “living in an apartment/condo” to “moving out to the suburbs,” not renting vs. owning.

Isn't that also what the OP is doing? They are comparing renters to owners who are usually in a different life situations (with the basic being kids vs no kids).

There are a lot of compounding factors OP is ignoring, likely out of not being in a set of life situations yet.

Thus commenters are bringing counter-exampled to dispute the OP claim, not as the 100% truth either.

I don't disagree with the his points, however:

"The flexibility of renting has major financial advantages"

Like 80% of my motivation to make money in past was: to buy a house. I have no interest in FIRE and be a couch surfing digital nomad around the world or whatever.

So it's hard for me to be motivated by the financial aspect if the end result was no house for now basically.

> People Tend to Overbuy

Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.

I've yet to see the solarpunk argument: buying a house lets you generate value with the land/building.

For example, perennial fruit and veggie gardens in your backyard let you invest a small amount of time and energy building a long term yield of high value food. This year I spent about 25 hours growing $800 of clean organic veggies. I also prepped areas to plant fruit trees and bushes that I expect will increase my yields in a few years.

Solar on the roof / yard can reduce electricity costs for decades.

Rainwater capture and filtration can reduce water costs.

Renting out a bedroom can produce dollars.

Building a climate battery into a yard can reduce heating and cooling costs.

I ran some numbers and figure I can shave several hundred dollars a month off at a 30% ROI.

And it's not just about dollars, there's something very powerful about knowing my property is supporting my life with these investments.

This article seems to present surface level arguments that aren't entirely fleshed out very well. Ex: what is the actual emotional impact of renting vs buying as that seems like it is the core underlying argument being made. I think the argument presented is dubious specifically because rents are a non fixed cost and provide no direct guaranteed long term benefit. Even as someone that purchased in 2021 with a price locked in from 2020, rents in my area are now equivalent or higher and it only took 2 years for the rent to catch up!. The graph tells the story that others are pointing out:

https://www.realpage.com/storage/files/blog/posts/images/202...

I really need some advice because I feel like I'm missing something, but here in Finland after some basic calculation I just don't see how a mortgage makes sense, especially for someone ineligible for ASP (local savings scheme for first home buyers, but it has many restrictions).

Home prices are not appreciating (which I otherwise consider a good thing for society), tax breaks for mortgages were abolished a few years ago, rates are at about 3%, down payment and collateral guarantees (when you don't have local collateral as an immigrant) make for a pretty hefty lump sum. Throwing the numbers into a calculator and pitting them against a 6% annual ETF over 20+ years seems to be too much in favor of the ETF, even with potentially higher rent down the line.

I took the middle way. I bought an RV and I rent the space I keep it in. I can move to a new park if I want and there are several counties where you can live in an RV while building a home or you can just permanently live in an RV.

I get good flexibility and value for my dollar. The savings over renting is insane.

Home prices have dramatically exceeded inflation for a long time, so you're getting advice from people who reaped huge appreciation gains. Now housing prices are hitting affordability limits, interest rates are less appealing, so it's unclear if the future will look like the past.

Interest rates for home-ownership are a ratchet, though. If they ever go down (and they do fluctuate over the course of decades), and you are financially stable (this may or may not be the case at the right time) you can generally refinance to lock-in the lower rate.

That only applies to mortgages in the US for the most part. Everywhere else you only finance for 3-5 years at a time.

> People rarely buy with a purely rational investment mindset; they buy based on lifestyle and emotion.

> If you bought a home equivalent to the apartment you’d rent, or a slight downgrade, you might come out ahead financially over five years.

This is really the key point. Everyone I've known personally who buys a home does so with the intent to "upgrade" their lifestyle. Even if they were perfectly content before in their 1000 sq ft 2 bedroom apartment, they aren't content purchasing the same size home. Instead they upgrade to a 1700 sq ft 3 bedroom home, or larger, because after all owning a home is supposed to feel better than just renting an apartment. In financial terms, they are worse off, but maybe they are happier with their spending (I'd hope).

If they want children, they’ll need more room. Same if you want/need a home office or to move an elderly parent in. I wouldn’t really classify those things as “feeling nice”, more going through natural life stages that renting a 2 bd may retard.

We have kids, we're a bit crammed in our current place and we're building a 3x bigger and much nicer place. Location is a small LCOL country in Europe with high foreign income. So, I see your point about naturally needing more room with kids, but there is also a lifestyle upgrade factor for us. We would be comfortable with 2x the space and without modern / luxury finish, spending less than half.

The rent I pay now is 1/12 of the rent I would get charged on the property I'm building. I'm happy paying my current rent, but I would never rent a fancy property and spend all that money with no equity, even if it would be less than 30% of my monthly income.

You forgot the tax advantage and the protection against inflation (if you have to fix rate mortatge).

The tax advantage is only available for people that itemize. Only about 10% of taxpayers do so. Inflation protection is very real and important though.

I think he covered these by his mention of "spreadsheets". A good spreadsheet for rent-vs-buy would include the values in the sliders seen on https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

Exactly. The tax advantages are tangential to the behavioral factors I mentioned.

All else being equal, a house is too personal a thing for me to rent. It would be like renting a complete set of clothes.

I don’t want to be a real estate developer writ large, but I do want to develop my own space and optimize it for my family as it grows and changes over time.

That's fair. I was mainly trying to push back against the idea that owning a home is always a good investment. There are definitely other major advantages to owning a home.

The fact that the author writes about his buying decision in first person singular is telling. Home "as a product" (vs investment) is contingent on your situation in life.

If you are a single person who is likely to get married and/or move for work, why would you buy? The transaction costs of buying and then selling are non trivial.

On the other hand if you are with your wife and kids, the potential ability to move for a job is less important (objectively) than community you are establishing for your kids and family. So it's not just those who value stability vs flexibility as a behavioral trait but as a realistic reflection of a situation.

It's like a bike guy becomes a minivan guy when he has 3 kids.

My current assumption is that other classes of assets, assuming technological progress continues at its current rate, will grow significantly faster than demand for land. So the economics that once made homeownership favorable, no longer exist.

Holding the assumption that your landlord operates on favorable conditions (mine is pretty responsive and rent increases are controlled), I’m not sure I have a good reason to opt to purchase a house unless I’m planning on occupying it for the next 2 decades at minimum.

I can’t help but think purchasing is an emotional decision, unless the location you live in allows you to buy for a similar rate to the mortgage pricing, but I’ve only observed this in LCOL areas.

> My current assumption is that other classes of assets, assuming technological progress continues at its current rate, will grow significantly faster than demand for land.

You seemed to have missed one unique attribute of land. They’re not making any more of it.

As someone who's both renting and has bought (renting my main flat and bought a summer flat), I think I prefer buying. I'm always living in fear of being told I have to leave, and the flexibility is overrated because everyone I've talked to tends to just like where they happened to live. Everyone generally finds the positives of their current area to be the positives they really like, and the negatives manageable.

This means that, generally, no matter where you buy, you won't want to have bought anywhere else after a few years. There are cases where you might hate it, of course, but you could still sell/rent to someone else and buy/rent elsewhere.

I can say I'm very much on the other side now after owning (and unfortunately still owning) a townhome that I used to love living in but now can't seem to get rid of in Seattle while I rent across the country. I moved for work and really wish I had been renting since I do not want the hassle of being a landlord, but Seattle townhome sales have slowed to a crawl as the city never really recovered after covid.

If you get unlucky with no reason to still be in a particular city and that city starts a downward swing, there's no gaurantee it ever comes back and you're stuck taking care of something that you might never be able to sell for anything but a loss.

I will likely stay a renter and keep that flexibility in my new city for a long time after this experience.

The author disclaims that he's not a homeowner at the very end of the article, but these types of pieces steelmanning renting always read to me as thinly veiled pleas of "please exit the market so I can have more".

this is one of those where sheer facts and numbers can be interpreted either way and more so (in my opinion) than most other “arguments” it is almost impossible to change someone’s opinion once it formed.

I once spent 1/2 my Sunday trying to convince my best friend that he would have financially been better off if he rented (he paid off his house which he can sell today for $2,000,000) - I came with receipts (pun intended) showing how he would have been significantly better off if he rented and invested in the market but to no avail :)

And over the decades there have been many more pro-renting pieces like this in the general press than pro-home ownership. I’ve assumed the pieces are bankrolled by the investment community, because investment bankers can’t make money off of your money if your money is locked up in a home.

“Rent your apartment, save the difference, invest it in the financial casino of your choice and maybe you’ll win big this time.” Or maybe not. But the house (investment brokers) always win.

Well. Lots of ideas there. But I just bought into a Coop because my rent went up 40% in one year. Since 2015 rents have gone up something like 50%. My experience says it’s true.

Now as an owner (of shares) I’m pegged to my mortgage (fixed) + HOA (and their scheduled increases) for the next 30y (if I choose). That’s something.

The thing about renting is, unless you’re in rent-controlled district, it can go up any amount. And in my experience, what’s advertised is always more than what you’re paying.

I like the stability and peace of not being homeless. I'm glad I have a place to live. I am lucky I don't need to pay rent, or else I'd have to choose between rent or groceries.

When you pay rent you are dependent of a landlord, who has a lot of power over you when you are vulnerable. Being homeless is a cruel situation, and they know it.

Problem is most people can't afford owning a home nowadays. Power imbalances increase even more...

My spouse and I quite like where I am now, but I don't want to buy something here due to rates, insurance and future potential of the city. So, I've pretty much settled on buying something small in another city and renting it out while we rent here.

I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p

Pretty lacking in math for an article that mentions math a few times.

I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion. https://arriens.us/articles/housing.html

Can't believe an article on rent-vs-buy doesn't feature the word "evict".

Yes, renting allows you to up and leave, but buying gives you the security you won't be homeless when your landlord gets bored of you.

This really matters when you have roots. Kids in school, proximal employment, friends and family nearby, a lifestyle.

For me personally, the two main factors that made me buy a home (and avoid renting anything when not required) are stability and control. Renting leaves those up to a third party, ownership means you're the master of your own domain.

That's important for both political and social reasons, and for peace of mind ones. For example, I know way too many people who rented a place, treated it well, paid exactly what they needed to and who were model tenants... that then got kicked out in short order because the landlord decided they'd make more money selling the property or by trying to find new (and better paying) inhabitants.

Owning means not worrying about that situation. About being told you've got a few months to get lost, and the resulting pressure to find a new place before homelessness sets in.

There's also the political side. I know rental agreements are stronger than many similar ones in other industries, and that it seems unlikely now, but renting feels like you're leaving your life and usage of a service up to the whims of a third party, and one that could easily decide to terminate said service if you get into a controversy or legal trouble. We've all seen cases where large companies kicked out customers that made them look bad, even when what they were doing was entirely legal.

Owning things means you don't lose them if someone else hates you and everything you stand for, and gives you stability when you get caught in drama of any kind.

Meanwhile, the control side can't be overstated here. Landlords can decide you can't alter the property in any way, including hanging up paintings or shelves or changing the lighting. They can decide that pets aren't allowed, or how many people can live at a property. They can refuse to upgrade or install services that might be necessary for many of us, like high-speed internet.

Owning means you're the one that chooses how you want to decorate the property, what changes can be made, and who/what can live there. I can choose to have everything remodelled or reinstalled or replaced depending on my tastes, to have pets or roommates, to upgrade or install whatever services I need and how I want everything room laid out and decorated.

For me, that's how I treat basically everything. Why give up stability and control for convenience in any situation? I don't lease vehicles, use streaming services or rent any physical object, and I avoid digital games and cloud services unless absolutely necessary.

NYT has a nice calculator to help you decide renting v buying. US only. It is updated until July 2025.

https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

This one doesn't require an account: https://smartmoneytools.co.uk/tools/rent-vs-buy/

My mortgage is $1900 a month and I am extremely grateful for that, because it's been that for three years. I chose to buy so that I could have more predictability in my housing costs, and maybe someday I'll move, but then I'll rent it out. All that to say, if you can buying is infinitely better.

only because you got lucky to buy at that interest rates.

Thats like saying it makes sense to buy tesla stock because i bought it at $10

You can refinance your mortgage when interest rates are lower.

you can also win a lottery

At least 10^7 people have refinanced their homes at lower rates, while only 10^5 people have won the lottery. So refinancing is substantially more likely than lottering.

yea an event that happened just once ( 2.5% rate ) is more likely.

The TL;DR is that the value of renting vs. buying has a lot to do with being realistic and understanding real estate and investments in general.

Buying a house is often an emotionally motivated decision with many important risk factors... Were inspections comprehensive and thorough or did they overlook an issue with the foundation, wiring, plumbing, etc.? Did the buyer understand the required disclosures, and specifically understand what the seller is not obligated to disclose in their jurisdiction? (e.g., in many areas the seller is not obligated to disclose if a child sex offender lives next door). Is the neighborhood up and coming or struggling?

Getting these wrong can easily negate the potential upsides of ownership.

Renting can also be great, but as the article points out, if it mostly just results in more disposable cash, then you may be better off owning (forced savings). Rental properties often cannot be sublet and also cannot be used as collateral or passed on to family members with a step-up in basis. Rental leases also fluctuate with the market, so it's not uncommon in big cities for renters to be paying close or equal prices of their homeowners next door.

Anecdotally I know many folks who have rented their way through, invested wisely, and done well. I also know folks who have moved around the US and always purchased, did their homework, capitalized on tax incentives, and now have a stable of rental properties that helped them become FIRE.

There used to be a world where you could get INTO the investment with almost free money. You can't get a 2% loan and dump it into the stock market. Well you can't do either anymore but you used to be able to :)

In my experience there is a real difference between the places available to rent and to buy. It is not an idealized single good with a spectrum of prices that line up cleanly with quality.

Being 47 and still renting I think the piece missed a big issue, which is most prevalent these days: we cannot afford to buy. Anything. Anywhere. I reckon I’m fatally doomed to renting.

I travel around the US and Canada in my campervan and I've noticed that it feels like a lot more people live in RV's now, which enables you to buy something and park it nearly anywhere (location wise) that you can find space. There are RV parks all over. Depending on where you decide to be, it probably isn't a bad solution and worth considering if you do want to own something, but don't want or can't commit to a whole house.

I feel like real estate markets have way to much variance country to country, city to city, or even neighborhood to neighborhood, to make generalizations like this.

The location should be mentioned. Renting is a lot more sensible in countries with strong tenant rights.

When living with inflationary currencies, over-buying is logical: you buy more today than tomorrow for the same amount of money. With deflationary currencies, it's the inverse.

When you buy, you transfer money into an asset that will be resalable one day. It might be worth more or less money than the original, like any investment. It might be that having bought something else (e.g. financial instruments) and rented a house, after deducting rent, taxes (in both cases) etc., you end up with more money than if you had bought, but it's relative and by no means guaranteed, also because those who rent out generally are better off financially than those who rent, so, as they say... When you rent you just consumed money over a certain period. No resale.

The current narrative, the push for Agenda 2030 where "you will own nothing", clearly shows this contradiction, because if it's so advantageous not to own, how is it that all the wealthy individuals do the exact opposite as much as they can?

The interest rate on my mortgage has been below inflation for 5 years now. I'm 7 years shy of paying it fully. I pay around 850€ a month for my mortgage + 110€ monthly community costs + 400€ on property taxes annually. Lets round it up to 1000€ a month. Meanwhile, the average rent around me is about 1150€. If I was renting whilst sharing with other 2 people I could be paying about 400€ and have about 600€ a month for investing, that is true. But that would mean I'd be changing places every 10-16 months, increasingly paying more, and gambling on landing good flatmates. A ton of stress and almost ensured mental health issues. I´d know because that was my life from when I was 18 to when I bought my home at 26. If I wanted to rent my spare rooms I could be racking about 800€ a month - 20-27% set aside for taxes. Always cherrypicking my flatmates and increasing their rent every now and then. However, I wanna live alone for a while, be calm whenever I'm at home.

Even if that "math" does not work for you, take into account those 600€ monthly investment would have to compete against my home's value. My property has appreciated about 90% in the last 10 years, practically doubling my potential earnings compared to the original cost. From 300k to 570k on 10 years. There is no way somebody with 0 investing knowledge could pull that off.

Renting is just better if you have enough fuck you money to rent whatever you want, whenever you want, with the flexibility of choosing to be alone or accompanied.

This is just propaganda to push people to cope and be part of a renter class that gets screwed over by a homeowner class.

No, don't be emotional, don't buy your own place and have stability. Own nothing and be happy! Let the corporations own everything and have "flexibility (TM)"

There is one unmentioned far future benefit: if you pay your mortgage off before retirement you'll probably enjoy more shelter security than your peers. Rent is a monthly cost (eating into your retirement) that could skyrocket (which your retirement plans may not have accounted for).

Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.

I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.

Imagine two things being able to be true at the same time

That sometimes under the right circumstances a home is both a great place to live, the best deal you can get in your area, and also an investment

You sort of alluded to it in your post, but it’s different for everyone, but then you go on ahead and speak as if there were one answer

Good for you you chose to rent - you don’t have to deny homes potentially being good investments to validate your decision

Counter thought:

Rent is going up A LOT every year. My parent's house in a similar area is not, even with extra taxes, it is far lower than what I pay.

They fix up something, its fixed. We have a problem -- it will be fixed in the cheapest possible terribly looking way.

And rent keeps going up. All the time. By so much.

There's flexibility in it when you're in your 20s. But in 30s and 40s its terrible.

One size doesn’t fit all

Have you ever seen a realestate agent renting? So, does that make you think - maybe ownership has more benefits!

I like the general idea of this post but in the end I think it suffers from being too generalized and a little bit too renting biased.

> The math can always be made to “work” if you’re willing to adjust what or where you buy.

This is essentially a useless statement, the result of the math is either that either renting or buying makes you end up more wealthy. Whether it "works" or not isn't even the question, the question is which choice makes you more wealthy over time (more on that later).

For that, it's more helpful to use a rent vs. buy calculator [1] with the details of your market plugged in. Whether renting or buying makes more sense for you has a lot to do with where you live.

Let's continue on to the next section, "Buying a Home Isn’t Really an Investment."

The obvious rebuttal to this is "of course it is!"

> The decision is usually driven by lifestyle factors such as proximity to work, school districts, family, and the neighborhood.

All of these factors play in to whether or not the property is a good investment. Places that are in good school districts and have close proximity to job centers are good investments. The real estate investors that this section mentions think about these exact same things before starting projects.

Next section: "People Tend to Overbuy." Is there any data or evidence behind this whole paragraph? Are we just saying that people who own homes buy more furniture and stuff than renters? Maybe they do, but even if that's true could that be because they're more wealthy in the first place? Who knows, this entire paragraph is all assumptions and nothing backing it up.

Next section: "The Flexibility of Renting Is Undervalued"

6/10 Americans live within 10 miles of where they grew up, and 8/10 Americans live within 100 miles of where they grew up. [2] Is the flexibility of renting actually needed for most Americans? Are Americans missing out on job promotions because they own homes? (It's not like you can't sell a home quickly)

I would counter the premise of this section with "The stability of home ownership is undervalued" and "the 30-year fixed mortgage is a gigantic subsidy to homebuyers." By taking out a mortgage, homeowners are locking in the majority of their monthly cost with the exception of maintenance, utilities, and property taxes. They sit in their house for a few years and they end up paying below market on monthly payment compared to renters. So maybe they "overbought" a home with too many bedrooms to fit all phases of life, but it doesn't really matter because after the first ~5-10 years of home ownership they are going to be paying less than market-rate rentals.

The 30-year fixed mortgage allows homeowners to refinance and minimize their rate pretty much any time the rate drops, so basically every renter is always getting the lowest rate possible since from their purchase date forward, and it never goes up.

The last section: Why the Home Investment Myth Persists

Sure, this section is technically correct, someone investing money elsewhere is going to beat real estate on returns. But you can't live in an index fund, an index fund may not have the same protections [a] and tax incentives as a home, and it is a fact that most people are not disciplined with investments which means the forced investment of a mortgage's end result is that homeowners are far more wealthier than renters on average. [3]

[a] For example, your home equity doesn't count toward the ability to pay calculation for FAFSA, and you are generally protected from having your home taken away from you if you get into most debt situations. Check out how OJ Simpson avoided paying his civil judgment: https://www.kiplinger.com/retirement/how-did-oj-simpson-avoi...

[1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

[2] https://www.census.gov/library/stories/2022/07/theres-no-pla...

[3] https://www.nar.realtor/magazine/real-estate-news/study-home...

Renting is more expensive and you are just burning money vs building equity. This article is ridiculous.

How long is a piece of string?

I am a home owner since 1998 I think that none of you arguments against owning make sense to me. To me your writing reads like following: due to the world gone crazy I can no longer afford to buy house so let's concoct some soul soothing reason and pretend that all is fine.

Yes and how about also people in older generations who are done paying off mortgages and now live paying just the real estate tax.

Because they purchased. And they stayed there. I think people forget that boomers bought their houses 20 30, 40 years ago, and they stayed there. It's not like they bought it 10 years ago and all of a sudden it went up dramatically. I don't think a lot of people consider that longer timeline, it's just easier to blame "boomers."

And maintained it. The house didn't just get better over 30 years. A lot of weekends were spent painting and mending things.

I assure you I pay a lot more than just the real estate tax (and insurance). There's a ton of maintenance in general. Even with insurance, I was just out a good $50K with a middle of the night kitchen fire.

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