And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.
firecall · 1m ago
Absolutely agree with this!
We need, as a society, to bring back generational communities.
Our workplaces are not our families!
I'll also add, that once you have children, owning your home is a very welcome level of stability.
Nothing worse than looking for a new rental and potentially being forced to upend all your routines and find new schools for the kids as you cant rent in the same area anymore!
wavemode · 2m ago
I don't know many homeowners who formed "local communities" with their neighbors. I know a few, but not many. And I know renters who know all their neighbors well. Seems more like a personality trait than something enabled by owning where you live.
filoleg · 22m ago
> the stability of buying
It depends.
Personally, after witnessing both sides of the coin second-hand, I am not leaning in the direction of either buying or renting in absolute. It is highly dependent on the context and circumstances of a specific situation/market.
I am aware that this is just an anecdote (i.e., it isn't going to say much about the overall state of things across all states in the US), but there is a specific example I'd witnessed myself, which led me to believe that this is a bit more complicated than just "renting is the move" and "buying is the move."
TLDR: one of my former coworkers bought a condo in Queen Anne neighborhood of Seattle (which is a highly desirable and expensive neighborhood in that metro area). Within the first year of his ownership, the pipes behind his laundry machine burst due to no fault of his own (while he was at work), and it ended up flooding the apartment of the neighbor below. It decimated the flooring of both his own unit and the unit of the neighbor below. He ended up was facing the costs of unfucking his own condo AND the unit below.
I don't remember the numbers off the top of my head at all (as the whole thing happened around 2018-2019, and I wasn't really involved in any direct way at all), but I remember that he did the math and (based upon the numbers, reasonably) ended up selling his condo as soon as he'd finished fixing his own unit + paying for the fixes to the unit below.
Meanwhile, I am currently renting, and if the pipes in my unit burst and end up flooding the neighbors below, it would be mostly the problem of the property management company running my building to deal with, not mine. This alone make me feel way more stable than if I'd owned the unit I live in atm.
tehwebguy · 17m ago
Buying a condo is half buying and half renting.
david-gpu · 11m ago
As an approximation, condo fees make explicit a number of recurring costs that are only implicit when you own. E.g. heating/cooling, maintenance, landscaping, accumulating an emergency fund, etc. Thus, if a condo is half-renting, so is buying a house.
bombcar · 12m ago
A condo somehow combines the worst aspects of buying and renting.
devonkim · 1m ago
That would be an HOA moreso than the features of a condo, although a condo tends to imply an HOA in the US. The irony of my experiences with an HOA is that its actions tended to suppress my property value rather than preserve or grow it.
pedalpete · 26m ago
As a renter who has recently been given notice that I must vacate my apartment in 90 days, you'd think I'd agree with you.
However, I think this depends highly on the personality of the renter/owner, and that is the point this article misses.
If someone is, like myself, comfortable with risks, I'm ok with changing neighbors, locations, and I've lived on 3 different continents and 9 cities?
If you're someone who craves stability, then this isn't for you, and you're proably better off buying a house.
zeroq · 2m ago
Counterpoint: buying is always better, people just can't afford it.
Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage.
But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your retirement.
If you rent you're left with nothing.
Then why is not everyone buying? Because few people can afford the 20% downpayement needed for mortgage. In reality it's even more because you have to furnish and/or renovate the place.
Renting has it's charm for youngsters, but once you get older and you start acummulating things the lack of stability and the danger of your landlord having a change of heart and breaking the contract (either because he decided to sell it or give it to a child) becomes a pain in the ass. Even having a pet is troublesome and many property owners will refuse to rent if you have a dog or a cat.
firtoz · 35m ago
It's interesting to paint the homeowner as an emotional person and the renter as the pragmatic, however both are roughly equally emotional.
As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.
They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.
sidrag22 · 27m ago
its a unique math problem for the individual, but if you ARE buying, that likely means you have a down payment. so if you rent instead, you can then utilize that down payment for other investment opportunities.
this touches on something the author sorta hinted at, mortgage as a forced investment. Some buyers/renters won't view the down payment as an investment opportunity if they go the path of renting, they decide to rent and suddenly theyve got a new car loan and all new furniture or whatever, and that down payment is gone, instead of compounding year over year in an attempt to make renting a financial advantage
you can usually napkin math investing the down payment and it makes more financial sense to rent, but from a human perspective its just not gonna happen like that for so many people. they are gonna mess with that money instead.
bnchrch · 23m ago
I've seen these critiques for years.
and while its not necessarily wrong, I believe it under weights a few points:
- Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment.
- Leverage: I can't get a $700k loan to put into equities but I can for a home.
- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.
- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit
- Stability: No one can evict me into a hot rental market to suit their needs.
I wish more people talked about these points, selfishly so I didnt take so many of these articles at face value because in hindsight I wouldve bought earlier.
al_borland · 6m ago
> No one can evict me into a hot rental market to suit their needs.
The bank can, if you take out too many loans against your house that you can’t pay back. When you barrow against your house you’re increasing your risk.
“Rational people don’t risk what they have and need for what they don’t have and don’t need.” - Warren Buffett
My house is paid off now and I can’t think of anything that would make me barrow against it. Setting aside variable maintenance costs, with only having to worry about property taxes now, I could work at Costco and make ends meet now. That gives me some peace of mind against an uncertain job market. A loan against the house would change that equation wildly.
dbish · 18m ago
You're not taking into account that housing prices can fall, not just stay flat and there are always things to fix and deal with in a house that you own.
Renting it out is also not always gauranteed or easy if you are not nearby or don't want to deal with being a landlord, so imho that flexibility is not really there in many cases.
jcims · 18m ago
The home buying process seems to have been thoroughly corrupted, at least in the US. The transaction costs are high, parasitic HOAs and paying over ask have been normalized, new homes are built as cheaply as possible, investors are driving up costs, etc. etc. The investment aspect is a bit overrated. You can't get that money 'back' because you still need a place to live. Most folks just flip their equity into the next place, so it never really comes back to them until they downsize or die.
I've been a homeowner for 30 years and am now renting a temporary apartment in a new location. There's a lot of upside of renting. I don't like apartment living at all, but I don't feel anchored to the location at all and have the freedom to live wherever without a bunch of overhead. I'm definitely spending more money per square foot renting, and obviously none of this is coming back to myself or my family, but that's ok for me right now.
I think my main takeaway is that there is no rule about what is best. It's what's right for you at that time of your life. A house is nice when you have kids and want some stability. Renting is nice when you want freedom and flexibility.
edmundsauto · 33m ago
This is one persons opinions on their own situation. It’s written too broadly, but does a reasonable job representing one side of the tradeoffs that people should consider. It is not particularly balanced or overly insightful for anyone who has spent much time thinking this stuff through, and a lot of statements that could be backed by data are not and are simply asserted as fact. (For example, the idea that renters are more likely to pursue promotions is a very non-serious argument unless backed with some actual data)
If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)
As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.
motbus3 · 11m ago
In current market, owning dozens of properties is not a good investment. Owning thousands is. And, in my opinion, which does not mean much, is one of the problems.
I have a friend living somewhere in the UK. He wants to buy an apartment. He has the conditions for it, but he cannot because every single building in his city belongs to the same company who keeps them to inflate the prices.
Why there is no exponential taxes for owning that many properties after they are finished?
eweise · 38m ago
All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.
al_borland · 13m ago
Who are these people who can afford $6k/month for a rental? It has to be a very small percentage of the population, yet I see these kind of numbers thrown around a lot.
Statistically, I’m in the top ~5% of income earners (from the data I can find), with no debt, and I couldn’t afford $6k/month.
I bought a house because I don't understand the rental market anymore. I don’t really like being a home owner, but the rent prices these days are so out of hand. I think the most I ever paid for rent was $1,680 and I felt irresponsible doing that. I don’t know how all these rentals are full with the prices they’re charging. Does everyone have roommates?
antonymoose · 6m ago
The $6k number is a touch high, but the answer is realistically 30-something DINKs and up. I make $150k a year, let’s say, and if I have a spouse with a corporate career let’s say it’s similar so maybe $250k-300k per year in income? Well that’s about $12,000 in income after taxes, medical, and a 10% retirement contribution.
So, yes, $6k per month is house-poor numbers, but it’s workable for sure. If you’re even better off, good for you, it may fall into affordable range.
A_D_E_P_T · 32m ago
Something I've noticed is that some cities are better for renters, and others are better for buyers.
My current city in central Europe is very renter-friendly. A nice apartment would cost $600k, but rents practically never exceed $1500/month. Under such circumstances an apartment doesn't seem like a great investment.
I've also lived, briefly, in Canada -- where rents were often extremely high relative to home prices. (I have a friend who pays $300/month on a mortgage and rents the place out for $2000/month. At the same time, the house has nearly tripled in value over the past ~7 years.)
zeroq · 22m ago
Good for you, but it's not true for everyone.
Here a variable rate is norm and has been since I remember.
I was eyeballing a particular house with specific financing in mind just before covid started, and if I'd pull a trigger on that transaction my monthly payement would more than double at some point.
bthrn · 36m ago
Property taxes and insurance go up pretty much every year.
toomuchtodo · 34m ago
Not faster than rent. You can always challenge your property taxes and shop your homeowners insurance. If your rent goes up, you can only move.
Half of American renters are cost burdened, for example.
(own my primary US residence free and clear, my housing savings goes into investments, which grow faster than inflation)
grues-dinner · 32m ago
Presumably those go up roughly the same for rental properties as well. So while your payments may still go up, you're paying it either way on top of interest/rent.
campnic · 32m ago
Which has the exact same impact on rental properties. In many jurisdictions it is worse for rentals (no homestead or occupancy reductions)
slumpt_ · 34m ago
i guess it will depend a lot on where you bought
some parts of california have been affected by insurers more than others, but in those more minimally affected? prop tax is suppressed via prop 13 (for better or worse), and the cost of insurance is a drop in the bucket relative to what id be paying for a roof over my head otherwise tbh
ForHackernews · 15m ago
Sounds like you're stuck there forever. Golden handcuffs, real estate edition.
slumpt_ · 36m ago
yep
my life cannot be uprooted based on the whims of a crummy landlord or because my obligation has crept out of my budget
i bought conservatively and now have a tiny payment relative to what i’d otherwise have to pay to live in the bay area. peace of mind is hard to put a price on
al_borland · 23m ago
The prevalence of luxury apartments flies in the face of the overbuying section. People overbuy on apartments as well.
Every time I see someone arguing about minimum wage, their benchmark seems to be having a 2 bedroom apartment, not a studio or even a 1 bedroom. I find this wildly unrealistic.
Apartments also sell people on amenities that almost no one uses, but justify higher rent prices.
These luxury apartments are used in the same way people use their over-bought homes. It’s a way to buy into a different class of neighbors, feel like you’re not sacrificing with a rental, signal to others that you’re doing well, ideally have better management/maintenance, and live in a place that out-classes the home they may otherwise buy… all with no maintenance or investment.
I’ve seen some crazy rent prices. I’m not sure who is renting these places, but someone must be, because they keep building them.
I prefer renting, but I ended up buying a house because rent prices starting going up beyond what I felt with reasonable.
andy99 · 34m ago
This is written from the perspective of someone who doesnt have kids or other ties that reduce flexibility (and from that perspective I agree a house is a huge liability in term of being able to make big life changes). It also sucks if you have neighbors you can't stand.
The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.
jvanderbot · 28m ago
When my computer was getting too loud, I took a drill, made a hole to the closet, and moved it in there and ran the cables through the hole.
When I didn't like mowing the hill behind my house, I had a retaining wall put in. Also preserving the elevated deck.
When I found i didn't like the elevated deck, I build a new ground level one with my father in law.
I'm not sure I like entering into the kitchen so I'll probably put a door into the porch instead.
I'm not saying I couldn't just rent a new place to find better digs. But I hate moving, hate shopping for new houses, love this yard and house in general, and am not paying more month to month than I was when renting (and get much more space for the dollar).
I don't want this place to make me rich, in the above you might get a sense that I already feel content. That's my decision criteria and I don't know why that's incorrect. You don't have to run a household like an investment company.
arnonejoe · 31m ago
I have owned a few homes over the years and have also had many landlords. The house we rented in Lafayette, Ca in 2010 was in a nice hood. At the time it was 2 years past the financial crisis and homeownership was not something I wanted to do for a while. The land lady we rented from wanted to sell the house for 650k. That house is now 4.3 million on zillow. Granted it has since had a renovation and an addition, but still. We also rented a townhouse in Encinitas, Ca. The rent was 3k a month in 2017 and now a similar townhouse in the same complex is renting out for 6500. The problem with renting is that eventually you get priced out of the nicer hoods. The problem with not buying a house when a deal shows up in a decent hood is that eventually that hood will never be affordable to mere mortals again. Maybe these rules only apply to California.
pjmv · 36m ago
The argument the author makes about the returns in stocks being higher than returns in real estate does not really hold when taking leverage into account.
In my country, buying a home is the only way to get cheap debt for the vast majority of people.
zahlman · 33m ago
> does not really hold when taking leverage into account.
As Ben notes the tax advantaged status of primary homes has more capacity than most tax sheltered alternatives.
But a lot of this depends upon income.
This reminds me, I need to buy more DFA. :)
apwell23 · 30m ago
you are forgetting that ppl have to take lower paying jobs ( or stay unemployed longer) because they are now tied down to that particular location
CSSer · 35m ago
The framing makes it seem as if valuing stability is somehow inferior while elevating financial growth. This makes me think our financial and housing systems have become so distorted that it has infected our thinking. Adult humans are often super resilient, but kids aren't. Moreover, even adults have limits. I don't want to live in a system filled with chaos just because it makes some intangible number go up. We're all going to die one day. What will we leave behind, material or otherwise? Stability seems very underrated.
ndriscoll · 33m ago
Median first time home buyer is 35. Median first child birth age is 27. Most people buying their first home aren't looking for the flexibility to move every year.
moooo99 · 29m ago
First of all, I fundamentally disagree on the notion that buying a home should be considered an investment (I would go as far as to argue that this attitude is part of the reason the real estate markets are so broken in many places of the world). I don't want to be rich and I don't need to be - I just want a place where my kids some day can grow up, where I can enjoy the sun in the garden and invite family and friends over to spend a nice evening. I do not care about the financial aspect of it beyond "can I afford this without overstretching and putting my family into financial danger".
From a purely financial perspective, I think you could say: the more protections you as a renter receive, the more renting makes sense.
Living in Germany, I do have quite a few protections as a renter. My landlord can't arbitrarily hike prices, etc. In my current city, it would be absolutely impossible to get a mortgage anywhere close to my current monthly rent (even with substantial equity)
Gibbon1 · 10m ago
When I bought me house what I eventually decided is you can't use ordinary financial metrics for owner occupied housing. The reason is buying a house on credit is essentially the only investment you can make with the money you have available for housing.
My opinion is the issue with renting and housing in general is the world wide financialization of real estate. It's being treated as a primary investment instead of the secondary investment it is. Some fraction of people are getting exceedingly wealthy but there are deep negative effects.
My bet is the crashing fertility rates are likely what's going to put a stop to it. Notable every 15-20 years we have a bigger than the previous financial crisis. Once populations start to decline the bottom will fall out.
Sleaker · 29m ago
This article seems to present surface level arguments that aren't entirely fleshed out very well. Ex: what is the actual emotional impact of renting vs buying as that seems like it is the core underlying argument being made. I think the argument presented is dubious specifically because rents are a non fixed cost and provide no direct guaranteed long term benefit. Even as someone that purchased in 2021 with a price locked in from 2020, rents in my area are now equivalent or higher and it only took 2 years for the rent to catch up!. The graph tells the story that others are pointing out:
As someone who's both renting and has bought (renting my main flat and bought a summer flat), I think I prefer buying. I'm always living in fear of being told I have to leave, and the flexibility is overrated because everyone I've talked to tends to just like where they happened to live. Everyone generally finds the positives of their current area to be the positives they really like, and the negatives manageable.
This means that, generally, no matter where you buy, you won't want to have bought anywhere else after a few years. There are cases where you might hate it, of course, but you could still sell/rent to someone else and buy/rent elsewhere.
dbish · 24m ago
I can say I'm very much on the other side now after owning (and unfortunately still owning) a townhome that I used to love living in but now can't seem to get rid of in Seattle while I rent across the country. I moved for work and really wish I had been renting since I do not want the hassle of being a landlord, but Seattle townhome sales have slowed to a crawl as the city never really recovered after covid.
If you get unlucky with no reason to still be in a particular city and that city starts a downward swing, there's no gaurantee it ever comes back and you're stuck taking care of something that you might never be able to sell for anything but a loss.
I will likely stay a renter and keep that flexibility in my new city for a long time after this experience.
kleinsch · 35m ago
Home prices have dramatically exceeded inflation for a long time, so you're getting advice from people who reaped huge appreciation gains. Now housing prices are hitting affordability limits, interest rates are less appealing, so it's unclear if the future will look like the past.
saulpw · 30m ago
Interest rates for home-ownership are a ratchet, though. If they ever go down (and they do fluctuate over the course of decades), and you are financially stable (this may or may not be the case at the right time) you can generally refinance to lock-in the lower rate.
streetcat1 · 45m ago
You forgot the tax advantage and the protection against inflation (if you have to fix rate mortatge).
The tax advantage is only available for people that itemize. Only about 10% of taxpayers do so. Inflation protection is very real and important though.
creakingstairs · 34m ago
My spouse and I quite like where I am now, but I don't want to buy something here due to rates, insurance and future potential of the city. So, I've pretty much settled on buying something small in another city and renting it out while we rent here.
I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p
matthewfcarlson · 37m ago
I think a better take away from this article is that if you aren’t buying your home like an investment (looking at cash flow and prioritizing financial outcome over all other factors such as distance to work or functionality), then you shouldn’t consider your home one. You’re paying for a place to live and if it happens to be financially sound, great. Otherwise you need to accept that you might lose money on it. Somehow this has been normalized for cars but not homes.
rda2 · 32m ago
Pretty lacking in math for an article that mentions math a few times.
I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion.
https://arriens.us/articles/housing.html
freshtake · 14m ago
The TL;DR is that the value of renting vs. buying has a lot to do with being realistic and understanding real estate and investments in general.
Buying a house is often an emotionally motivated decision with many important risk factors... Were inspections comprehensive and thorough or did they overlook an issue with the foundation, wiring, plumbing, etc.? Did the buyer understand the required disclosures, and specifically understand what the seller is not obligated to disclose in their jurisdiction? (e.g., in many areas the seller is not obligated to disclose if a child sex offender lives next door). Is the neighborhood up and coming or struggling?
Getting these wrong can easily negate the potential upsides of ownership.
Renting can also be great, but as the article points out, if it mostly just results in more disposable cash, then you may be better off owning (forced savings). Rental properties often cannot be sublet and also cannot be used as collateral or passed on to family members with a step-up in basis. Rental leases also fluctuate with the market, so it's not uncommon in big cities for renters to be paying close or equal prices of their homeowners next door.
Anecdotally I know many folks who have rented their way through, invested wisely, and done well. I also know folks who have moved around the US and always purchased, did their homework, capitalized on tax incentives, and now have a stable of rental properties that helped them become FIRE.
themafia · 31m ago
I took the middle way. I bought an RV and I rent the space I keep it in. I can move to a new park if I want and there are several counties where you can live in an RV while building a home or you can just permanently live in an RV.
I get good flexibility and value for my dollar. The savings over renting is insane.
kennywinker · 37m ago
If renting doesn’t make sense economically, how is it profitable for the landlord? Because it’s almost always profitable for the landlord.
Simulacra · 35m ago
Because of the price, and the market willing to pay that price. If nobody was willing to pay $2500 for an apartment, nobody would rent it, and the landlord wouldn't have any money. For one person that can't afford a place, there are 10 who can. So landlords quite naturally match the market demand.
apwell23 · 35m ago
they bought it ( or refied it) at lower interest rates.
It currently only profitable only of ppl who got super lucky during covid .
zahlman · 35m ago
> People Tend to Overbuy
Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.
dcre · 24m ago
In my experience there is a real difference between the places available to rent and to buy. It is not an idealized single good with a spectrum of prices that line up cleanly with quality.
cschep · 37m ago
There used to be a world where you could get INTO the investment with almost free money. You can't get a 2% loan and dump it into the stock market. Well you can't do either anymore but you used to be able to :)
yrcyrc · 33m ago
Being 47 and still renting I think the piece missed a big issue, which is most prevalent these days: we cannot afford to buy. Anything. Anywhere.
I reckon I’m fatally doomed to renting.
zamalek · 32m ago
There is one unmentioned far future benefit: if you pay your mortgage off before retirement you'll probably enjoy more shelter security than your peers. Rent is a monthly cost (eating into your retirement) that could skyrocket (which your retirement plans may not have accounted for).
Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.
I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.
“Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?”
Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:
- It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.
- It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.
- It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.
- It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.
- It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.
- It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out."
isaacremuant · 25m ago
This is just propaganda to push people to cope and be part of a renter class that gets screwed over by a homeowner class.
No, don't be emotional, don't buy your own place and have stability. Own nothing and be happy! Let the corporations own everything and have "flexibility (TM)"
encoderer · 26m ago
All else being equal, a house is too personal a thing for me to rent. It would be like renting a complete set of clothes.
I don’t want to be a real estate developer writ large, but I do want to develop my own space and optimize it for my family as it grows and changes over time.
gedy · 27m ago
I don't disagree with the his points, however:
"The flexibility of renting has major financial advantages"
Like 80% of my motivation to make money in past was: to buy a house. I have no interest in FIRE and be a couch surfing digital nomad around the world or whatever.
So it's hard for me to be motivated by the financial aspect if the end result was no house for now basically.
bongodongobob · 32m ago
Renting is more expensive and you are just burning money vs building equity. This article is ridiculous.
Simulacra · 36m ago
My mortgage is $1900 a month and I am extremely grateful for that, because it's been that for three years. I chose to buy so that I could have more predictability in my housing costs, and maybe someday I'll move, but then I'll rent it out. All that to say, if you can buying is infinitely better.
apwell23 · 33m ago
only because you got lucky to buy at that interest rates.
Thats like saying it makes sense to buy tesla stock because i bought it at $10
saulpw · 30m ago
You can refinance your mortgage when interest rates are lower.
apwell23 · 29m ago
you can also win a lottery
dangus · 14m ago
I like the general idea of this post but in the end I think it suffers from being too generalized and a little bit too renting biased.
> The math can always be made to “work” if you’re willing to adjust what or where you buy.
This is essentially a useless statement, the result of the math is either that either renting or buying makes you end up more wealthy. Whether it "works" or not isn't even the question, the question is which choice makes you more wealthy over time (more on that later).
For that, it's more helpful to use a rent vs. buy calculator [1] with the details of your market plugged in. Whether renting or buying makes more sense for you has a lot to do with where you live.
Let's continue on to the next section, "Buying a Home Isn’t Really an Investment."
The obvious rebuttal to this is "of course it is!"
> The decision is usually driven by lifestyle factors such as proximity to work, school districts, family, and the neighborhood.
All of these factors play in to whether or not the property is a good investment. Places that are in good school districts and have close proximity to job centers are good investments. The real estate investors that this section mentions think about these exact same things before starting projects.
Next section: "People Tend to Overbuy." Is there any data or evidence behind this whole paragraph? Are we just saying that people who own homes buy more furniture and stuff than renters? Maybe they do, but even if that's true could that be because they're more wealthy in the first place? Who knows, this entire paragraph is all assumptions and nothing backing it up.
Next section: "The Flexibility of Renting Is Undervalued"
6/10 Americans live within 10 miles of where they grew up, and 8/10 Americans live within 100 miles of where they grew up. [2] Is the flexibility of renting actually needed for most Americans? Are Americans missing out on job promotions because they own homes? (It's not like you can't sell a home quickly)
I would counter the premise of this section with "The stability of home ownership is undervalued" and "the 30-year fixed mortgage is a gigantic subsidy to homebuyers." By taking out a mortgage, homeowners are locking in the majority of their monthly cost with the exception of maintenance, utilities, and property taxes. They sit in their house for a few years and they end up paying below market on monthly payment compared to renters. So maybe they "overbought" a home with too many bedrooms to fit all phases of life, but it doesn't really matter because after the first ~5-10 years of home ownership they are going to be paying less than market-rate rentals.
The 30-year fixed mortgage allows homeowners to refinance and minimize their rate pretty much any time the rate drops, so basically every renter is always getting the lowest rate possible since from their purchase date forward, and it never goes up.
The last section: Why the Home Investment Myth Persists
Sure, this section is technically correct, someone investing money elsewhere is going to beat real estate on returns. But you can't live in an index fund, an index fund may not have the same protections [a] and tax incentives as a home, and it is a fact that most people are not disciplined with investments which means the forced investment of a mortgage's end result is that homeowners are far more wealthier than renters on average. [3]
[a] For example, your home equity doesn't count toward the ability to pay calculation for FAFSA, and you are generally protected from having your home taken away from you if you get into most debt situations. Check out how OJ Simpson avoided paying his civil judgment: https://www.kiplinger.com/retirement/how-did-oj-simpson-avoi...
Imagine two things being able to be true at the same time
That sometimes under the right circumstances a home is both a great place to live, the best deal you can get in your area, and also an investment
You sort of alluded to it in your post, but it’s different for everyone, but then you go on ahead and speak as if there were one answer
Good for you you chose to rent - you don’t have to deny homes potentially being good investments to validate your decision
FpUser · 40m ago
I am a home owner since 1998 I think that none of you arguments against owning make sense to me. To me your writing reads like following: due to the world gone crazy I can no longer afford to buy house so let's concoct some soul soothing reason and pretend that all is fine.
foobarian · 37m ago
Yes and how about also people in older generations who are done paying off mortgages and now live paying just the real estate tax.
Simulacra · 34m ago
Because they purchased. And they stayed there. I think people forget that boomers bought their houses 20 30, 40 years ago, and they stayed there. It's not like they bought it 10 years ago and all of a sudden it went up dramatically. I don't think a lot of people consider that longer timeline, it's just easier to blame "boomers."
prasadjoglekar · 28m ago
And maintained it. The house didn't just get better over 30 years. A lot of weekends were spent painting and mending things.
And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.
We need, as a society, to bring back generational communities.
Our workplaces are not our families!
I'll also add, that once you have children, owning your home is a very welcome level of stability.
Nothing worse than looking for a new rental and potentially being forced to upend all your routines and find new schools for the kids as you cant rent in the same area anymore!
It depends.
Personally, after witnessing both sides of the coin second-hand, I am not leaning in the direction of either buying or renting in absolute. It is highly dependent on the context and circumstances of a specific situation/market.
I am aware that this is just an anecdote (i.e., it isn't going to say much about the overall state of things across all states in the US), but there is a specific example I'd witnessed myself, which led me to believe that this is a bit more complicated than just "renting is the move" and "buying is the move."
TLDR: one of my former coworkers bought a condo in Queen Anne neighborhood of Seattle (which is a highly desirable and expensive neighborhood in that metro area). Within the first year of his ownership, the pipes behind his laundry machine burst due to no fault of his own (while he was at work), and it ended up flooding the apartment of the neighbor below. It decimated the flooring of both his own unit and the unit of the neighbor below. He ended up was facing the costs of unfucking his own condo AND the unit below.
I don't remember the numbers off the top of my head at all (as the whole thing happened around 2018-2019, and I wasn't really involved in any direct way at all), but I remember that he did the math and (based upon the numbers, reasonably) ended up selling his condo as soon as he'd finished fixing his own unit + paying for the fixes to the unit below.
Meanwhile, I am currently renting, and if the pipes in my unit burst and end up flooding the neighbors below, it would be mostly the problem of the property management company running my building to deal with, not mine. This alone make me feel way more stable than if I'd owned the unit I live in atm.
However, I think this depends highly on the personality of the renter/owner, and that is the point this article misses.
If someone is, like myself, comfortable with risks, I'm ok with changing neighbors, locations, and I've lived on 3 different continents and 9 cities?
If you're someone who craves stability, then this isn't for you, and you're proably better off buying a house.
Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage.
But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your retirement. If you rent you're left with nothing.
Then why is not everyone buying? Because few people can afford the 20% downpayement needed for mortgage. In reality it's even more because you have to furnish and/or renovate the place.
Renting has it's charm for youngsters, but once you get older and you start acummulating things the lack of stability and the danger of your landlord having a change of heart and breaking the contract (either because he decided to sell it or give it to a child) becomes a pain in the ass. Even having a pet is troublesome and many property owners will refuse to rent if you have a dog or a cat.
As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.
They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.
this touches on something the author sorta hinted at, mortgage as a forced investment. Some buyers/renters won't view the down payment as an investment opportunity if they go the path of renting, they decide to rent and suddenly theyve got a new car loan and all new furniture or whatever, and that down payment is gone, instead of compounding year over year in an attempt to make renting a financial advantage
you can usually napkin math investing the down payment and it makes more financial sense to rent, but from a human perspective its just not gonna happen like that for so many people. they are gonna mess with that money instead.
and while its not necessarily wrong, I believe it under weights a few points:
- Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment.
- Leverage: I can't get a $700k loan to put into equities but I can for a home.
- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.
- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit
- Stability: No one can evict me into a hot rental market to suit their needs.
I wish more people talked about these points, selfishly so I didnt take so many of these articles at face value because in hindsight I wouldve bought earlier.
The bank can, if you take out too many loans against your house that you can’t pay back. When you barrow against your house you’re increasing your risk.
“Rational people don’t risk what they have and need for what they don’t have and don’t need.” - Warren Buffett
My house is paid off now and I can’t think of anything that would make me barrow against it. Setting aside variable maintenance costs, with only having to worry about property taxes now, I could work at Costco and make ends meet now. That gives me some peace of mind against an uncertain job market. A loan against the house would change that equation wildly.
Renting it out is also not always gauranteed or easy if you are not nearby or don't want to deal with being a landlord, so imho that flexibility is not really there in many cases.
I've been a homeowner for 30 years and am now renting a temporary apartment in a new location. There's a lot of upside of renting. I don't like apartment living at all, but I don't feel anchored to the location at all and have the freedom to live wherever without a bunch of overhead. I'm definitely spending more money per square foot renting, and obviously none of this is coming back to myself or my family, but that's ok for me right now.
I think my main takeaway is that there is no rule about what is best. It's what's right for you at that time of your life. A house is nice when you have kids and want some stability. Renting is nice when you want freedom and flexibility.
If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)
As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.
Why there is no exponential taxes for owning that many properties after they are finished?
Statistically, I’m in the top ~5% of income earners (from the data I can find), with no debt, and I couldn’t afford $6k/month.
I bought a house because I don't understand the rental market anymore. I don’t really like being a home owner, but the rent prices these days are so out of hand. I think the most I ever paid for rent was $1,680 and I felt irresponsible doing that. I don’t know how all these rentals are full with the prices they’re charging. Does everyone have roommates?
So, yes, $6k per month is house-poor numbers, but it’s workable for sure. If you’re even better off, good for you, it may fall into affordable range.
My current city in central Europe is very renter-friendly. A nice apartment would cost $600k, but rents practically never exceed $1500/month. Under such circumstances an apartment doesn't seem like a great investment.
I've also lived, briefly, in Canada -- where rents were often extremely high relative to home prices. (I have a friend who pays $300/month on a mortgage and rents the place out for $2000/month. At the same time, the house has nearly tripled in value over the past ~7 years.)
Here a variable rate is norm and has been since I remember.
I was eyeballing a particular house with specific financing in mind just before covid started, and if I'd pull a trigger on that transaction my monthly payement would more than double at some point.
Half of American renters are cost burdened, for example.
https://news.ycombinator.com/item?id=43119657
(own my primary US residence free and clear, my housing savings goes into investments, which grow faster than inflation)
some parts of california have been affected by insurers more than others, but in those more minimally affected? prop tax is suppressed via prop 13 (for better or worse), and the cost of insurance is a drop in the bucket relative to what id be paying for a roof over my head otherwise tbh
my life cannot be uprooted based on the whims of a crummy landlord or because my obligation has crept out of my budget
i bought conservatively and now have a tiny payment relative to what i’d otherwise have to pay to live in the bay area. peace of mind is hard to put a price on
Every time I see someone arguing about minimum wage, their benchmark seems to be having a 2 bedroom apartment, not a studio or even a 1 bedroom. I find this wildly unrealistic.
Apartments also sell people on amenities that almost no one uses, but justify higher rent prices.
These luxury apartments are used in the same way people use their over-bought homes. It’s a way to buy into a different class of neighbors, feel like you’re not sacrificing with a rental, signal to others that you’re doing well, ideally have better management/maintenance, and live in a place that out-classes the home they may otherwise buy… all with no maintenance or investment.
I’ve seen some crazy rent prices. I’m not sure who is renting these places, but someone must be, because they keep building them.
I prefer renting, but I ended up buying a house because rent prices starting going up beyond what I felt with reasonable.
The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.
When I didn't like mowing the hill behind my house, I had a retaining wall put in. Also preserving the elevated deck.
When I found i didn't like the elevated deck, I build a new ground level one with my father in law.
I'm not sure I like entering into the kitchen so I'll probably put a door into the porch instead.
I'm not saying I couldn't just rent a new place to find better digs. But I hate moving, hate shopping for new houses, love this yard and house in general, and am not paying more month to month than I was when renting (and get much more space for the dollar).
I don't want this place to make me rich, in the above you might get a sense that I already feel content. That's my decision criteria and I don't know why that's incorrect. You don't have to run a household like an investment company.
In my country, buying a home is the only way to get cheap debt for the vast majority of people.
Detailed analyses exist, e.g. https://www.youtube.com/watch?v=j4H9LL7A-nQ .
As Ben notes the tax advantaged status of primary homes has more capacity than most tax sheltered alternatives.
But a lot of this depends upon income.
This reminds me, I need to buy more DFA. :)
From a purely financial perspective, I think you could say: the more protections you as a renter receive, the more renting makes sense.
Living in Germany, I do have quite a few protections as a renter. My landlord can't arbitrarily hike prices, etc. In my current city, it would be absolutely impossible to get a mortgage anywhere close to my current monthly rent (even with substantial equity)
My opinion is the issue with renting and housing in general is the world wide financialization of real estate. It's being treated as a primary investment instead of the secondary investment it is. Some fraction of people are getting exceedingly wealthy but there are deep negative effects.
My bet is the crashing fertility rates are likely what's going to put a stop to it. Notable every 15-20 years we have a bigger than the previous financial crisis. Once populations start to decline the bottom will fall out.
https://www.realpage.com/storage/files/blog/posts/images/202...
This means that, generally, no matter where you buy, you won't want to have bought anywhere else after a few years. There are cases where you might hate it, of course, but you could still sell/rent to someone else and buy/rent elsewhere.
If you get unlucky with no reason to still be in a particular city and that city starts a downward swing, there's no gaurantee it ever comes back and you're stuck taking care of something that you might never be able to sell for anything but a loss.
I will likely stay a renter and keep that flexibility in my new city for a long time after this experience.
I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p
I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion. https://arriens.us/articles/housing.html
Buying a house is often an emotionally motivated decision with many important risk factors... Were inspections comprehensive and thorough or did they overlook an issue with the foundation, wiring, plumbing, etc.? Did the buyer understand the required disclosures, and specifically understand what the seller is not obligated to disclose in their jurisdiction? (e.g., in many areas the seller is not obligated to disclose if a child sex offender lives next door). Is the neighborhood up and coming or struggling?
Getting these wrong can easily negate the potential upsides of ownership.
Renting can also be great, but as the article points out, if it mostly just results in more disposable cash, then you may be better off owning (forced savings). Rental properties often cannot be sublet and also cannot be used as collateral or passed on to family members with a step-up in basis. Rental leases also fluctuate with the market, so it's not uncommon in big cities for renters to be paying close or equal prices of their homeowners next door.
Anecdotally I know many folks who have rented their way through, invested wisely, and done well. I also know folks who have moved around the US and always purchased, did their homework, capitalized on tax incentives, and now have a stable of rental properties that helped them become FIRE.
I get good flexibility and value for my dollar. The savings over renting is insane.
It currently only profitable only of ppl who got super lucky during covid .
Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.
Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.
I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.
“Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?”
Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:
- It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.
- It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.
- It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.
- It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.
- It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.
- It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out."
No, don't be emotional, don't buy your own place and have stability. Own nothing and be happy! Let the corporations own everything and have "flexibility (TM)"
I don’t want to be a real estate developer writ large, but I do want to develop my own space and optimize it for my family as it grows and changes over time.
"The flexibility of renting has major financial advantages"
Like 80% of my motivation to make money in past was: to buy a house. I have no interest in FIRE and be a couch surfing digital nomad around the world or whatever.
So it's hard for me to be motivated by the financial aspect if the end result was no house for now basically.
Thats like saying it makes sense to buy tesla stock because i bought it at $10
> The math can always be made to “work” if you’re willing to adjust what or where you buy.
This is essentially a useless statement, the result of the math is either that either renting or buying makes you end up more wealthy. Whether it "works" or not isn't even the question, the question is which choice makes you more wealthy over time (more on that later).
For that, it's more helpful to use a rent vs. buy calculator [1] with the details of your market plugged in. Whether renting or buying makes more sense for you has a lot to do with where you live.
Let's continue on to the next section, "Buying a Home Isn’t Really an Investment."
The obvious rebuttal to this is "of course it is!"
> The decision is usually driven by lifestyle factors such as proximity to work, school districts, family, and the neighborhood.
All of these factors play in to whether or not the property is a good investment. Places that are in good school districts and have close proximity to job centers are good investments. The real estate investors that this section mentions think about these exact same things before starting projects.
Next section: "People Tend to Overbuy." Is there any data or evidence behind this whole paragraph? Are we just saying that people who own homes buy more furniture and stuff than renters? Maybe they do, but even if that's true could that be because they're more wealthy in the first place? Who knows, this entire paragraph is all assumptions and nothing backing it up.
Next section: "The Flexibility of Renting Is Undervalued"
6/10 Americans live within 10 miles of where they grew up, and 8/10 Americans live within 100 miles of where they grew up. [2] Is the flexibility of renting actually needed for most Americans? Are Americans missing out on job promotions because they own homes? (It's not like you can't sell a home quickly)
I would counter the premise of this section with "The stability of home ownership is undervalued" and "the 30-year fixed mortgage is a gigantic subsidy to homebuyers." By taking out a mortgage, homeowners are locking in the majority of their monthly cost with the exception of maintenance, utilities, and property taxes. They sit in their house for a few years and they end up paying below market on monthly payment compared to renters. So maybe they "overbought" a home with too many bedrooms to fit all phases of life, but it doesn't really matter because after the first ~5-10 years of home ownership they are going to be paying less than market-rate rentals.
The 30-year fixed mortgage allows homeowners to refinance and minimize their rate pretty much any time the rate drops, so basically every renter is always getting the lowest rate possible since from their purchase date forward, and it never goes up.
The last section: Why the Home Investment Myth Persists
Sure, this section is technically correct, someone investing money elsewhere is going to beat real estate on returns. But you can't live in an index fund, an index fund may not have the same protections [a] and tax incentives as a home, and it is a fact that most people are not disciplined with investments which means the forced investment of a mortgage's end result is that homeowners are far more wealthier than renters on average. [3]
[a] For example, your home equity doesn't count toward the ability to pay calculation for FAFSA, and you are generally protected from having your home taken away from you if you get into most debt situations. Check out how OJ Simpson avoided paying his civil judgment: https://www.kiplinger.com/retirement/how-did-oj-simpson-avoi...
[1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
[2] https://www.census.gov/library/stories/2022/07/theres-no-pla...
[3] https://www.nar.realtor/magazine/real-estate-news/study-home...
That sometimes under the right circumstances a home is both a great place to live, the best deal you can get in your area, and also an investment
You sort of alluded to it in your post, but it’s different for everyone, but then you go on ahead and speak as if there were one answer
Good for you you chose to rent - you don’t have to deny homes potentially being good investments to validate your decision