hintklb

I don't even know where to start. The math is incredibly more complex than the back of the napkin example you just gave. (downpayment, taxes, hoa, repairs, insurance, realtors, closing fees??)

But you are proving my point, you "think" you came ahead (while ending up paying way way more). Functionally you live in the same place, and the system managed to extract more money from you.

> Erm, apart from the bit where you, you know, own the property meaning you can put pictures on the wall, and that's just the start...

Maybe, just maybe, those benefits are not as big as the house ownership social class has made us believe it is? Put pictures on the wall.

You need to review your assumptions.

> There is no landlord renting at a loss.

there absolutely is. Again, most people don't do the math. It's no different for their rental property. They think it is "worth it".

> the landlord is going to pass that cost on to the renter.

Nope, there are a lot of studies on this. Rental prices are defined by offer and demand, not by costs for the landlord.

exactly the way I think. Home ownership is what you do when you act on autopilot.

If you think this through, it is essentially spending more money and more time on something very materialistic that doesn't matter that much.

Renting allows you to spend more time and resources doing things that really matter.

I think most people would come to that same conclusion if they really think about this from first principle, but as a society we have been pushed and molded to believe that home ownership is the pinnacle of success and personal accomplishment somehow. I have been attacked left and right for even suggesting that owning a home is maybe not as big of a deal for personal happiness as we think. In the west and in the US it has been pushed as a core component of people's identities.

I think you are missing the point entirely and have an "holier than you attitude"

The whole point of optimizing for some things is exactly so that I can spend more time with my kids and wife. I will be retired in the next year (in my 40s) and spend time with them while most people will continue to work in their 70s to pay their mortgage.

I am regularly traveling the world with my son and loved ones while most people use their weekend to "repair their homes".

The exact reason I do all of this is to spend way more time with my loved ones. Most people that act in autopilot mode never think about this and therefore end up not spending time with their kids (But Go Kart around the yard!)

You seem to think the only way forward is to provide a house to your family. I think retiring early, spending more time with them and experiencing the world is a good trade off for renting. I would invite you to consider different point of views

I'm not sure what you are talking about? I did way more in my 30s and 40s than most of my peers that are not mindful of anything.

The whole point of opportunity cost is to be mindful of what you are spending your time and efforts on. It is not only about money

And so is your sad judgement of other people.

I literally use opportunity cost as a reason to spend MORE time with my family. It is not about money strictly speaking but it is about maximizing what matters to you.

I have kids in school and none of your example holds.

your house is never truly yours. What happens if you stop paying taxes and HOA for example? You can never fully hedge against everything, live with it.

There are no certainty in life and thinking that a house is yours forever is an illusion.

At this point, the so-called tax benefits are mainly a realtor talking point (the same as "Renting is throwing money away")

I don't know why you think this is not taken into account by those calculator. They obviously include the cost of rent for a similar place...

I understand probability theories but I don't see how this applies here. I don't see either how the insurance concept applies for housing? There is a healthy rental market that will always exist, Are you arguing that you might get priced out and therefore you should buy (even if overpriced) to avoid that potential issue?

Both housing and stocks will go down during an economical collapse. They are both correlated. You can actually make a point that housing being a highly leveraged asset is way worse during a downturn than being long on stocks.

except that those are not the numbers we have today (in the US, I don't know in the UK).

Rather, for a $1M house:

1. The bank lends me $800k to buy a house with a 6.5% interest. you need to put 200k$ as a downpayment.

2. The rent equivalent is 28000$ a year.

The math is way more complex than this, but what really matter at this point is the gap between renting and buying a place.

I spend more time than 99.999% of people on this subject and I'm quite educated in economics.

I'm not arguing that buying a house is never right. I'm arguing that on average, especially in today's environment it is extremely difficult to make the number work in favor of owning as an investment. As a lifestyle luxury for the intangibles? Sure. But as an investment, this doesn't really make sense anymore.

>> Can you try to offer some explanation for your reasoning?

Those two numbers simply do not represent the same thing. A mortgage is an absolute minimum that dismisses the opportunity cost on the downpayment, doesn't include all the fees and definitely doesn't account for the increase in taxes, HOA and insurances.

>> When you eventually pay off your mortgage your expenses drop to zero. Who pays for Taxes, Insurance, HOA, Repairs? Who pays the 6% realtor fees the day you sell?

Based on those questions, I would invite you to similarly get educated.

I fully agree with you. I also think that there are as many good intangible argument for owning as for renting.

Renting allows you to be flexible for new opportunities. They allow you to focus on other things in life than your house, treat your landlord as a service provider, free your time to do more important things.

Frankly it is sad that as a society we value homeownership so highly and judge people that decide to rent so harshly.

All the calculators include leverage, yes.

In fact leverage is absolutely required for real estate to even be considered an investment, and not even a good one. The fees, interest, etc are eating all the gains from the leverage.

A leverage also goes both ways. Making the housing investment so much more risky if not well timed.

Houses in Denver for example went down close to 10%. Now imagine you leveraged this...

you definitely came ahead by not buying and you did the math. Good for you!

Generally, this holds true today for most HCOL and MCOL areas. It is still a good idea to buy in a few LCOL areas.

What I have seen is that in high-earner areas (Bay area for example) buying completely outpaces renting in cost (buy to rent ratio_. Mainly because the pool of buyers outbid each other. This is mainly due to the narrative and social pressure to buy at all cost. Similarly, renting stays relatively low as people do not compete as much.

Oh I don't like renting, but so far it has saved me so...so much money that I will be able to buy as a luxury down the line something WAY better than if I bought directly.

The difference is that I will treat it as a luxury. Not as an investment. The same exact thought process as if I bought a sport car.

you obviously include the price of the rent-equivalent of the place you would buy in the math. Cannot even believe I have to say this.

Let me guess. You put 8$% of YoY house appreciation? 3% of YoY stock appreciation? 10% of yearly rent increase?

if you buy a house today, you are literally paying a "huge amounts so that it becomes unviable". Check the concept of opportunity cost.

Is this a condo with an outrageous HOA that you are not including? Many such cases that explain why condos are valued so much lower.

In SF I have been renting a 1.6M$ townhouse for 4k$/month, and that is very typical of what you can find in SF and in SV.

That has been my experience. Rent increase have been outrageous, but not as bad as the ratio between renting and buying. I would still rent even if my rent went up 50%...

And I would agree. There are a ton of second order effect and more complex concepts that I have learned about over the years. Opportunity cost is still the key one I go back to so often.

That was the case initially.

Now the prices have skyrocketed due to offer and demand, and frankly because of the narrative that "Buying is always good", which ironically makes it a subpar investment.

Real estate is now a subpar investment. Especially today, and even with those advantages. It is also not diversified at all, absolutely not liquid and does not return even close to the SP500 (Even if you take the leverage into account, and leverages go both ways by the way...).

This is wrong in so many ways. Just using the buy or rent calculator demonstrate this. You are essentially repeating realtor talking points ("Renting is throwing money out of the window"). You need to use real numbers and compare them to the rent equivalent.

* Down payment: not a real cost, that money is yours in the form of equity

The opportunity cost of the downpayment is the issue. The equity you gain from downpayment is nowhere close to the opportunity cost of investing it in the stock market.

Owning MIGHT have been an OK investment for most Americans 20 years ago. that is absolutely not the case today anymore.

Ah yes, so you timed buying your house perfectly due to the one time increase during covid ("7 years ago"), and you think this generalizes to anyone buying today.

This is the same story as me anecdotally saying that I bought Nvidia 6 years ago therefore Stocks are always absolutely better.

So let me ask you? Based on your logic there is no price at which buying makes no more sense? What is the cutoff for you? What if you could rent a 4M$ house for 4k$/Month? Is it still a great deal? What if that house only goes up 2% a year?

Those are the only things that matter. The hard numbers! And right now they do absolutely not make sense.

It's worse than that. Buying a house without leverage is a terrible investment.

The leverage is absolutely required because all the fees that come with real estate (Realtors, Interest, HOA, Taxes, Insurances, Closing costs, Downpayment opportunity cost,...). The leverage makes it an OK investment, but still historically not on the level of a diversified basket of stocks.

The leverage also works in both ways and essentially makes your house an even more risky asset. It supposes that it only ever goes up which has not always been the case historically.

Thanks for clarifying. Being mindful of opportunity cost allows people to retire early, to spend more time with their loved ones, do better financial decisions.

I have seen too many of my loved ones work until their 70s because they didn't think about those concepts enough. That is what is sad.

So It's really sad to think about the value of time or things? Don't you implicitly do that every time you chose an activity over another? When you chose a job over another? when you chose to spend your time with a friend or with your wife?

The best way to calculate those intangible is to associate a value to them, Most people love to say that owning is so good because they can decide on their own house improvement.

Ok, but how much do you really value this over? Is it worth 2M$ over 30 years? Because in a lot of cases this is what you leave on the table by deciding to own.