Not everyone needs to own a home. If rental rights were stronger and we didn’t have STR’s owned by private equity firms gobbling up real estate and driving up prices then we’d likely see a much more sustainable mix of rental and ownership available to everyone. The one positive thing about current interest rates is it’s scaring folks away from investment properties.
Obviously this varies from city to city but it is definitely a consistent issue in many major cities.
It’s a multi-faceted problem, I am just discussing a major part of the issue as it relates to the US housing market. It’s a piece of the discussion. I mean the opening of the article is about how interest rates influence buying and provide certainty to buyers. The whole thing is about the market cooling which impacts everyone.
The nice thing about owning a home is that you actually build up your saving. If you at some point get in hot waters you can sell your home to get some backup cash.
In a healthy housing market, there’s enough competition that renting is much cheaper than buying. Indeed, I remember it being that way when I was a kid. Over the course of my life, landlording went from something that retired people did for a very small additional income stream to a get rich quick scam.
You’re forking over interest into the furnace each month as well as home insurance and property taxes. My escrow is higher than my principal. As a renter you have none of these costs.
When interest rates are low and you lock one in, yes, owning a home can be very economical. But just owning one is not always better. A lot of it depends on if you are solo or have a family as well.
It must be different in different places. I went from a renter in one area, to an owner in the same area, to a renter again in a different area in the period of 5ish years (long story).
Rent in the first area was about the same cost for a two bedroom, two bath, 1000 sq ft apartment as the entire mortgage on a 3 bedroom, 2 bath, 1200 sq ft house, including principle, interest, and taxes. The only reason people would rent there is because they don’t have the money for a down payment.
When we left that area, we could have become landlords and rented the house out. We could have easily gotten twice the entire mortgage in rental income, but we felt that being a landlord was unethical (especially since we were relatively wealthy for that area, although we made less than the US median family income). We sold the house and broke even.
Now, we live in a much higher COL area. It’s true here that renting is much cheaper than buying, but that’s because you can’t get a SFH for less than about $1.5 million here. My rent on my 1 bed, 1 bath, 700 sq ft apartment is more than twice my mortgage in my previous area. Our incomes have increased, now we make slightly above the median family income. But our leftover at the end of the month honestly went down a ton. If we weren’t here to get an education, we’d be gone by now.
Just saying… As someone who has both rented and owned, I definitely feel more like I’m shoveling money into a fire as a renter. Owning was the best financial situation I’d ever been in.
So I’m going to change the numbers but keep the ratios the same here.
I paid $100/mo as a renter for me and my wife. Our first house cost $200/mo not including home insurance, things like HVAC/termite/pest contracts, annual repairs, etc. Our house is definitely bigger but if I adjust for sqft (same neighborhood so that’s accounted for) our rent would’ve been about $140/mo. But after that, it’s just utilities. Not even appliances.
The benefit of the house was a fair bit went towards principal but for most fixed rate 30yr mortgages even at a great interest rate, you’re paying more than half into interest when you pay your mortgage every month until about year 9 or 10. That interest is money completely lost, no value for you. And if the market goes downward, you can lose money on the sale or at the very least eat away at your investment.
I am not saying in the long run owning is not advantageous. But there is a lot to consider especially when historic interest rates are no longer available that can make renting the superior option. Especially if it is just one or two people living together.
That would be true of landlords didn’t also know that and, in turn, redline rent to the maximum tenants can possibly pay.
I don’t know about the US specifically, but In Canada, investors big and small have bought up all the rental stock and rents are now maxed out beyond what many people can pay.
Big rental companies/STR companies and PE firms that also dabble in both drive up the cost of neighborhoods far more than typical landlords. Landlords are usually an issue for driving the value of a building down due to refusal to fix anything that isn’t absolutely about to kill someone - and even then they often don’t until an assessor or someone identifies it and makes threats.
Don’t get me wrong, landlords are an issue too. But my first comment I said renters need more rights. That’s me saying they need protection from greedy/negligent landlords as well.
Not everyone needs to own a home. If rental rights were stronger and we didn’t have STR’s owned by private equity firms gobbling up real estate and driving up prices then we’d likely see a much more sustainable mix of rental and ownership available to everyone. The one positive thing about current interest rates is it’s scaring folks away from investment properties.
Obviously this varies from city to city but it is definitely a consistent issue in many major cities.
Maybe, but that doesn’t really have anything to do with what the article is covering.
It’s a multi-faceted problem, I am just discussing a major part of the issue as it relates to the US housing market. It’s a piece of the discussion. I mean the opening of the article is about how interest rates influence buying and provide certainty to buyers. The whole thing is about the market cooling which impacts everyone.
The nice thing about owning a home is that you actually build up your saving. If you at some point get in hot waters you can sell your home to get some backup cash.
In a healthy housing market, there’s enough competition that renting is much cheaper than buying. Indeed, I remember it being that way when I was a kid. Over the course of my life, landlording went from something that retired people did for a very small additional income stream to a get rich quick scam.
This.
15 years ago, wifey and I talked of selling our home, renting (turnkey), and living off/investing the remaining equity.
Today? Let’s just say that “the best laid plans something something…”
As a boomer, one of the biggest “flaws” I see in this irl, is that people won’t sell their shit, and their dreams die in their sleep, with them.
Yea, that’s true. But I would say that is still better then forking over money into the rent furnace each month right?
You’re forking over interest into the furnace each month as well as home insurance and property taxes. My escrow is higher than my principal. As a renter you have none of these costs.
When interest rates are low and you lock one in, yes, owning a home can be very economical. But just owning one is not always better. A lot of it depends on if you are solo or have a family as well.
It must be different in different places. I went from a renter in one area, to an owner in the same area, to a renter again in a different area in the period of 5ish years (long story).
Rent in the first area was about the same cost for a two bedroom, two bath, 1000 sq ft apartment as the entire mortgage on a 3 bedroom, 2 bath, 1200 sq ft house, including principle, interest, and taxes. The only reason people would rent there is because they don’t have the money for a down payment.
When we left that area, we could have become landlords and rented the house out. We could have easily gotten twice the entire mortgage in rental income, but we felt that being a landlord was unethical (especially since we were relatively wealthy for that area, although we made less than the US median family income). We sold the house and broke even.
Now, we live in a much higher COL area. It’s true here that renting is much cheaper than buying, but that’s because you can’t get a SFH for less than about $1.5 million here. My rent on my 1 bed, 1 bath, 700 sq ft apartment is more than twice my mortgage in my previous area. Our incomes have increased, now we make slightly above the median family income. But our leftover at the end of the month honestly went down a ton. If we weren’t here to get an education, we’d be gone by now.
Just saying… As someone who has both rented and owned, I definitely feel more like I’m shoveling money into a fire as a renter. Owning was the best financial situation I’d ever been in.
So I’m going to change the numbers but keep the ratios the same here.
I paid $100/mo as a renter for me and my wife. Our first house cost $200/mo not including home insurance, things like HVAC/termite/pest contracts, annual repairs, etc. Our house is definitely bigger but if I adjust for sqft (same neighborhood so that’s accounted for) our rent would’ve been about $140/mo. But after that, it’s just utilities. Not even appliances.
The benefit of the house was a fair bit went towards principal but for most fixed rate 30yr mortgages even at a great interest rate, you’re paying more than half into interest when you pay your mortgage every month until about year 9 or 10. That interest is money completely lost, no value for you. And if the market goes downward, you can lose money on the sale or at the very least eat away at your investment.
I am not saying in the long run owning is not advantageous. But there is a lot to consider especially when historic interest rates are no longer available that can make renting the superior option. Especially if it is just one or two people living together.
Sure but as a renter you aren’t responsible for upkeep/changes to the home so you can also squirrel away more in a more reasonable market.
Nobody likes big unexpected costs. That’s why landlords tend to offload the risk to PMCs, warranties, and insurance.
And then your rent pays for the monthly costs of all of that.
That would be true of landlords didn’t also know that and, in turn, redline rent to the maximum tenants can possibly pay.
I don’t know about the US specifically, but In Canada, investors big and small have bought up all the rental stock and rents are now maxed out beyond what many people can pay.
Big rental companies/STR companies and PE firms that also dabble in both drive up the cost of neighborhoods far more than typical landlords. Landlords are usually an issue for driving the value of a building down due to refusal to fix anything that isn’t absolutely about to kill someone - and even then they often don’t until an assessor or someone identifies it and makes threats.
Don’t get me wrong, landlords are an issue too. But my first comment I said renters need more rights. That’s me saying they need protection from greedy/negligent landlords as well.