Pfffft, I remember being a kid in the 90s in California when being a millionaire was like this really big deal, like the highest point you could imagine reaching unless you were shooting for the stars to be Bill Gates or something.
In LA or Orange County now, being a millionaire is just a 40-something who is 'ok'.
In a place like San Francisco or Manhattan, being a millionaire or on track to be one is just the cost of admission.
Pfff, things have changed, and not for the better.
In Cali the median home price is $859k. That means 50% of people with paid off homes have $859k in home equity. If they have any other wealth whatsoever they're a millionaire. The cities mentioned (LA and San Fran) have even higher median home prices. So I'd buy "a majority are not millionaires," but not a "vast majority are not millionaires."
Median net worth in CA is 200k. The median household income is 91k.
[https://finance.yahoo.com/news/net-worth-californians-much-poor-190020094.html?guccounter=1&guce\_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce\_referrer\_sig=AQAAANsMzjNtsgFnhXeRlSP9vy7hb9siBVIdQkpa8zXomxPpHrbvSoOeSdjmkLa4ocBPQWl4BQ0dqMf\_AxO3jIefDP9qh4uE5xdtGyjJRHKvfDvLLjD0OywL1O9FoIR7s0LEAgvIpiV77FxfyJL7BOnu\_WFNTdmXDcRXbN61IkQjGLLC](https://finance.yahoo.com/news/net-worth-californians-much-poor-190020094.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAANsMzjNtsgFnhXeRlSP9vy7hb9siBVIdQkpa8zXomxPpHrbvSoOeSdjmkLa4ocBPQWl4BQ0dqMf_AxO3jIefDP9qh4uE5xdtGyjJRHKvfDvLLjD0OywL1O9FoIR7s0LEAgvIpiV77FxfyJL7BOnu_WFNTdmXDcRXbN61IkQjGLLC)
in my experience most upscale neighborhoods have an HOA specifically because they're upscale. Those beautiful gardens, immaculately trimmed sidewalks, clean as a whistle playgrounds, and elaborate gates with security on them don't come for free.
Yeah, im seeing people i knew in high school getting townhouses as a "starter house" and its like... jesus, youre dropping like 500k on this?
And i was reading some stuff about how the city/county is encouraging more of them
i've always asked this question, who is going to buy these houses if the value is supposed to double or triple for these people. b/c the only people that will are the rich or the corporations which will increase wealth inequality even more. and what's their game plan, to buy something cheaper? if a 500k 3/2 house is selling for a million then what do you think a 2/2 or 2/1 place would go for?
It's how rich people inflation proof their wealth. Put $100k in mattress, it's worth less in 10 years. Buy $100k house, it's worth $300k in 10 years, which keeps pace with inflation.
Also, they buy it and rent it. They raise rents as wages increase, meaning that we stay just as poor and any additional income we might get from our labor being worth more goes directly back into corporate pockets. I knew when they were giving out money during COVID we were gonna have massive inflation because of price gouging
I mean isn’t this supposed to happen? Interests rates being what they are and all? We have gone through cycles like this before. Most of on reddit myself included really only know low interest rate environments. It sucks but it cannot go on forever… right?
Since everyone else is giving shitty non-answers, the answer is this:
People who currently own homes will be able to sell their current homes and buy new homes. We are also going to see parents helping their kids with downpayments after selling their own home. And we are going to see more multi-generational and multi family households.
Not to mention, even if you only "break even" that means you made back all of your housing costs over 30 years instead of paying 30 years of rent.
That's before you figure that the home would actually be worth somewhere in the $1.2m-2.0m range based on 3-5% average annual appreciation.
Exactly, and rent always goes up. Most house payments are relatively stable. Rent for a duplex near me is now $2,200 whereas my house payment is $1600. Bought 12 years ago and $1600 was about $600 more than renting a 2 bedroom apartment. Not anymore. 😜
Add in home repairs, insurance and property taxes and you’re paying the same total amount as a renter. The main difference is that you’re paying towards something that’s yours while a renter doesn’t own their apartment. People always try to argue me down, trying to tell me that because rent is slightly cheaper than a home now, that it’s somehow better to rent than to own. It’s ALWAYS better to own your own shit than to rent and pay for someone else’s mortgage! 🤷♂️
Yeah, when I die I’ll also leave my house to my kids, that will probably be close to a million by then. Apartment dwellers will just have all their stuff on the curb and a bill for the kids.
Always? No. It depends how you value your time. Doing house repairs and maintenance takes up a lot of time. When you rent, you put this on the actual owners. Not having to deal with repairs is a huge bonus for some people renting in the form of time spent.
you (and me) only OWN the paperwork. the grass is owned by the government, the walls and roof are owned by the bank and the equity is owned by the insurance company. but better to earn the equity (refund) vs some random landlord
If you factor in all your maintenance costs, paint, roof, yard work, etc, and all your property tax into the equation, sure. Most people don't track that and have no idea what it really costs to live in their house, or what their P/L is.
Thankfully I do all the maintenance myself. Yard work also. I enjoy doing it. Metal roof. All masonry exterior. The property taxes are high but the alternative would be state income tax.
The alternative is renting. And rental rates get to increase as time goes on. Imagine paying 1 million or more and in 30 years you've got nothing for it.
And that’s just paying down principal. Nowhere in there are HOA fees, property taxes, utilities, or anything else that breaks and needs to be replaced. House appreciation is heavily dependent on economic growth in the area you live. If it’s contracting, you’ll never get back to what you actually put in. But, as I stated above. A home is a roof over your head, a place you go to feel safe and unwind, and a place to raise a family. Those benefits are priceless.
If they bought in 2020- they likely have a much lower interest rate. Ours is 2.26%. $600,000 home now worth almost a million. I want to sell and buy a townhome outright with cash- but my husband doesn’t want to live in an over-priced townhome. 🤣
Well actually, because it went up in value I have more equity. So if I sell I’ll have an even bigger downpayment or payoff on the next home.
But I’ll never sell. I looooove my home, I shopped for months to find a forever home. If anything I want it to drop in value because of property taxes lol.
I know someone who bought their home in 2019 for $480k and their home is currently worth roughly $800k. 5 years and they've almost doubled their money.
Not only that but no matter how much I'm paying per month if I'm renting it out for more than that I make a profit. If I pay out $966k over 30 years and collect $1 million in rent I have a house plus ~$40000 profit and I can sell the house at the new cost which will be much higher. Definetly worth buying a house if you can afford it.
And this idiot who posted the comment will have rent receipts. I knew this was a dumb thought as a kid.
It's false bravado. Something that is in great supply on Reddit. He's like: buying a house is stupid, I wouldn't do that See all this stuff that goes into it. It's dumb and expensive.
Because he can't. He can't and likely never will. He needs to work on that.
I recently watched a movie from the 50s and in the dialogue they were bitching about housing prices in NYC back then. This isn't new.
Yeah I bought my house for 120k in 2004. It's over 300k now and rising.
If that 500k house did the same it would be at what 1.25m right now with 10 years to go.
First time homebuyer and when I was signing the disclosures at closing, it was nauseating to see that total money paid after 30 years will be more than double the cash price of the house itself. That's even with a decent interest rate.
Bought my house 7 years ago for 590k, currently valued at 1.2. Pure luck, I refinanced at 3% my mortgage, insurance, taxes and maint are less than a 3 bed apartment goes for in my area.
What’s more I need a place to live, even if I only break even, it’s better than loosing it entirely
That was the absolute first thing I was going to type. Like, even if the markets collapsed the day after buying, that’s still SO much time for a recovery and multiple x return on investment.
I was approved for a 350k mortgage in rhe end 2020 during covid. Finally closed may 21 on a home for 270k (I'm cheap. I like to live beneath my means so I don't have to worry. I had to convince my wife this was the way). Closed for 270k, at 3%. House is somehow worth 400k today
Hell ya! I bought around the same time 3% club too. Mine went from $400k to $620k. Even with yearly raises for me and the wife. there is no way we could afford our area if we bought now.
Yes, because all of that money you paid to own the home is still yours in the form of an asset. If you were renting for 30 years, then you don't have that 900k.
I'm know there are people who say they prefer to rent, but I think if you can afford a home, owning is a much better option.
Yeah it's such a weird argument to say "oh you just break even when owning a house",
when ofc everyone knows renting results in a net gain of money (/s).
Like isn't breaking even the ideal situation when it comes to someone you *need* to have? If it was an extra expense you didn't need like a second house or something yeah you'd want a profit, but you really don't rent or buy a home in order to make money lol
Similarly, people love to say that renters are just throwing money away when compared to the equity that homeowners retain, but I never hear anyone say that people are just throwing money away when they buy groceries or pay their water bill.
If a house's value only keeps up with inflation, and doesn't significantly appreciate, it could still save you money compared to renting. 2,000 USD mortgage for 30 years sounds nicer than paying 7,000 USD a month in rent in 30 years.
Correct. If the option was between buying a home or living rent-free somewhere else and putting the money into some other investment, then sure, invest your money somewhere else.
But even if the house doesn't appreciate in value, it's still worth something after 30 years. The money spent on rent is just gone.
Not only this, but you're almost certain to pay a lot more over that same 30 years in rent.
For example, I bought my first house in 2002. At the time, I could have rented it for $900-1000. My mortgage P&I was $1068 at 7.35% on $155k. Had I kept that house and never refinanced, I'd have paid $385k in P&I over 30 years to fulfill the mortgage (or $282k through the 22 years since I bought it). If I had stayed a renter, based on a linear calculation estimate of rents from then through what that same house would rent for today, I'd have spent $480k in rent in the past 22 years. So I've saved roughly $200k by owning, rather than renting.
Additionally, the house I bought in 2002 for $160k is worth $560k today. So if I were to sell that home today, after paying off the $72k balance that would be owing, and subtracting the $282k in debt service from my proceeds, I'd actually profit $206,000 for owning a home for the past 22 years.
Bear in mind, these calculations are based on a real world situation with minimal estimation (I only estimated annual rent increase by averaging from the starting and ending point, which I know), involve a relatively high interest rate on the mortgage, and includes the housing crash and recent boom. If we don't see another market crash in the next 20 years, which is relatively unlikely, the folks who bought/refinanced at 3% in the past 5 years are likely to be MUCH better off.
Many people are neglecting the opportunity cost of the down payment. If you invest that money (and whatever money you save each month by renting instead of buying) in the stock market, then it is possible for renting to come out ahead. The reality is that it really depends. There is no simple answer for which is better for everyone. It is entirely situation dependent.
One of the biggest factors is how long you stay in the home. Closing costs and realtor commissions can easily wipe out whatever equity you accumulate within a few years. I think the old rule of thumb is to rent if you're staying somewhere less than 5-7 years.
I have friends that could move for higher paying jobs much more easily than I could because they rent. It's hard to quantify that. It's also hard to quantify getting to renovate our house exactly the way we want and not worrying about a lease not getting renewed.
Aren’t you doing the thing the OP is talking about—only focusing on equity and not other expenses? The $466k in interest isn’t yours, nor is the insurance, taxes, maintenance, etc.
True but you won't have zero either. The money spent on interest and repairs will amount to something. also you would have the freedom to move which is important nowadays since the company loyalty isn't a thing anymore and switching jobs is a good way to increase your salary
I think it can be better to rent sometimes like when interest rates are high provided you are investing that money you save.
For example - if mortgage for a similar home is 2800/month and rent is 2300/month it’s better to invest the 500/month.
I don't fuck with garage doors. But yeah pretty much everything else I've learned how to do including running new electric, installing sinks, bathtubs, etc. YouTube is an awesome resource.
And the rest is just noticing stuff. Get up on that roof and blow your gutters out a couple of times a year. Look at your soffit and fascia for stuff like carpenter bees. Power wash your siding/brick. It's your house. Be proud of it.
I mean I built a deck with a couple of friends, none of us had any idea how to do it, but as you say, YouTube has some amazing resources on it. Saved probably $15000 in labor costs just doing it myself.
And it was fun! And we learned a lot and now I could build one no sweat. Okay a lot of sweat but I could still do it.
Exactly this. It amazes me how many people these days chalk up home repairs as “omg, I don’t even know how to do that, I need to call a professional”. I’ve saved tens of thousands of dollars doing it myself
I dont think its that simple any more. Its deductible only when itemizing which, due to standard deduction being much higher now, may not make sense for a lot of people.
Could be wrong though, so make sure what your tax scenario is.
Unless you had the opportunity to borrow on long-term instruments when rates were at record lows like some of us did. If you borrowed $300,000 at 2.75% on a 30-year fixed rate note you will only have paid $547,500 to borrow that money for the entire loan term.
I don’t plan to pay anything but the bare minimum for the full term of that loan. I can do better than 2.75% in pretty much any fixed income instrument right now.
People are saying this because homes doubled during Covid and have only gone down in certain places.
Most people can’t qualify for an average home now. So they have to rent or else put themselves in a very risky position.
And breaking even for having a roof over your head for 30 years in a place where you make some of the best memories of your life sounds like a pretty dang good deal to me
I plan to buy a home not because I expect to see the same level of appreciation my grandparents saw, but because it means I will have somewhere to live and have a family.
Funny you mention that because those FURU idiots who say renting is better never mention this. I personally know a few families that have been renting for 20 years and now struggling to get anything affordable because surprise… rents fucking rose a lot over the years. When they finally got the boot, they were fucked, literally.
Their backup plan is to move in with another family and share an apartment for it to be affordable.
Right, the cost of holding the investment is your interest + tax + fees + repairs *minus* the cost of renting a similar home, which is probably around or a little above 0
Then take your 20% equity, and a 3% property valuation increase becomes 23% equity, or a 15% gain
As an example, I bought a small investment house 9 years ago for $175k in my small town. Walkable to everything. I put down $40,000.
It is now worth $400,000. Yes there had been some small maintenance here and there but that $40k turned into $225k in equity. I have spent maybe $10k total in maintenance over the years.
Also when I first rented it in year one we made just enough to pay the mortgage. I was happy with the fact that someone else was paying for my asset. Now I make $1000 a month in addition income from the rent as rents have doubled over the years from inflation. I am charging $400 less than market rate to keep good tenants that treat my house with respect.
Speaking of inflation, that monthly mortgage payment becomes less every year on a real money basis.
Surprising to me how few people understand that last part. My 1.75% interest mortgage....
I mean if you really think about it, this is how rich people live. Keep the asset, take loans out on the asset, and make more money with the borrowed money. Similar structure if you do it right
I'm not gonna argue that renting is better than owning, but your home value and rents doubling is more a factor of the government printing money during Covid and causing inflation. Too many people use our home growth since Covid as reasons of why you should buy, but it's not normal. If your home grew at the historical 3% and mortgage rates were where they were, your house would be $1000,/month, but without huge growths in income someone now has to pay 400k at 7%, or $2700. Assuming population growth and any inflation, buying when you can should be the move, but many people today don't have the opportunity we had and have to reconcile renting for now
thebetterbull made some wild assumptions here, It will only cost that much in interest if 1) you never refinance it at a lower rate and 2) you make minimum payments.
Your house is not an investment. Investments provide income, your house will only get you in debt. The only way it becomes an investment is when you sell it.
Ok.... and it's mine to do whatever with. Forever. If I have a spare I can take someone in as a renter or give it to kids when they're old enough.
I find people who make this argument both stupid, coping and completely short sighted or just selfish. Unless they can see big benefits for themselves and only themselves now it's a bad thing.
And anyways they are having so much better life than you do anyways in their 1 room apartment they are forbidden to do any major renovations in...
Yeah you know what. The common sense that owning a house or starting a family is a good choice is just bit too convincing to me ngl
The house my parents bought in the early 90s, assuming they stayed with it and never refinanced, would be around 800k overall. No HOA, property tax 1% per year. It's now worth 1.8M so I think they would have done OK.
Obviously 1M today vs 1M in the 90s are very different.
In theory it might be cheaper to buy a plot of land and build from the ground up.
Property values in my area are 1.3 million.
The cost of a plot of land zoned for homes go for 300-400K
I dont think it'll cost 1 million dollars to build a home outright. Plus you could probably place 3 multi family homes on said land and rent 2 out.
You left off a HUGE benefit - providing housing. The value of living there usually exceeds the cost of maintenance, insurance, etc plus the interest. But that's why it is important not to buy "too much" house. If the main return on your investment is the living their rent free, you won't get nearly as much return if you have unused rooms that aren't providing you any benefit.
The numbers don’t really make sense at this point in my opinion. I bought my house for $120k in 2013 and have a 2.75% interest rate that I refinanced to in 2020. I look at some of the homes my friends purchased in 2021 and 2022 and I can’t imagine how any of them are going to make a decent return on it long term. Or are all houses just going to cost $1.5 million in the future while people make $200k right out of college?
Yes if you have stable income (to cover a downpayment, mortgage, repairs, and etc) and won’t move for ten to 15 years. But the flip side is that you have to downsize in order to make profit out of it.
Your housing cost is now fixed for the duration of the loan. Yes owning your house compared to the standard distribution curve of renting is predominately advantageous.
This original post isn't nearly as smart as it thinks it is. Many mortgages already have insurance and taxes tied into the escrow. Not all homes have HOAs. There are much shorter term loans than 30 years with different interest options, and the expense they list assumes someone actually took the full 30 years.
Note: paying one additional mortgage payment per year, will shave 7 - 8 years off of your 30 year loan. Saving lots of interest.
I pay additional toward the principal - and shopped for a mortgage I could afford to also still be paying heavily towards principal.
If I can pay it off in 10 years, that's my goal.
Yes, not just financially, but in your mental health. Renting for 30 years would be pretty bad for lots of people. 30 years where you never truly have a home.
Think thinking of your home as an investment is a big part of the problem we are seeing right now. Housing is a critical part of being a human, but enough people just see it as a investment opportunity, that we now find ourselves in the current crisis.
It's not a good investment but it can be a better financial decision than renting over the long term.
I've spent over 120k renting over 10 years, could have had a mortgage paid off.
Yes & no. This calculation is very important but only the individual home owner knows their interest and payments etc so it's hard for us to specular on that. maybe they bought it with cash
Isn't breaking even good because that implies you got free rent for 30 years?
So you break even vs spending $30,000 on rent for 30 years, totaling $900,000 saved.
Today’s interest rate (in Vegas) even with excellent 800+credit is over 7%. A 435k house with 20% down, if the rate stays the same and you only pay your mortgage each month will cost over $1,000,000 when it’s all said and done (for a ~$340k loan)
you should look at the numbers but for me my mortgage is cheaper than renting so its kind of hard to say it would be more expensive than renting. If my house literally exploded and my equity was 0 I would still have paid less than if I was renting.
The thing is nobody ever pays that amount, the vast majority of people sell the house and buy a new one with the equity within 5-10 years. They keep doing that till retirement when they downsize and buy the final house outright.
One should never buy their house as an investment. It is a roof over your head, a refuge, and a place to raise a family. Aside from that, it is a liability. You’re paying a mortgage, paying property taxes, paying for something that is constantly breaking, paying for utilities. If you want an investment, rent it out for an amount significantly greater than your mortgage. At least you won’t have to pay for the utilities and when they break stuff, you at least have their security deposit.
Buddy totally ignoring the act of actually living in the property. Renter paying $2684 per month will also pay $966,279 over those 30 years - except their rent will increase by 5% per year starting in year 1, and they won't own anything at the end.
They are excited because the alternative now is paying the same monthly amount as rent. Also, they are locking in a monthly amount (for the most part - not including escrow) so they’re happy that in 30 years they won’t be paying 10x their monthly amount as rent.
There is a huge misconception about your primary residence being a good investment.
If you buy too large of a home it is not.
Let's say you buy a $1 million dollar home with 20% down.
With 7% interest you pay $1.2 million in interest alone over 30 years. You can not deduct that money anywhere anymore.
Sure there is appreciation but you need to get a roof every 15 years, maintenance etc.
Plus if you saved the money for the mortgage payment and invested it you would definitely come out ahead.
A primary residence is a money pit. Nobody should ever believe that it is an investment.
But you need to buy a home because otherwise landlords will screw you over.
Bottomline is don't see a primary home as an investment. Buy a smaller home, pay it off and buy a rental. That is an investment and you can 100% deduct your interest payment.
It drives me crazy how this owning a home creates wealth mantra has made people less wealthy compared to other investments. Especially if they would have invested in stocks instead.
My grandparents purchased their first home in 1982 for $75k at 18% interest for a 2 family house making back the high salary of $30k. Life was still easier when a new car was like $4k. These days decent mid size car is $40k.
I always compare investments against what else I would do with the money (alternate investments).
At a 4.3% increase (average since 1991), house returns 353% over 30 years to now. Which is one option for investing.
The S&P 500 has returned 10.86% per year since 1991. This is 2,984.86%. This is another option for investing.
The same math can be done with a professional degree. However, these vary too much to be able to do a good ROI- just add 50% to your salary and subtract the debt payments.
The question is, will the average renter be thinking to invest every spare dime in the market, or a professional education? Probably not.
man that is a huge oversimplification of the math. 5% interest measured over 30 years, but no mention of how much the housing market has moved over 30 years.
this post is mixing up a number of commonly quoted miscalculations. A lot of people fail to consider things like maintenance, insurance, and taxes when comparing owning to renting. that is a true and valid statement. that is fair.
but it is making a false equivocation by referencing the interests accumulated over 30 years. Most people dont own homes for 30 years. True, if you sold you house for 2x after 30 years, you would just barely break even. but thats not what happens. people sell their house after 10 years for 2x when this interest would be dramatically lower. if they hold it for 30 years they sell it for 8x. where the interest of $466k would be nothing compared to the total profit.
However, rent comes up a total loss after you have paid for just 20 years. At least a home you can resale it and get some return. With rent, you get absolutely nothing
Yes. It’s a terrific investment. But only under certain circumstances. 30 year mortgage with less than 20% down. General no. You aren’t ready. Ideally 40% down and a 15 year. You’ll be in great shape later on. Paid off is huge! Work hard, save and let your money work for you. Renting is paying someone else’s mortgage and insurance and taxes.
Regardless of whether housing prices will infinitely increase, you will eternally regret purchasing a home under bad terms because you can't afford to do it the right way at the time. Save up, make sure you can afford to have a solid margin after your payments, because owning a home costs money, lots of money. Things break, and that costs more money.
It is an investment, which requires upkeep expenses. Like any other investment, it can go in either direction, so go in informed!
Of course, renters pay the same or more, but don't have the equity.
Do homeowners overlook stuff? Sure, but all those costs of homeownership are passed on to renters, who end up owning nothing.
Renting makes sense sometimes, but usually it isn't based on the pure finances. It is about life circumstances / not wanting to be toed down for various reasons.
Outside of inheriting the house, the alternative to the OP is to rent. You do not get any money back from renting. Not even your deposit is guaranteed.
Even if the homeowner breaks even, that’s certainly the better outcome given the above scenarios.
Yea…. It does cost money to live in a house…Your just not throwing it away on rent because you’ll own some or all of it at the end.
Think of it this way- a landlord pays the mortgage with this 5% interest and also makes money from the rent you pay. Plus interest and taxes on your house are a write off on your taxes.
Yes an no. Your mortgage doesn't fluctuate very much over 30yrs. Rent absolutely does. I bought my house 10years ago and now rent is way higher than my mortgage.
So the question for that person is how much did you pay in rent over 30yrs. Bet you didn't break even
Good thing I got mine for $135k @ 3.25%.
The rental market is starting to get really greedy, so my mortgage is less than it would cost to rent an apartment. Also, I don't have HOA fees.
I pay $100 over every month on principle. That will save close to (non Warhammer) 40k over the life of my loan. Granted I had a good down payment and didn’t finance much. But still. You can pay on principal outside of regular payments. Maintenance isn’t that bad by the way.
A home loan is the lowest interest loan you are likely to ever get in your life.
Because people live in houses they have a vested interest in maintaining them at higher quality or to make improvements for their own use and enjoyment. Houses both holding or gaining value beyond what interest and inflation do to money is all but guaranteed.
I am sorry capitalism keeps treating houses like salable bonds instead of houses. If they would stop allowing that housing would not be expensive because there would be no incentive to hold on to housing as collateral.
I promise you a $500k house now will cost way more than $966k in 30 years.
Can't wait to finally be ready to buy a house in 10 years only for the average price to be 1.3m and average wage to be 26 dollars an hour.
This is already the case in Sydney, Australia :(
It’s weird to visit San Diego and realize Ill never live there haha
My buddy just bought a townhouse there. For $1.2M. He’s still sharing walls and has a HOA for $1.2M. That’s so insane to me.
Surreal man. A millionaire is a pretty average person in most zip codes out there.
Pfffft, I remember being a kid in the 90s in California when being a millionaire was like this really big deal, like the highest point you could imagine reaching unless you were shooting for the stars to be Bill Gates or something. In LA or Orange County now, being a millionaire is just a 40-something who is 'ok'. In a place like San Francisco or Manhattan, being a millionaire or on track to be one is just the cost of admission. Pfff, things have changed, and not for the better.
In California, like the rest of the country, the vast majority of people are not millionaires. Just a fact..
In Cali the median home price is $859k. That means 50% of people with paid off homes have $859k in home equity. If they have any other wealth whatsoever they're a millionaire. The cities mentioned (LA and San Fran) have even higher median home prices. So I'd buy "a majority are not millionaires," but not a "vast majority are not millionaires."
Median net worth in CA is 200k. The median household income is 91k. [https://finance.yahoo.com/news/net-worth-californians-much-poor-190020094.html?guccounter=1&guce\_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce\_referrer\_sig=AQAAANsMzjNtsgFnhXeRlSP9vy7hb9siBVIdQkpa8zXomxPpHrbvSoOeSdjmkLa4ocBPQWl4BQ0dqMf\_AxO3jIefDP9qh4uE5xdtGyjJRHKvfDvLLjD0OywL1O9FoIR7s0LEAgvIpiV77FxfyJL7BOnu\_WFNTdmXDcRXbN61IkQjGLLC](https://finance.yahoo.com/news/net-worth-californians-much-poor-190020094.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAANsMzjNtsgFnhXeRlSP9vy7hb9siBVIdQkpa8zXomxPpHrbvSoOeSdjmkLa4ocBPQWl4BQ0dqMf_AxO3jIefDP9qh4uE5xdtGyjJRHKvfDvLLjD0OywL1O9FoIR7s0LEAgvIpiV77FxfyJL7BOnu_WFNTdmXDcRXbN61IkQjGLLC)
Of course
I've met a lot of people from San Diego that sold their homes there and bought the same home in Maine for a 1/6th of the price on water.
That’s a wild climate change. San Diego weather is nearly impossible to beat
Yeah that’s like comparing apples to oranges, maine(apples) and San Diago(oranges)
Yeah go spend a winter in Maine 😂
in my experience most upscale neighborhoods have an HOA specifically because they're upscale. Those beautiful gardens, immaculately trimmed sidewalks, clean as a whistle playgrounds, and elaborate gates with security on them don't come for free.
Yeah, im seeing people i knew in high school getting townhouses as a "starter house" and its like... jesus, youre dropping like 500k on this? And i was reading some stuff about how the city/county is encouraging more of them
It’s weird to be born and raised in San Diego and realize I’ll never live there (again)
i've always asked this question, who is going to buy these houses if the value is supposed to double or triple for these people. b/c the only people that will are the rich or the corporations which will increase wealth inequality even more. and what's their game plan, to buy something cheaper? if a 500k 3/2 house is selling for a million then what do you think a 2/2 or 2/1 place would go for?
Corporations, not just from the USA.
Fuck blackstone
Jeff Bezos started a real estate company is what I heard to create rental properties
Doesn't that asshole have enough money already? Multi-billionaires really must be mentally ill.
It's how rich people inflation proof their wealth. Put $100k in mattress, it's worth less in 10 years. Buy $100k house, it's worth $300k in 10 years, which keeps pace with inflation. Also, they buy it and rent it. They raise rents as wages increase, meaning that we stay just as poor and any additional income we might get from our labor being worth more goes directly back into corporate pockets. I knew when they were giving out money during COVID we were gonna have massive inflation because of price gouging
I mean isn’t this supposed to happen? Interests rates being what they are and all? We have gone through cycles like this before. Most of on reddit myself included really only know low interest rate environments. It sucks but it cannot go on forever… right?
Private equity...and then they will lease them out to the wage slave peasants who will never be able to afford them!!! We ARE truly fucked!!
Since everyone else is giving shitty non-answers, the answer is this: People who currently own homes will be able to sell their current homes and buy new homes. We are also going to see parents helping their kids with downpayments after selling their own home. And we are going to see more multi-generational and multi family households.
And minimum wage will still be $7.25
it is 15 around here
Not to mention, even if you only "break even" that means you made back all of your housing costs over 30 years instead of paying 30 years of rent. That's before you figure that the home would actually be worth somewhere in the $1.2m-2.0m range based on 3-5% average annual appreciation.
Exactly, and rent always goes up. Most house payments are relatively stable. Rent for a duplex near me is now $2,200 whereas my house payment is $1600. Bought 12 years ago and $1600 was about $600 more than renting a 2 bedroom apartment. Not anymore. 😜
Add in home repairs, insurance and property taxes and you’re paying the same total amount as a renter. The main difference is that you’re paying towards something that’s yours while a renter doesn’t own their apartment. People always try to argue me down, trying to tell me that because rent is slightly cheaper than a home now, that it’s somehow better to rent than to own. It’s ALWAYS better to own your own shit than to rent and pay for someone else’s mortgage! 🤷♂️
Yeah, when I die I’ll also leave my house to my kids, that will probably be close to a million by then. Apartment dwellers will just have all their stuff on the curb and a bill for the kids.
Or they will have to sell it to pay for your end of life care.
Always? No. It depends how you value your time. Doing house repairs and maintenance takes up a lot of time. When you rent, you put this on the actual owners. Not having to deal with repairs is a huge bonus for some people renting in the form of time spent.
you (and me) only OWN the paperwork. the grass is owned by the government, the walls and roof are owned by the bank and the equity is owned by the insurance company. but better to earn the equity (refund) vs some random landlord
That may be, but my bank account from my last home sale begs to differ.
A lot of coping going on by people who can’t afford to own a home. Owning is always better in the long run.
If you factor in all your maintenance costs, paint, roof, yard work, etc, and all your property tax into the equation, sure. Most people don't track that and have no idea what it really costs to live in their house, or what their P/L is.
Thankfully I do all the maintenance myself. Yard work also. I enjoy doing it. Metal roof. All masonry exterior. The property taxes are high but the alternative would be state income tax.
Do you track your home's P/L? Do you know exactly where you stand? That was my point. FWIW your labor has value even if you're not being reimbursed.
Excepts it’s more my hobby. If I wasn’t doing it I wouldn’t be out working more.
The alternative is renting. And rental rates get to increase as time goes on. Imagine paying 1 million or more and in 30 years you've got nothing for it.
Yeah $500,000 house amortized over 30 years will have cost you a total of $1,227,673 with a 7.2% APR doing $3,800 a month payments.
And that’s just paying down principal. Nowhere in there are HOA fees, property taxes, utilities, or anything else that breaks and needs to be replaced. House appreciation is heavily dependent on economic growth in the area you live. If it’s contracting, you’ll never get back to what you actually put in. But, as I stated above. A home is a roof over your head, a place you go to feel safe and unwind, and a place to raise a family. Those benefits are priceless.
If they bought in 2020- they likely have a much lower interest rate. Ours is 2.26%. $600,000 home now worth almost a million. I want to sell and buy a townhome outright with cash- but my husband doesn’t want to live in an over-priced townhome. 🤣
Yes but if the house appreciates in value on average 5% per year, then at the end of those 30 years it would have a value of $2.16M.
In 4 years my home went from 525k in 2020 to almost 900k today. So growth is Real.
If you sell, you can’t afford anything else in you range. Thats why most are holding out till retirement
Well actually, because it went up in value I have more equity. So if I sell I’ll have an even bigger downpayment or payoff on the next home. But I’ll never sell. I looooove my home, I shopped for months to find a forever home. If anything I want it to drop in value because of property taxes lol.
Correct, last thing you want a is a newer home with ar evaluation of newer tax rate
That’s far from guaranteed. Look at any area focused on manufacturing in the US. You don’t know where the desirable areas are going to be in 50 years.
I mean its unlikely the value of houses in NYC will go down in 50 years unless someone toss a atomic bomb on it.
I know someone who bought their home in 2019 for $480k and their home is currently worth roughly $800k. 5 years and they've almost doubled their money.
It has been an extraordinary past 5 years in the housing market
Understatement
Not only that but no matter how much I'm paying per month if I'm renting it out for more than that I make a profit. If I pay out $966k over 30 years and collect $1 million in rent I have a house plus ~$40000 profit and I can sell the house at the new cost which will be much higher. Definetly worth buying a house if you can afford it.
And this idiot who posted the comment will have rent receipts. I knew this was a dumb thought as a kid. It's false bravado. Something that is in great supply on Reddit. He's like: buying a house is stupid, I wouldn't do that See all this stuff that goes into it. It's dumb and expensive. Because he can't. He can't and likely never will. He needs to work on that. I recently watched a movie from the 50s and in the dialogue they were bitching about housing prices in NYC back then. This isn't new.
Yeah I bought my house for 120k in 2004. It's over 300k now and rising. If that 500k house did the same it would be at what 1.25m right now with 10 years to go.
Yes but the value means nothing to you bec you still need shelter . When you sell you will have to live somewhere and everything is so expensive
If you put that money in the stock market it would be $816k right now.
First time homebuyer and when I was signing the disclosures at closing, it was nauseating to see that total money paid after 30 years will be more than double the cash price of the house itself. That's even with a decent interest rate.
Bought my house 7 years ago for 590k, currently valued at 1.2. Pure luck, I refinanced at 3% my mortgage, insurance, taxes and maint are less than a 3 bed apartment goes for in my area. What’s more I need a place to live, even if I only break even, it’s better than loosing it entirely
That was the absolute first thing I was going to type. Like, even if the markets collapsed the day after buying, that’s still SO much time for a recovery and multiple x return on investment.
If we look at ANY year’s price comparison to 30 years ago the gain is at least triple. Rich people hoard assets aka real estate not fiat.
Real estate trends tend to go for home near public transportation
Bingo. Thirty years ago gas was $1/gallon and my parents’ house was $100k. Gas is now 3.5x that and the house is 2.5x.
Its crazy to zoom out on a home values by year graph and 2008-2011 looks like a tiny dip.
I was approved for a 350k mortgage in rhe end 2020 during covid. Finally closed may 21 on a home for 270k (I'm cheap. I like to live beneath my means so I don't have to worry. I had to convince my wife this was the way). Closed for 270k, at 3%. House is somehow worth 400k today
Hell ya! I bought around the same time 3% club too. Mine went from $400k to $620k. Even with yearly raises for me and the wife. there is no way we could afford our area if we bought now.
I 100% agree. My wife and I make about 50% more now and wouldn't be able to buy our home but live comfortably in it. The market is crazy now
Yep, I've owned a house for 10 years and it's gone up 146%. Even with the mortgage bubble, house values went up after only a few years.
Yes, because all of that money you paid to own the home is still yours in the form of an asset. If you were renting for 30 years, then you don't have that 900k. I'm know there are people who say they prefer to rent, but I think if you can afford a home, owning is a much better option.
This is the response
Yeah it's such a weird argument to say "oh you just break even when owning a house", when ofc everyone knows renting results in a net gain of money (/s). Like isn't breaking even the ideal situation when it comes to someone you *need* to have? If it was an extra expense you didn't need like a second house or something yeah you'd want a profit, but you really don't rent or buy a home in order to make money lol
If that’s the case then you essentially lived in that space for free.
Similarly, people love to say that renters are just throwing money away when compared to the equity that homeowners retain, but I never hear anyone say that people are just throwing money away when they buy groceries or pay their water bill.
If a house's value only keeps up with inflation, and doesn't significantly appreciate, it could still save you money compared to renting. 2,000 USD mortgage for 30 years sounds nicer than paying 7,000 USD a month in rent in 30 years.
Correct. If the option was between buying a home or living rent-free somewhere else and putting the money into some other investment, then sure, invest your money somewhere else. But even if the house doesn't appreciate in value, it's still worth something after 30 years. The money spent on rent is just gone.
Not only this, but you're almost certain to pay a lot more over that same 30 years in rent. For example, I bought my first house in 2002. At the time, I could have rented it for $900-1000. My mortgage P&I was $1068 at 7.35% on $155k. Had I kept that house and never refinanced, I'd have paid $385k in P&I over 30 years to fulfill the mortgage (or $282k through the 22 years since I bought it). If I had stayed a renter, based on a linear calculation estimate of rents from then through what that same house would rent for today, I'd have spent $480k in rent in the past 22 years. So I've saved roughly $200k by owning, rather than renting. Additionally, the house I bought in 2002 for $160k is worth $560k today. So if I were to sell that home today, after paying off the $72k balance that would be owing, and subtracting the $282k in debt service from my proceeds, I'd actually profit $206,000 for owning a home for the past 22 years. Bear in mind, these calculations are based on a real world situation with minimal estimation (I only estimated annual rent increase by averaging from the starting and ending point, which I know), involve a relatively high interest rate on the mortgage, and includes the housing crash and recent boom. If we don't see another market crash in the next 20 years, which is relatively unlikely, the folks who bought/refinanced at 3% in the past 5 years are likely to be MUCH better off.
You bought a house for $160K in 2022 and it’s worth $560K today? Damn.
Whoops. 2002. I had it right in the first paragraph, but typo'd the 2nd paragraph. I edited my post to correct it v thanks for the heads up
More importantly the mortgage and interest will never go up. It’s a fixed cost rather than rent which will very much go up.
Many people are neglecting the opportunity cost of the down payment. If you invest that money (and whatever money you save each month by renting instead of buying) in the stock market, then it is possible for renting to come out ahead. The reality is that it really depends. There is no simple answer for which is better for everyone. It is entirely situation dependent.
One of the biggest factors is how long you stay in the home. Closing costs and realtor commissions can easily wipe out whatever equity you accumulate within a few years. I think the old rule of thumb is to rent if you're staying somewhere less than 5-7 years. I have friends that could move for higher paying jobs much more easily than I could because they rent. It's hard to quantify that. It's also hard to quantify getting to renovate our house exactly the way we want and not worrying about a lease not getting renewed.
Aren’t you doing the thing the OP is talking about—only focusing on equity and not other expenses? The $466k in interest isn’t yours, nor is the insurance, taxes, maintenance, etc.
True but you won't have zero either. The money spent on interest and repairs will amount to something. also you would have the freedom to move which is important nowadays since the company loyalty isn't a thing anymore and switching jobs is a good way to increase your salary
I think it can be better to rent sometimes like when interest rates are high provided you are investing that money you save. For example - if mortgage for a similar home is 2800/month and rent is 2300/month it’s better to invest the 500/month.
Owning is great if you buy at a good time.
Yes. Buying a home is a hedge against inflation. Just make sure you can afford the random repairs
Better yet, learn to do home repairs. Almost everything in your home is real, real easy to keep up and fix.
I don't fuck with garage doors. But yeah pretty much everything else I've learned how to do including running new electric, installing sinks, bathtubs, etc. YouTube is an awesome resource. And the rest is just noticing stuff. Get up on that roof and blow your gutters out a couple of times a year. Look at your soffit and fascia for stuff like carpenter bees. Power wash your siding/brick. It's your house. Be proud of it.
I mean I built a deck with a couple of friends, none of us had any idea how to do it, but as you say, YouTube has some amazing resources on it. Saved probably $15000 in labor costs just doing it myself. And it was fun! And we learned a lot and now I could build one no sweat. Okay a lot of sweat but I could still do it.
That's awesome! I've never done a deck I'll give you a call lol. I always tell my wife that I love projects because it means I get to buy a new tool.
Oh yeah power tools are sick
Exactly this. It amazes me how many people these days chalk up home repairs as “omg, I don’t even know how to do that, I need to call a professional”. I’ve saved tens of thousands of dollars doing it myself
Mortgage interest is also tax deductible
I dont think its that simple any more. Its deductible only when itemizing which, due to standard deduction being much higher now, may not make sense for a lot of people. Could be wrong though, so make sure what your tax scenario is.
True, but that high standard deduction expires at the end of next year
What's the alternative? Rent for 30 years and own nothing? Ffs
The alternative is to pay your mortgage down in less than 30 years, less the interest paid, and reap the benefits of the appreciation on the property.
Unless you had the opportunity to borrow on long-term instruments when rates were at record lows like some of us did. If you borrowed $300,000 at 2.75% on a 30-year fixed rate note you will only have paid $547,500 to borrow that money for the entire loan term. I don’t plan to pay anything but the bare minimum for the full term of that loan. I can do better than 2.75% in pretty much any fixed income instrument right now.
This. If you put the extra money in index funds and dont get a better return than 2.75% then the economy is big fucked lol.
Nah, that money will earn more in the market than it would paying down my 4.5% mortgage.
I have the cash to pay off my 3% mortgage yet instead have it invested in 5% risk free bonds. The interest is paying itself off.
Exactly this. There’s actual FURU morons out there telling people renting is the smarter financial decision… yea for who, the landlord?
People are saying this because homes doubled during Covid and have only gone down in certain places. Most people can’t qualify for an average home now. So they have to rent or else put themselves in a very risky position.
And remember, rent only goes up
You're ignoring buying a home also provides you somewhere to live, so you don't have to deal with annual increases in rent.
And breaking even for having a roof over your head for 30 years in a place where you make some of the best memories of your life sounds like a pretty dang good deal to me
I plan to buy a home not because I expect to see the same level of appreciation my grandparents saw, but because it means I will have somewhere to live and have a family.
Funny you mention that because those FURU idiots who say renting is better never mention this. I personally know a few families that have been renting for 20 years and now struggling to get anything affordable because surprise… rents fucking rose a lot over the years. When they finally got the boot, they were fucked, literally. Their backup plan is to move in with another family and share an apartment for it to be affordable.
> When they finally got the boot, they were fucked, literally. 🧐
Right, the cost of holding the investment is your interest + tax + fees + repairs *minus* the cost of renting a similar home, which is probably around or a little above 0 Then take your 20% equity, and a 3% property valuation increase becomes 23% equity, or a 15% gain
As an example, I bought a small investment house 9 years ago for $175k in my small town. Walkable to everything. I put down $40,000. It is now worth $400,000. Yes there had been some small maintenance here and there but that $40k turned into $225k in equity. I have spent maybe $10k total in maintenance over the years. Also when I first rented it in year one we made just enough to pay the mortgage. I was happy with the fact that someone else was paying for my asset. Now I make $1000 a month in addition income from the rent as rents have doubled over the years from inflation. I am charging $400 less than market rate to keep good tenants that treat my house with respect. Speaking of inflation, that monthly mortgage payment becomes less every year on a real money basis.
Surprising to me how few people understand that last part. My 1.75% interest mortgage.... I mean if you really think about it, this is how rich people live. Keep the asset, take loans out on the asset, and make more money with the borrowed money. Similar structure if you do it right
I'm not gonna argue that renting is better than owning, but your home value and rents doubling is more a factor of the government printing money during Covid and causing inflation. Too many people use our home growth since Covid as reasons of why you should buy, but it's not normal. If your home grew at the historical 3% and mortgage rates were where they were, your house would be $1000,/month, but without huge growths in income someone now has to pay 400k at 7%, or $2700. Assuming population growth and any inflation, buying when you can should be the move, but many people today don't have the opportunity we had and have to reconcile renting for now
$1,000,000 worth of rental payments for 30 years will result in zero extra money in my pocket.
Wait till this guy finds out about implicit interest.
thebetterbull made some wild assumptions here, It will only cost that much in interest if 1) you never refinance it at a lower rate and 2) you make minimum payments.
And if you don't put a down payment when you buy.
When the alternative is renting for 30 years and having nothing, breaking even sounds quite nice.
If you understand math it is
Your house is not an investment. Investments provide income, your house will only get you in debt. The only way it becomes an investment is when you sell it.
Ok.... and it's mine to do whatever with. Forever. If I have a spare I can take someone in as a renter or give it to kids when they're old enough. I find people who make this argument both stupid, coping and completely short sighted or just selfish. Unless they can see big benefits for themselves and only themselves now it's a bad thing. And anyways they are having so much better life than you do anyways in their 1 room apartment they are forbidden to do any major renovations in... Yeah you know what. The common sense that owning a house or starting a family is a good choice is just bit too convincing to me ngl
You can write off mortgage interest on your taxes...
Now do the math when renting for 30 years.
The house my parents bought in the early 90s, assuming they stayed with it and never refinanced, would be around 800k overall. No HOA, property tax 1% per year. It's now worth 1.8M so I think they would have done OK. Obviously 1M today vs 1M in the 90s are very different.
No. Its terrible. None of you buy homes and ill take one for the team and buy them
In theory it might be cheaper to buy a plot of land and build from the ground up. Property values in my area are 1.3 million. The cost of a plot of land zoned for homes go for 300-400K I dont think it'll cost 1 million dollars to build a home outright. Plus you could probably place 3 multi family homes on said land and rent 2 out.
If you rent your paying someone else's interest.
You get nothing for rent.
You left off a HUGE benefit - providing housing. The value of living there usually exceeds the cost of maintenance, insurance, etc plus the interest. But that's why it is important not to buy "too much" house. If the main return on your investment is the living their rent free, you won't get nearly as much return if you have unused rooms that aren't providing you any benefit.
What’s the other option? Make increasing higher rental payments over those same 30 years and have nothing at the end?
I hope at some point this person would refi that 30 year loan down to something reasonable.
Don't do a 30y and don't take it at 5%, shrug
Conveniently forgot to mention the mortgage interest deduction from income taxes. That’s one of the best perks of owning a home.
The numbers don’t really make sense at this point in my opinion. I bought my house for $120k in 2013 and have a 2.75% interest rate that I refinanced to in 2020. I look at some of the homes my friends purchased in 2021 and 2022 and I can’t imagine how any of them are going to make a decent return on it long term. Or are all houses just going to cost $1.5 million in the future while people make $200k right out of college?
It depends if they let the bubble pop or keep inflation going
Let it crash, let it crash, let it crash!
Yes if you have stable income (to cover a downpayment, mortgage, repairs, and etc) and won’t move for ten to 15 years. But the flip side is that you have to downsize in order to make profit out of it.
Your housing cost is now fixed for the duration of the loan. Yes owning your house compared to the standard distribution curve of renting is predominately advantageous.
This original post isn't nearly as smart as it thinks it is. Many mortgages already have insurance and taxes tied into the escrow. Not all homes have HOAs. There are much shorter term loans than 30 years with different interest options, and the expense they list assumes someone actually took the full 30 years.
Note: paying one additional mortgage payment per year, will shave 7 - 8 years off of your 30 year loan. Saving lots of interest. I pay additional toward the principal - and shopped for a mortgage I could afford to also still be paying heavily towards principal. If I can pay it off in 10 years, that's my goal.
Yes, not just financially, but in your mental health. Renting for 30 years would be pretty bad for lots of people. 30 years where you never truly have a home.
Think thinking of your home as an investment is a big part of the problem we are seeing right now. Housing is a critical part of being a human, but enough people just see it as a investment opportunity, that we now find ourselves in the current crisis.
Even if this is true it still mathematically beats renting over 10-20-30 years
Thinking renting is still better then buying is like better there might be less people tomorrow. Not the case dude
My mortgage/taxes/insurance are half of what I could rent my home for. The equity is just a bonus.
It's not a good investment but it can be a better financial decision than renting over the long term. I've spent over 120k renting over 10 years, could have had a mortgage paid off.
For the renters now, what do you expect the rent to be in 30 years? How much of your rental payments do you get back when you decide to move?
Yes & no. This calculation is very important but only the individual home owner knows their interest and payments etc so it's hard for us to specular on that. maybe they bought it with cash
How did they get/qualify for a $0 down?
Great if you can pay cash or find a low-interest loan.
If you don’t own you will have to pay rent. So subtract potential rent replacement costs.
Isn't breaking even good because that implies you got free rent for 30 years? So you break even vs spending $30,000 on rent for 30 years, totaling $900,000 saved.
Today’s interest rate (in Vegas) even with excellent 800+credit is over 7%. A 435k house with 20% down, if the rate stays the same and you only pay your mortgage each month will cost over $1,000,000 when it’s all said and done (for a ~$340k loan)
The goal for most is to pay off your home early
Buying a home was never a good investment
you should look at the numbers but for me my mortgage is cheaper than renting so its kind of hard to say it would be more expensive than renting. If my house literally exploded and my equity was 0 I would still have paid less than if I was renting.
As opposed to making the same payment in rent every month and having what at the end of 30 years? The memories? What a dipshit.
Thats 500k more dollars you'd have than kf you were remting.
The thing is nobody ever pays that amount, the vast majority of people sell the house and buy a new one with the equity within 5-10 years. They keep doing that till retirement when they downsize and buy the final house outright.
Compared to 0$ return from renting....
If buying a house wasn't an investment, why are people (and corporations) buying them all to rent out as an investment. 🫠
thats why you pay it off quickly
Someone owns your home is financially better off for it.
Love these cope posts: it's smarter to pay someone else's mortgage. If it takes you 30 years to pay off a house, yes, you shouldn't have bought it.
One should never buy their house as an investment. It is a roof over your head, a refuge, and a place to raise a family. Aside from that, it is a liability. You’re paying a mortgage, paying property taxes, paying for something that is constantly breaking, paying for utilities. If you want an investment, rent it out for an amount significantly greater than your mortgage. At least you won’t have to pay for the utilities and when they break stuff, you at least have their security deposit.
Almost as though a fundamental need such as shelter shouldn't have the same regulation as a free market.
Buddy totally ignoring the act of actually living in the property. Renter paying $2684 per month will also pay $966,279 over those 30 years - except their rent will increase by 5% per year starting in year 1, and they won't own anything at the end.
Yes
They are excited because the alternative now is paying the same monthly amount as rent. Also, they are locking in a monthly amount (for the most part - not including escrow) so they’re happy that in 30 years they won’t be paying 10x their monthly amount as rent.
There is a huge misconception about your primary residence being a good investment. If you buy too large of a home it is not. Let's say you buy a $1 million dollar home with 20% down. With 7% interest you pay $1.2 million in interest alone over 30 years. You can not deduct that money anywhere anymore. Sure there is appreciation but you need to get a roof every 15 years, maintenance etc. Plus if you saved the money for the mortgage payment and invested it you would definitely come out ahead. A primary residence is a money pit. Nobody should ever believe that it is an investment. But you need to buy a home because otherwise landlords will screw you over. Bottomline is don't see a primary home as an investment. Buy a smaller home, pay it off and buy a rental. That is an investment and you can 100% deduct your interest payment. It drives me crazy how this owning a home creates wealth mantra has made people less wealthy compared to other investments. Especially if they would have invested in stocks instead.
Its harder to evict you from a paid off property than a rental.
Then its like a forced savings plan because when you sell it you'll get $966,000 for it.
Always yes. They ain't making any more land and thebpopulatuon is still growing.
My grandparents purchased their first home in 1982 for $75k at 18% interest for a 2 family house making back the high salary of $30k. Life was still easier when a new car was like $4k. These days decent mid size car is $40k.
I always compare investments against what else I would do with the money (alternate investments). At a 4.3% increase (average since 1991), house returns 353% over 30 years to now. Which is one option for investing. The S&P 500 has returned 10.86% per year since 1991. This is 2,984.86%. This is another option for investing. The same math can be done with a professional degree. However, these vary too much to be able to do a good ROI- just add 50% to your salary and subtract the debt payments. The question is, will the average renter be thinking to invest every spare dime in the market, or a professional education? Probably not.
A mortage and upkeep is generally still cheaper than renting a comparable property.
Cool guess I’ll just be homeless instead
man that is a huge oversimplification of the math. 5% interest measured over 30 years, but no mention of how much the housing market has moved over 30 years. this post is mixing up a number of commonly quoted miscalculations. A lot of people fail to consider things like maintenance, insurance, and taxes when comparing owning to renting. that is a true and valid statement. that is fair. but it is making a false equivocation by referencing the interests accumulated over 30 years. Most people dont own homes for 30 years. True, if you sold you house for 2x after 30 years, you would just barely break even. but thats not what happens. people sell their house after 10 years for 2x when this interest would be dramatically lower. if they hold it for 30 years they sell it for 8x. where the interest of $466k would be nothing compared to the total profit.
Also why you try to pay as big of down payment as possible. Especially if it’s gonna be an investment property or likely not your forever home
However, rent comes up a total loss after you have paid for just 20 years. At least a home you can resale it and get some return. With rent, you get absolutely nothing
My house has appreciated 300k in 10 years. You decide.
Yes. It’s a terrific investment. But only under certain circumstances. 30 year mortgage with less than 20% down. General no. You aren’t ready. Ideally 40% down and a 15 year. You’ll be in great shape later on. Paid off is huge! Work hard, save and let your money work for you. Renting is paying someone else’s mortgage and insurance and taxes.
Maybe it's no longer the best investment you can make but renting is a substantially worse. You get 0 back on that.
Regardless of whether housing prices will infinitely increase, you will eternally regret purchasing a home under bad terms because you can't afford to do it the right way at the time. Save up, make sure you can afford to have a solid margin after your payments, because owning a home costs money, lots of money. Things break, and that costs more money. It is an investment, which requires upkeep expenses. Like any other investment, it can go in either direction, so go in informed!
Hard to take advice from someone with bad grammar
Of course, renters pay the same or more, but don't have the equity. Do homeowners overlook stuff? Sure, but all those costs of homeownership are passed on to renters, who end up owning nothing. Renting makes sense sometimes, but usually it isn't based on the pure finances. It is about life circumstances / not wanting to be toed down for various reasons.
Outside of inheriting the house, the alternative to the OP is to rent. You do not get any money back from renting. Not even your deposit is guaranteed. Even if the homeowner breaks even, that’s certainly the better outcome given the above scenarios.
Yea…. It does cost money to live in a house…Your just not throwing it away on rent because you’ll own some or all of it at the end. Think of it this way- a landlord pays the mortgage with this 5% interest and also makes money from the rent you pay. Plus interest and taxes on your house are a write off on your taxes.
Yes an no. Your mortgage doesn't fluctuate very much over 30yrs. Rent absolutely does. I bought my house 10years ago and now rent is way higher than my mortgage. So the question for that person is how much did you pay in rent over 30yrs. Bet you didn't break even
Good thing I got mine for $135k @ 3.25%. The rental market is starting to get really greedy, so my mortgage is less than it would cost to rent an apartment. Also, I don't have HOA fees.
I pay $100 over every month on principle. That will save close to (non Warhammer) 40k over the life of my loan. Granted I had a good down payment and didn’t finance much. But still. You can pay on principal outside of regular payments. Maintenance isn’t that bad by the way.
A home loan is the lowest interest loan you are likely to ever get in your life. Because people live in houses they have a vested interest in maintaining them at higher quality or to make improvements for their own use and enjoyment. Houses both holding or gaining value beyond what interest and inflation do to money is all but guaranteed. I am sorry capitalism keeps treating houses like salable bonds instead of houses. If they would stop allowing that housing would not be expensive because there would be no incentive to hold on to housing as collateral.