Buying A House: C or D?

owning a house really means something different depending on where you are living and who lives with you imo

― mh, Monday, June 26, 2023 2:37 PM (five hours ago) bookmarkflaglink

There's definitely much more incentive to own one in that I have kids and want them to grow up in a place and not multiple places. I would consider renting again once they move out permanently.

Not convinced that inventories are low simply because selling would mean a higher interest rate mortgage. In Australia, inventories are low too, which is holding up prices. But we don't have mortgages with an interest rate fixed for the duration. Like the UK, most homeowners are on a variable rate mortgage or on 2 or 3 year fixed rate mortgages. But still we have the low inventory/prices holding up dynamic, so something else is going on.

well yeah it's never just one factor is it? where i live the mortgage interest rates plus lack of inventory are crippling the market, and there's no quick solution to the inventory problem.

In 2021 I bought a "house" (older double wide in a park where I pay monthly rent in the lot) and it's... fine but not exactly where we want to be for the rest of our remaining time. So last week I bought nearly 20 acres of unimproved land about an hour south of us. Initial plan is off-grid infrastructure and a group of tiny houses/cabins and eventually live there full time and have a pet sanctuary while managing the natural wetland area as well as we can. So - come camp?

That sounds amazing! It will be a lot of hard work no doubt but what a project!

tha does sound good. all my Grand Designs fantasies.

radio 4 did a 'but what about the renters?' piece the other day, re the interest rate increases. but the estate agent they talked to was more interested in telling them about the bloke who'd just sold his 14 rental properties because the paperwork was now too much of a faff.

Bless

Jaq, that's awesome!

tbf, I think they meant, "If you are living in an upper-middle-class home and have a mortgage at 3%, it discourages you from taking out a new mortgage to buy YET ANOTHER upper-middle-class home at 6%." tl;dr. They are talking mostly about rich people problems. No one knows what - gasp - RENTERS do when their marriages deteriorate. That is beyond our purview to contemplate.

this is less of a rich people problem than a middle class/working class problem, esp. if there are kids. Because it isn't just a sell one house and buy another house, it's a "support two households with the same income that only had to support one" ... It's often less "sticker shock" for renters to move, though it depends on a bunch of things

I know people who are going through this right now - they're selling the house and renting two apartments nearby, which is still significantly more combined than their house payments, although their house had appreciated since they bought it so they benefited from that at least. You do have to be pretty well off to think about buying a second home while keeping the first.

you just have to get married again immediately

I joke, but a friend’s sister-in-law kind of did this

We’re going back to renting.

This is how I break it down.

Pros:

The rent is the most you pay each month for housing. The mortgage is the least you pay.

Problems are someone else’s problem.

We’re able to afford a nicer home in a nicer neighborhood than if we bought. This is NYC. YMMV.

We can move more easily.

Cons:

Rent goes up every year.

Might have to move when you don’t want to.

Neither:

Equity vs “throwing your money away” only relevant if house prices definitely rise faster than whatever else you’d do with the money (not true for us).

you are a much smarter guy than i am but im lost at that final one

nb this may be explained by the irish housing market ofc

Well the last point also assumes that a mortgage costs more than rent, freeing up "extra" monthly money to go into savings. Probably still true in NYC, but where I am e.g. we bought our house in 2014 at a low interest rate, and since then rents around here have gone up tremendously. Our mortgage is definitely lower than rent we'd be paying for a comparable place right now. But that's a function of when we bought, obviously.

speaking *purely financially* (i.e. forgetting you need somewhere to live, and that security and stability are worth something)...

i totally concede that buying a house is rarely a bad financial move for most people, and usually a pretty good one.

- you are forced to invest (otherwise you are homeless), which is a good behavioral hack because it means that most people "save" more than they otherwise would

- you are investing money in an appreciating asset (in most places)

- you are investing it in a way that is heavily tax-advantaged (in most places)

but there are downsides:

- you are locking your money up in a way that you can't get at unless you move house, which is expensive and inconvenient.

- buy buying a house, you are actually doing something quite risky: concentrating all your savings in a single investment rather than diversifying. house prices might fall (unlikely but not impossible in many places, but happening right now in canada and NZ for example. it does happen!). and house prices might go up, but at a rate of return less than you could get by doing something else with the money (e.g. suppose house prices go up 5%/year and the stock market goes up 10%/year).

so *purely financially*, renting makes sense if you can do it for cheap enough that you save money vs a mortgage payment (this is true in most cities!) and you trust yourself to invest the money you save in ways that have less risk and/or more reward than a single house (this is often not true, depends very much on your outlook, circumstances, etc.)

id find it hard to see how ill do any better than just paying off the mortgage and having the place for life but yeah renting the place would be significantly more expensive than current mortgage is id guess also

xp

xp, yeah changing rates etc. matter a lot. right now renting is "cheaper" almost everywhere in america, but fwiw that was true in a lot of cities even when mortgages were at 3%.

to invest the money you save in ways that have less risk and/or more reward than a single house

like what, for example?

to be clear, i'm talking about moving to NYC. i.e. the choice isn't between a five year old mortgage at 2.75% and renting. it's between buying a 2 bed place with a 6% mortgage and renting a three bed place for 2/3 the monthly housing payment. so it makes the financial case easy for us.

but like i say, even if renting cost more, there *are* financial downsides to having your biggest (and for many people only) savings being 1) a single asset 2) that you can't actually sell.

but like i say, even if renting cost more, there *are* financial downsides to having your biggest (and for many people only) savings being 1) a single asset 2) that you can't actually sell.

xp you are also iirc paying 1 mortgage in another expensive city already, so you have a decent chunk invested in residential property. And some mortgage tax breaks have total mortgage limits, etc. So it is a special case.

xp lol, totally agree!

like, it also really, really sucks to move when you rent!

like what, for example?

― budo jeru, Thursday, July 6, 2023 4:12 PM (three minutes ago) bookmarkflaglink

in the US?

you can get the same average return with less risk by investing in real estate in a diversified way (e.g. a REIT, buying shares of lots of buildings rather than 100% of one building).

you can get twice the annual return with more risk (but in a way that probably doesn't matter if you're saving on decade+ timescales) by investing in the stock market.

right now renting is "cheaper" almost everywhere in america

Definitely not true here.

Btw guys my pro tip is to pay off your mortgage, then you don't have any monthly payments, hope that helps!

even paying a tiny bit extra in the first few years has an outsized influence on total debt!

you are also iirc paying 1 mortgage in another expensive city already, so you have a decent chunk invested in residential property

yup. the financial arguments against home ownership break down in CA (where we live for now, and where we own). house prices appreciate faster here than basically anything else you can own (lmao) except lottery tickets, and receive insanely preferential tax treatment thanks to suicidal ballot measures. it would be better if this weren't true. it isn't (as) true in the place we're moving to, which is where we're renting there.

Nothing wrong with renting when you move to a new city, but are you factoring in the NYC apartment broker fee (15% of a year's rent every time you move) and the rental bidding wars going on for NYC apartments right now, or maybe you're talking about the suburbs.

You might want to check on the NYC subreddits to get a sense of the rental market there right now.

already signed a lease!

Don’t you have kids? The blasé attitude about “might have to move” seems kind of insane to me tbh!

totally! i wouldn't call it blase! it's definitely not ideal! but 1) we gain a bedroom and pay a lot less per month by renting 2) once the kids are in school they can stay in that school even if we have to move, so "have to move" would hopefully just be an (admittedly huge) hassle rather than generational trauma.

here's how I break it down to an extent:

is the monthly rent less than the all the parts of the homeownership payments that's not the principal? (that is to say: interest on your mortgage; home insurance; property taxes; HOA/maintenance fees). if so, then renting makes a ton of sense!

the trump tax cuts also took away a big benefit of home ownership, which is the property tax and interest deduction. or rather, it didn't take it away, but by capping the SALT deduction at $10k, it makes it a lot harder to combine property tax/interest and SALT to significantly beat the (increased under the same bill) standard deduction.

however, there are of course a bunch of non-financial benefits to owning, such as installing whatever fixtures you want, painting your walls black, buying that $3k QD OLED TV you've had your eye on without worrying about having to move it in a year, etc. etc.

also, since home ownership is subsidized by the US government via the artificiality of the 30-year fixed rate mortgage and a guaranteed bid on all mortgages via fannie and freddie, it's a relatively safe investment all things considered.

but yes, for most people who don't have $1-2M of cash on hand, it makes a ton more sense to rent in NYC than to subject yourself to the humiliation of paying $1M for a 500 ft studio.

non-financial benefits to owning

and also you get to (a) live in it and (b) not pay rent

yeah but even if you own outright with no mortgage you get to pay property taxes, insurance, and hoa/maintenance fees. also repair/replacement costs for everything that breaks in a house. those don't go away just because you own! also, your house could burn down if you live in california and your insurance might not cover that (true as of a few months ago.) then you lose all your equity!

you can buy a house now, and may think your house is impervious to climate change, but can you really predict what'll happen in 30 years, when your mortgage finally gets paid off? you feeling lucky?

right, because my landlord pays for shit when it breaks in my apartment! lmao

you can do the same in a house and just use half-broken shit all the time but you have to make up excuses when you sell it

or just ask for slightly less?

impervious to climate change, but can you really predict what'll happen in 30 years

explain how renting is preferable in this scenario!

right, if you buy a condo you're hopefully mostly insulated from repair costs, but that'll depend on your association. i know that my landlord had about $500 a month added to her condo fees ~6 months this year because they needed to replace the water heater in the building.

if you own an actual house and not just a condo, replacing a water heater or central air unit, replacing the roof, dealing with leaks (or worse: floods!) etc. etc. can be, uh, expensive? like, $1k-5k expensive per pop? or more?

lololololol

i really feel like im missing something here

i pay a mortgage and its the same as rent month to month or its higher or lower, grand ok month to month im better or worse off

after 300 months i own a thing worth todays equivalent of half a million or so or whatever

i feel like you're handwaving that away a fair bit?

our new roof was $10K like 6 years ago, I shudder to think what it would cost now

xpost

our entire society and economy is a scam and we all know we are massively fucked as a species. we're going to see unprecedented instability in our lifetime, sure! not sure what pointing that out has to do with this convo, except i guess to highlight its futility, which, fair

explain how renting is preferable in this scenario!

― budo jeru, Thursday, July 6, 2023 6:06 PM (one minute ago)

if the place you're renting burns down or gets flooded due to climate change, you just move to a new place? you're just out the rent you've paid over the years? recovering the value of the house itself is not your problem? sure you lost all your rare jazz vinyl, but that's just like, stuff, man. you don't need that to live.

Or if you bought a house somewhere that became essentially uninhabitable because it got too damn hot all the time, and you needed to move, you could have a hard time getting anyone to buy it. So in that sense climate change argues for renting. (Something I'm pondering as we continue to talk about moving to NOLA in a few years.)

?

the ability to install decent quality heating/insulation/cooking facilities over the years also strikes me as a value being handwaved away here but having rented in places with storage heaters or cardboard walls or etc etc its also a very real benefit

i really feel like im missing something here

i pay a mortgage and its the same as rent month to month or its higher or lower, grand ok month to month im better or worse off

after 300 months i own a thing worth todays equivalent of half a million or so or whatever

i feel like you're handwaving that away a fair bit?

― Ár an broc a mhic (darraghmac), Thursday, July 6, 2023 6:08 PM (one minute ago)

monthly homeownership costs are much higher than rent in a lot of places in the US where hipster ilxors prefer to live, is the simple answer

xps i feel reasonably confident that homeowners wont be left to deal with such consequences as individuals in my society in my lifetime but its dair to consider that this is a risk with different variables in the states i guess

xp fair! i did mean to note that property tax here is like ...300 quid

i'm not trying to say that there aren't risks or expenses associated with homeownership, but i agree with darraghmac that the benefits are profound and obvious in a way that makes it difficult for me to understand why you'd prefer renting except when relocating, or short-term stays, etc.