I don’t buy what this article is selling. For the average person in the US you are not “free” from having to work until you have a 100% paid off home.
Older Americans are not leaving their paid off 3/2bed in the burbs in exchange for a condo that has rent costs go up 10% every year. Every single older person I know with a paid off house won’t move because it will be dramatically more expensive than what they pay now for way less housing.
rwmj · 58m ago
Is renting stable in the United States? In the UK it's very precarious. The landlord can throw you out after a year with a couple of months' notice[1], so you might have to move every year. You don't want to be kicked out of your house and have to move when you're in your 70s or 80s. Plus the usual stuff like you cannot make any modifications, even paint a wall.
Plus, it is in no way tied to what the "average renter makes". In my state there are very few laws about rent increases. It can basically happen within 1 month of lease renewal IIRC. Which does not allow (most people) time to move and typically the surrounding rents have increased higher than the proposed increase so it often does not save money.
It really depends on the landlord or property management company involved though. Some do 5-10% increases every time they can because "that's the way it is"....some don't.
If I would have bought a house 6 years ago I would be spending ~$500/mo less than I am for the house I currently rent.
justinrubek · 24m ago
A couple of months' notice? That's an eternity compared to what we have here. Where I live in the US, tenants have very few rights. You can get one month notice. And you can't change anything at all. Even getting them to wire the electrical up to code is a crapshoot.
supertrope · 5m ago
Most states only mandate a minimum of one month’s notice. Many landlords write a two month notice into the lease but this is mostly for their benefit so they have advance notice to find the next tenant and minimize vacancy.
chrsw · 1h ago
For a while I thought owning a home wasn’t a great idea. Take on massive debt and sink massive amounts of time and money into home projects? No thanks.
But the trick I missed was we just don’t build housing in this country. Especially not affordable housing.
As long as this continues, and I don’t see any credible signs of abatement, owning a home is a good idea.
antisthenes · 39m ago
The trick in this country is that affordable housing is just housing that was built 50-80 years ago.
It's affordable because it has accumulated a lot of infrastructure debt, for example things like: insulation, roof, plumbing, electric. etc. etc.
ljsocal · 1h ago
There are some good rent vs own calculators out there. One thing that each person has to weigh is how much they value their time. Owning a home requires a certain amount of time that renters don’t commit. Not counting the considerable time in seeking out and buying a home or the preparation and process of selling a home, there’s an enormous amount time spent on maintenance, repair, renovation, etc. I’ve owned and rented and, for me, renting is a far superior lifestyle.
exe34 · 47m ago
you can pay somebody else to do all that. that's no different from renting. what's different is that when you pay off a mortgage, you're buying yourself a house. when you pay off your landlord's mortgage, you're buying him a house.
chrsw · 17m ago
Hiring contractors to work on your house is also high cost, in money and stress.
You commonly end up paying someone a lot of money who then turns around and gets underpaid subcontractors, of dubious employment eligibility status, to do the actual work.
If you’re going through the trouble of owning a home, it makes sense to do as much work yourself as you can.
foxyv · 1h ago
Owning a home wouldn't make much sense if we were building tons of affordable housing. However, with the constant artificial shortage created by cities, the rents and prices continue to rise ad infinitum.
This means, as a homeowner, I have a huge advantage over my friends who are renting and paying twice as much for a single bedroom apartment, even including maintenance costs. This will only get worse over time.
goyagoji · 33m ago
Hundred year events are now 10 year events. I'd much rather use a diverse portfolio to move outside of the scope of a disaster and chances are good that I will actually pay less than I should for the insurance component of rent because people are irrational. For raising rents it is similar, a city is usually getting too expensive all around for someone who doesn't need to live there.
foxyv · 44s ago
My house represents less than 10% of my portfolio cost basis. It is now 25% of my total portfolio just because it has exploded in value over the past 5 years.
supertrope · 2m ago
There are some retirees whose financial plan assumes that their house (the majority of their net worth) does not decrease in market value and that insurance will pay for hurricane damage. The recent condo market slump is the canary in the coal mine.
physicsguy · 1h ago
One reason to own a house in many countries is that there are often large tax and inheritance benefits to doing so. E.g. old age pension benefits related to capital excluding your primary residence.
Proofread0592 · 1h ago
Renting only makes sense on a fixed income if you can ensure your rent does not increase. If in 15 years your rent is double what it once was, you will probably not be able to afford it.
SirFatty · 1h ago
You're forgetting about property tax, another consideration on a fixed income. And of course it can increase.
exe34 · 50m ago
and that will also be reflected in your rent.
antisthenes · 42m ago
Every single cost mentioned in the article is passed to the renter in one way or another.
Also, property tax is pretty much the most unavoidable tax there is, and the most beneficial. It funds schools, parks, roads, police, garbage collection and much of the local infrastructure and essential services where I live.
I like having all those services, so I will gladly pay the tax, including any increases.
jqpabc123 · 1h ago
For retirees, this should be a simple choice between:
Paying taxes and insurance on your current McMansion
Downsizing to pay less taxes and insurance
Renting
For someone who owns their home, I can't imagine that renting is the most cost effective option. The only way renting might be better/cheaper is if you're stuck with a sizeable mortgage that won't be paid off any time soon. But even in this case, moving to something more affordable would still likely beat renting. You'll still have to move in either case.
supertrope · 8m ago
Downsizing paradoxically does not save as much money as you’d expect from the square footage difference. Because of the scarcity of cheap houses and alternatives like apartments, townhomes, duplexes and condos, the new home can be just as expensive. Mortgage rates going up and the high transaction costs in real estate eat up the cash difference.
commandlinefan · 59m ago
I also hope to pay off the house and be able to leave it to my kids at some point.
jqpabc123 · 52m ago
In other words, you're building equity.
Renting builds equity for someone else. And they have every incentive to take all they can get.
ecshafer · 34m ago
In their example case of someone with a 5 bedroom house, its obvious: sell it and move to a 1 or 2 bedroom condo. Renting isn't going to be optimal if her rent doubles every 10 years and she lives to 100.
The other option that boomer generation doesn't seem to be using as much is multi-generational homes. Give the house to your kid, you play grandma/grandpa and give them child care. The kid gets a cheap house and cheap childcare. You build multi-generational equity.
antisthenes · 46m ago
WSJ is shilling for companies like Blackrock and other private equity that wants to rent you housing at a markup compared to the ownership costs.
Of course they'll be pushing a narrative in which you shouldn't own your own home, the main source of financial security and peace of mind for when you are no longer able or willing to work a grueling 9-5 schedule.
Believe it or not, ownership costs aren't scary and, in most cases (unless you get fleeced by contractors) are very predictable and still cheaper than rent (especially in light of recent rent increases).
Personally, I wouldn't just treat this article with a grain of salt, I would disregard it entirely.
ecshafer · 32m ago
Home ownership costs are pretty low if you understand that everything is amortized. You buy a new roof every ~25 years, then you think of it as putting $50 a month into savings so you buy that roof when it comes up. Furnace in 20 years, hot water heater in 10. But instead people seem to want to wait until things blow up then treat it as a sudden large expense.
antisthenes · 26m ago
> But instead people seem to want to wait until things blow up then treat it as a sudden large expense.
It's fine to wait if you actually are saving money and putting it in the stock market. But USA in general has a savings problem, so of course it blows up on people.
lavelganzu · 13m ago
Incidentally, Blackrock doesn't buy homes. Other private equity, combined, own less than half a percent of single-family homes in the US.
emorning3 · 54m ago
I'm an atheist, but if there's a God then I am grateful to her for granting me the wisdom to pay off my house before retiring instead of investing that money in some horseshit.
Its a shelter from storms, both physically and metaphorically.
Older Americans are not leaving their paid off 3/2bed in the burbs in exchange for a condo that has rent costs go up 10% every year. Every single older person I know with a paid off house won’t move because it will be dramatically more expensive than what they pay now for way less housing.
[1] This might change to 4 months: https://en.wikipedia.org/wiki/Renters'_Rights_Bill
Plus, it is in no way tied to what the "average renter makes". In my state there are very few laws about rent increases. It can basically happen within 1 month of lease renewal IIRC. Which does not allow (most people) time to move and typically the surrounding rents have increased higher than the proposed increase so it often does not save money.
It really depends on the landlord or property management company involved though. Some do 5-10% increases every time they can because "that's the way it is"....some don't.
If I would have bought a house 6 years ago I would be spending ~$500/mo less than I am for the house I currently rent.
But the trick I missed was we just don’t build housing in this country. Especially not affordable housing.
As long as this continues, and I don’t see any credible signs of abatement, owning a home is a good idea.
It's affordable because it has accumulated a lot of infrastructure debt, for example things like: insulation, roof, plumbing, electric. etc. etc.
You commonly end up paying someone a lot of money who then turns around and gets underpaid subcontractors, of dubious employment eligibility status, to do the actual work.
If you’re going through the trouble of owning a home, it makes sense to do as much work yourself as you can.
This means, as a homeowner, I have a huge advantage over my friends who are renting and paying twice as much for a single bedroom apartment, even including maintenance costs. This will only get worse over time.
Also, property tax is pretty much the most unavoidable tax there is, and the most beneficial. It funds schools, parks, roads, police, garbage collection and much of the local infrastructure and essential services where I live.
I like having all those services, so I will gladly pay the tax, including any increases.
Renting builds equity for someone else. And they have every incentive to take all they can get.
The other option that boomer generation doesn't seem to be using as much is multi-generational homes. Give the house to your kid, you play grandma/grandpa and give them child care. The kid gets a cheap house and cheap childcare. You build multi-generational equity.
Of course they'll be pushing a narrative in which you shouldn't own your own home, the main source of financial security and peace of mind for when you are no longer able or willing to work a grueling 9-5 schedule.
Believe it or not, ownership costs aren't scary and, in most cases (unless you get fleeced by contractors) are very predictable and still cheaper than rent (especially in light of recent rent increases).
Personally, I wouldn't just treat this article with a grain of salt, I would disregard it entirely.
It's fine to wait if you actually are saving money and putting it in the stock market. But USA in general has a savings problem, so of course it blows up on people.
Its a shelter from storms, both physically and metaphorically.