Is Home Ownership Really Worth It?

[chinaco]

I know this topic has been discussed before. Sorry for dredging it up again... but has anyone found any good formal studies on the subject.

Most information I have seen tend to be apples to oranges where the rental is a lesser dwelling and not a good comparator.


Does one really wind up better off owning a home? Or should we be renting?

 

[Robert the Red]

It depends.

Where I live, 2000 sq ft homes sell for $700K, and rent for about $3K/month -- not enough to cover the mortgage. Only appreciation can make up that difference -- but will there be significant appreciation in the future?

In other cities and times, the numbers are much more favorable for buying.

It depends.

 

[teejayevans]

I know this topic has been discussed before. Sorry for dredging it up again... but has anyone found any good formal studies on the subject.
Most information I have seen tend to be apples to oranges where the rental is a lesser dwelling and not a good comparator.
Does one really wind up better off owning a home? Or should we be renting?

First question you have to ask is "how long will I be living here?"
Homes are good LONG term investments...
I think you'll find a lot of good deals in the coming months...
TJ

 

[Fireup2020]

If I could find a mortgage for the peanuts I am paying for housesharing, I'd buy in a heartbeat! - until then, nope. As Robert the Red stated, "it depends"

 

[Zathras]

It also depends upon lifestyle and what appeals to you. I prefer not to actually own where I live. It is my dreamhouse and I love the neighborhood and wildlife nearby. For me, it isn't about financials, it is about quality of life.
If you are considering ONLY buying depending upon the financial balance sheet, the above posters hit it on the head. It depends upon the area and the local real estate market.

 

[tryan]

Took about a decade, but we could never rent anything like our house for the cost of our mortgage, taxes, and insurance.

That said, Il'd rather rent than buy at today's prices. Rents are a bargin compared to ownership prices.

 

[Billy]

Here's a good piece on housing versus stocks, and Marlys Harris of CNNMoney.com did a decent job of comparing them. You might have already read it:
Stocks vs. Real Estate | 1 | CNNMoney.com

That being said, if you could discipline yourself to rent and save the difference between that and what you would be paying for a mortgage/repairs/remodels, etc., investing it in the market... that would be the way I'd go.

Be well,

Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[FIRE'd@51]

It also depends upon lifestyle and what appeals to you. I prefer not to actually own where I live. It is my dreamhouse and I love the neighborhood and wildlife nearby. For me, it isn't about financials, it is about quality of life.

Not sure I understand this. If you are renting under these circumstances, don't you risk losing your dreamhouse and location, should the owner decide to sell, or otherwise, stop renting to you? It seems to me that you have presented an argument for owning, where you would have complete control.

 

[Zathras]

Sorry Fire, there I go typing before my first cup of coffee!
Not sure where 'not' came from in that sentance, it shouldn't have been there I do own and that is the reason I do so, don't want to have someone else owning my dreamhouse

 

[FinanceGeek]

In the short run, especially if you're only going to be in one place a few years, renting is nearly always a better deal than owning. The longer you stay in one place, the better owning is.

 

[al_bundy]

if you are retired and rent, the landlord can raise the rent anytime he/she wants. you pay up or get out. no one cares if you can't afford it

if you buy something you can afford and pay it off after a few decades and you live in a low property tax area you can live on SSI very comfortably

 

[thefed]

time is the main determinign fsactor. short term no, longer term, yes. eventually, you will be living mortgage free!

 

[tryan]

yup, just sit tight long enough for the effects of your best hedge against inflation - aka mortgage - to kick in.

But if you keep moving around (and resetting the clock) then your better off renting.

 

[FIRE'd@51]

al_bundy's point about the property taxes is well taken. For long-time homeowners in some major metropolitan areas (e.g. many NYC suburbs), the property taxes today are considerably greater than the mortgage payments ever were.

 

[FinanceDude]

In the short run, especially if you're only going to be in one place a few years, renting is nearly always a better deal than owning. The longer you stay in one place, the better owning is.

Plus,it helps to buy during a dip in housing values, like now........

 

[bright eyed]

i agree w/ finance geek on the length of stay equation.

my mom's mortgage is a paltry $1200/month - rent in her area would be well over $3k today. so $1200/month may have seemed high 12 years ago when she bought it, it is CHEAP in comparison to today's $.

so if you are talking about being in a certain neighborhood for a long time, and are considering renting, make sure there is some form of rent control - but you can still be evicted or have change of ownership. I've had a few friends think they were in a great spot, good rent control etc. They got complacent, and then owners changed, rent went up 50% and they had to move out pronto.

 

[FIRE'd@51]

so if you are talking about being in a certain neighborhood for a long time, and are considering renting, make sure there is some form of rent control - but you can still be evicted or have change of ownership. I've had a few friends think they were in a great spot, good rent control etc. They got complacent, and then owners changed, rent went up 50% and they had to move out pronto.

The problem with rent control is that you can't rent something for a long time for less than it's cost of replacement plus some profit to the owner. Either what you describe happens, or the owner simply lets the place deteriorate. The long-term effect is to lead to a housing shortage in the area because no one will invest in new rental units.

 

[kcowan]

Purchasing a home is a lifestyle expense. If you need to compare it to investment returns, then you should be renting. It provides:
1) Forced saving - the actual costs including maintenance and taxes will take a bigger bite out of take-home pay.
2) Leverage - taking a mortgage is often the biggest financial leverage that many people ever have.
3) Stability - if you stay in one place, eventually the mortgage will be paid off.

As an investment, it has a trailer fee of 6%. Most people would not like that apsect, but it can be passed on to your heirs by never moving.

 

[al_bundy]

al_bundy's point about the property taxes is well taken. For long-time homeowners in some major metropolitan areas (e.g. many NYC suburbs), the property taxes today are considerably greater than the mortgage payments ever were.

NYC is actually some very cheap taxes. One family home will cost you $2000 a year in Queens. my wife had patients she would visit who are old, very little money but they own a home and can afford to live there on government assistance.

NY has STAR and other states and towns have other programs where they give you a cut on your property taxes. don't get that with rent either.

compare that to the burbs around NYC and taxes can be $10,000 or more for a regular middle class home. NJ the taxes can vary greatly and a lot of people buy in a high tax area for the schools and put their home up for sale a few months before their kids graduate high school and move to a low tax area

 

[tightasadrum]

buy or rent?

Does one really wind up better off owning a home? Or should we be renting?

As a homeowner & a landlord, the answer is a matter of what you're looking for. If you simply mean better financially, I would probably rent something adequate and invest the difference, particularly if I wasn't married. I could call the landlord whenever anything doesn't suit and act really stupid and helpless. Good result, not cost to me. I don't look at my home as a spendable asset anyway. Plus, if I wanted to go to New Zealand for awhile, there's nothing to work about while I'm gone. I could turn into a gypsy.

However, to make a house into something that is unique to DW & my taste, you should own it. Landlords get a little touchy when tenants start making "improvements" to the rental property.

I hope this picture comes through. It's what I view from the back porch having coffee in the morning. Don't know a rental in town where I could duplicate it.

 

[bosco]

how much is it worth to you to not have to deal with a landlord? To not have to ask to paint a room? To be told that next month the rent goes up? Or that they want to lay new carpet so please have all you stuff moved to a different room by thus and such a date?

I can't pin a number on it, but frankly, I hate dealing with landlords, so even if renting and buying were ultimately worth the same, I'd buy.

 

[semtex]

As a newcomer, just join the proud home owner family for one week, I have to say, the monthly bill makes me sick.

Renting makes more sense if only considering numbers, at least in the north NJ.

 

[al_bundy]

after i read about the pension thing in NJ i told my wife that there is no way i'm moving there

 

[semtex]

In fact, the property tax is the killer. About half block away, they just finished a huge house. Guess what's the property tax, 31k!!!

 

[FIRE'd@51]

In fact, the property tax is the killer. About half block away, they just finished a huge house. Guess what's the property tax, 31k!!!

Yup, and if the family that bought that house gets trapped by the AMT, they lose the property tax deduction.