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Buying a home is usually a bad investment
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2022 Jun 17, 1:16pm 2,418 views 35 comments
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15
Tenpoundbass
2022 Jun 17, 5:53pm
Tenpoundbass
2022 Jun 17, 5:53pm
It's the worst investment in a bubble market. And a no brainer in the bottom market.
A home is not an investment, a necessity is not an investment, it's a consumable. You have to have a place to live. You don't have to have two, and it doesn't have to be a palace.
People don't consider their lifestyle standards. There are people who rent luxury, and have zero to show for it. So if it takes that person $5K to $10K to live large in a rented Luxury suit. Then if that same person were to spend 1.5 million on a house or condo, and he were to live it in for 5 to 10 years. He would have paid the same had he rented a place. Down here in South Florida, you'll pay $5K to $16K on an expensive place. It really doesn't matter what your living quality is, the same scales no matter how much you paid for your house. If you figure ten years what you would be paying in rent. If you're in it for 10 years, then you broke even by this point. You could practically give the keys to a bum and walk away, and you didn't lose any money.
If you're trying to buy a house, any house, at any price, and flip it in a few months. That's where things go sideways.
A home is not an investment, a necessity is not an investment, it's a consumable. You have to have a place to live. You don't have to have two, and it doesn't have to be a palace.
People don't consider their lifestyle standards. There are people who rent luxury, and have zero to show for it. So if it takes that person $5K to $10K to live large in a rented Luxury suit. Then if that same person were to spend 1.5 million on a house or condo, and he were to live it in for 5 to 10 years. He would have paid the same had he rented a place. Down here in South Florida, you'll pay $5K to $16K on an expensive place. It really doesn't matter what your living quality is, the same scales no matter how much you paid for your house. If you figure ten years what you would be paying in rent. If you're in it for 10 years, then you broke even by this point. You could practically give the keys to a bum and walk away, and you didn't lose any money.
If you're trying to buy a house, any house, at any price, and flip it in a few months. That's where things go sideways.
16
porkchopXpress
2022 Jun 17, 5:57pm
porkchopXpress
2022 Jun 17, 5:57pm
Tenpoundbass says
That's how I'm now thinking about it. I need a place to live for the long term so why not get a tax deduction, pay myself back in principal, and make it the way I want it without getting kicked out.
A home is not an investment, a necessity is not an investment, it's a consumable. You have to have a place to live.
17
B.A.C.A.H.
2022 Jun 17, 6:13pm
B.A.C.A.H.
2022 Jun 17, 6:13pm
porkchopexpress says
I agree. That's why I was obsessed in my mid-20's of "owning" my residence.
What is silly is to have an inferiority complex to one's landlord.
it's not silly at all to be independent of a landlord
I agree. That's why I was obsessed in my mid-20's of "owning" my residence.
What is silly is to have an inferiority complex to one's landlord.
18
B.A.C.A.H.
2022 Jun 17, 6:14pm
B.A.C.A.H.
2022 Jun 17, 6:14pm
porkchopexpress says
Yep. But you hafta leave the Golden State to get the full deduction.
so why not get a tax deduction
Yep. But you hafta leave the Golden State to get the full deduction.
19
porkchopXpress
2022 Jun 17, 6:21pm
porkchopXpress
2022 Jun 17, 6:21pm
B.A.C.A.H. says
I disagree. You’re paying for their mortgage plus profit. Fuck that.
porkchopexpress says
it's not silly at all to be independent of a landlord
I agree. That's why I was obsessed in my mid-20's of "owning" my residence.
What is silly is to have an inferiority complex to one's landlord.
20
porkchopXpress
2022 Jun 17, 6:21pm
porkchopXpress
2022 Jun 17, 6:21pm
B.A.C.A.H. says
I am. Off to TN
porkchopexpress says
so why not get a tax deduction
Yep. But you hafta leave the Golden State to get the full deduction.
21
B.A.C.A.H.
2022 Jun 17, 6:25pm
B.A.C.A.H.
2022 Jun 17, 6:25pm
porkchopexpress says
Having an Inferiority Complex to anyone for anything is silly.
What is silly is to have an inferiority complex to one's landlord.I disagree.
Having an Inferiority Complex to anyone for anything is silly.
22
B.A.C.A.H.
2022 Jun 17, 6:27pm
B.A.C.A.H.
2022 Jun 17, 6:27pm
porkchopexpress says
Good move. Congratulations. We may join you, not to TN, but to a more financially prudent state than here.
porkchopexpress saysI am. Off to TN
so why not get a tax deduction
Yep. But you hafta leave the Golden State to get the full deduction.
Good move. Congratulations. We may join you, not to TN, but to a more financially prudent state than here.
23
Eric Holder
2022 Jun 23, 6:11pm
Eric Holder
2022 Jun 23, 6:11pm
ad says
This is an example of fucked up market. In such a market renting makes more sense, duh.
Say you live in Brooklyn, New York, and pay $2,500 a month to rent. If you buy your own place, you might pay $5,000 a month between your mortgage, taxes and other maintenance costs, Mallouk gives as an example.
This is an example of fucked up market. In such a market renting makes more sense, duh.
24
B.A.C.A.H.
2022 Jun 23, 6:54pm
B.A.C.A.H.
2022 Jun 23, 6:54pm
Eric Holder says
Yeah.
I looked on Zillow up my own dinky 53 year old stucco sh*tbox on a dinky lot in an undesirable neighborhood of 95148 (San Jose). It said $1.2 M.
It said "refi estimate" $6600 per month. I suppose that includes PITI but not a dime for maintenance on a 53 year old sh*tbox.
I suppose the Santa Clara County tax bill for a $1.2M purchase will be a bit more than $1k per month. Yes, I know, base rate is 1.000%, but there's a lot of Junk Fee assessments piled on.
It said the rent Zestimate® is $3600 per month. I know several renters. I think that's in the ballpark but a little high. Whatever. Suppose $3600.
It means the Greater Fool who would buy this place would pay an ownership premium of $3k per month, - that's an ownership premium of about 80% over renting. With the cash burn of $1k per month to fund local government retirement benefits.
Moreover, recent changes to the federal tax laws limit the deductibility of the mortgage interest and property taxes. So many ®ealtors over the years "coached" me on how wise and savvy homeownership would be for the tax breaks. F*ck them.
This is an example of fucked up market. In such a market renting makes more sense, duh.
Yeah.
I looked on Zillow up my own dinky 53 year old stucco sh*tbox on a dinky lot in an undesirable neighborhood of 95148 (San Jose). It said $1.2 M.
It said "refi estimate" $6600 per month. I suppose that includes PITI but not a dime for maintenance on a 53 year old sh*tbox.
I suppose the Santa Clara County tax bill for a $1.2M purchase will be a bit more than $1k per month. Yes, I know, base rate is 1.000%, but there's a lot of Junk Fee assessments piled on.
It said the rent Zestimate® is $3600 per month. I know several renters. I think that's in the ballpark but a little high. Whatever. Suppose $3600.
It means the Greater Fool who would buy this place would pay an ownership premium of $3k per month, - that's an ownership premium of about 80% over renting. With the cash burn of $1k per month to fund local government retirement benefits.
Moreover, recent changes to the federal tax laws limit the deductibility of the mortgage interest and property taxes. So many ®ealtors over the years "coached" me on how wise and savvy homeownership would be for the tax breaks. F*ck them.
25
AD
2022 Jun 23, 7:54pm
AD
2022 Jun 23, 7:54pm
If I want to buy a starter home for $500,000 at a 30 year mortgage rate of 3%, then my monthly payment is $2108. The bank determined I can afford that monthly payment.
Now with the rate at 6%, my monthly mortgage is $2998.
The home price would have to come down to $360,000 in order for the monthly payment to be near $2108 (for the 6% rate).
That means a drop of $140,000 (from $500,000 to $360,000 or 28%).
That is why I am figuring housing prices need to come down about 30%.
I think in a way the Fed is doing this to bring housing prices back to just above 2020 levels. They’ll keep rates steady for a while and then make adjustments as necessary.
For the ones who bought at 3% interest rate for a mortgage in 2020 to 2021, I don’t think this matters much if they plan on staying in their homes for at least 7 years.
Now with the rate at 6%, my monthly mortgage is $2998.
The home price would have to come down to $360,000 in order for the monthly payment to be near $2108 (for the 6% rate).
That means a drop of $140,000 (from $500,000 to $360,000 or 28%).
That is why I am figuring housing prices need to come down about 30%.
I think in a way the Fed is doing this to bring housing prices back to just above 2020 levels. They’ll keep rates steady for a while and then make adjustments as necessary.
For the ones who bought at 3% interest rate for a mortgage in 2020 to 2021, I don’t think this matters much if they plan on staying in their homes for at least 7 years.
26
zzyzzx
2022 Jul 1, 9:44am
zzyzzx
2022 Jul 1, 9:44am
https://www.dailybulletin.com/2022/06/29/california-renters-could-save-112000-vs-owning-over-5-years/
California renters could save $112,000 vs. owning over 5 years
California renters could save $112,000 vs. owning over 5 years
27
RWSGFY
2022 Jul 1, 10:31am
RWSGFY
2022 Jul 1, 10:31am
B.A.C.A.H. says
Then there is the itch to do "home improvement" which most of weemenz develop immediately after moving in (even though they liked the house as-is just fine up until you signed on the dotted line).... No such thing if you rent. You think granite countertops are "out" and marble are "in"? Tough cookies.
Eric Holder says
This is an example of fucked up market. In such a market renting makes more sense, duh.
Yeah.
I looked on Zillow up my own dinky 53 year old stucco sh*tbox on a dinky lot in an undesirable neighborhood of 95148 (San Jose). It said $1.2 M.
It said "refi estimate" $6600 per month. I suppose that includes PITI but not a dime for maintenance on a 53 year old sh*tbox.
I suppose the Santa Clara County tax bill for a $1.2M purchase will be a bit more than $1k per month. Yes, I know, base rate is 1.000%, but there's a lot of Junk Fee assessments piled on.
It said the rent Zestimate® is $3600 per month. I know several renters. I think that's in the ballpark but a little high. Whatever. Suppose $3600.
It means the Greater Fool who would buy this place would pay an ownership premium of $3k per month, ...
Then there is the itch to do "home improvement" which most of weemenz develop immediately after moving in (even though they liked the house as-is just fine up until you signed on the dotted line).... No such thing if you rent. You think granite countertops are "out" and marble are "in"? Tough cookies.
28
Onvacation
2022 Jul 1, 10:44am
Onvacation
2022 Jul 1, 10:44am
B.A.C.A.H. says
SELL!!! Sell it while you can!
I looked on Zillow up my own dinky 53 year old stucco sh*tbox on a dinky lot in an undesirable neighborhood of 95148 (San Jose). It said $1.2 M.
SELL!!! Sell it while you can!
29
Onvacation
2022 Jul 1, 10:48am
Onvacation
2022 Jul 1, 10:48am
zzyzzx says
But they'll spend it on frivolousness instead of saving it.
California renters could save $112,000 vs. owning over 5 years
But they'll spend it on frivolousness instead of saving it.
30
FortwayeAsFuckJoeBiden
2022 Jul 1, 10:50am
Onvacation says
you only live once. on death bed you will never regret having a good life.
zzyzzx says
California renters could save $112,000 vs. owning over 5 years
But they'll spend it on frivolousness instead of saving it.
you only live once. on death bed you will never regret having a good life.
31
Patrick
2022 Jul 1, 10:56am
Patrick
2022 Jul 1, 10:56am
zzyzzx says
Exactly. It all depends on the numbers.
The prices in coastal CA are generally too high to justify buying vs renting the equivalent.
https://www.dailybulletin.com/2022/06/29/california-renters-could-save-112000-vs-owning-over-5-years/
California renters could save $112,000 vs. owning over 5 years
Exactly. It all depends on the numbers.
The prices in coastal CA are generally too high to justify buying vs renting the equivalent.
32
Eric Holder
2022 Jul 1, 11:14am
Eric Holder
2022 Jul 1, 11:14am
Onvacation says
"Half of my money I spent on women, booze and fast cars. The rest I wasted".
zzyzzx says
California renters could save $112,000 vs. owning over 5 years
But they'll spend it on frivolousness instead of saving it.
"Half of my money I spent on women, booze and fast cars. The rest I wasted".
34
B.A.C.A.H.
2022 Sep 23, 12:28pm
B.A.C.A.H.
2022 Sep 23, 12:28pm
Onvacation says
Do you live in California? Do you know about Proposition 13?
B.A.C.A.H. says
I looked on Zillow up my own dinky 53 year old stucco sh*tbox on a dinky lot in an undesirable neighborhood of 95148 (San Jose). It said $1.2 M.
SELL!!! Sell it while you can!
Do you live in California? Do you know about Proposition 13?
35
WookieMan
2022 Sep 23, 1:27pm
WookieMan
2022 Sep 23, 1:27pm
If you can lock in a decent price, rate, and plan to live there 7 plus years, you'll do much better owning. Doesn't matter if renting is cheaper in the moment unless you might buy and then move quickly. Owning will beat renting 10 out of 10 times over 7-10 years. Also, very few are disciplined enough to invest the savings of renting versus owning.
Fact is you're still paying the landlords PITA at minimum. Likely a 20% mark up. Out side of CA and Prop 13 as BACAH mentions, rent is generally more expensive than owning. No chance in hell I could rent my house for $1,200. It would be 2,200-2,600/mo. I'm paying down the principle and can still save or invest the remaining $1k/mo.
Patricks basis for this site still holds water. But it's primarily a California or East Coast phenomenon. Where I'm at there's no point in renting if you don't have to.
Fact is you're still paying the landlords PITA at minimum. Likely a 20% mark up. Out side of CA and Prop 13 as BACAH mentions, rent is generally more expensive than owning. No chance in hell I could rent my house for $1,200. It would be 2,200-2,600/mo. I'm paying down the principle and can still save or invest the remaining $1k/mo.
Patricks basis for this site still holds water. But it's primarily a California or East Coast phenomenon. Where I'm at there's no point in renting if you don't have to.
.
https://www.cnbc.com/2019/04/18/wealth-manager-buying-a-home-is-usually-a-terrible-investment.html
A lot of people will tell you that buying a home is a good investment, but “that couldn’t be further from the truth,” says Peter Mallouk, a certified financial planner and president of wealth management firm Creative Planning.
“In reality, it’s usually a terrible investment,” he says. That’s because, at the end of the day, owning a home takes money out of your pocket: “You’re paying property taxes, you’re paying maintenance, you’re paying insurance. There are all of these other things that happen with your home that you’ve got to pay for.”
Young homeowners in particular have figured that out the hard way: Underestimating the hidden costs is the No. 1 reason millennials who do own homes have regrets.
Over time, your home might increase in value, Mallouk says, but it probably won’t appreciate enough to offset all of the costs. Instead, if you took what you’d save from not buying a house and invested it in something that’s likely to grow in value, such as stocks and bonds, chances are you’d end up with more money in the long term.
Say you live in Brooklyn, New York, and pay $2,500 a month to rent. If you buy your own place, you might pay $5,000 a month between your mortgage, taxes and other maintenance costs, Mallouk gives as an example. (Other financial experts estimate that, thanks to home ownership costs, buying could cost you about 40% more than renting.)
“If you take the difference and you save it, that extra $2,500 you’re saving in a diversified portfolio is almost certainly, over a long period of time, going to grow to be worth more than what your home equity would have been worth if you had just put the money into a home,” he says.
Ramit Sethi, self-made millionaire and author of “I Will Teach You to be Rich,” has made the same argument. Think about it this way, Sethi suggests: “Generally we can assume that over the long term, if we invest in a low-cost diversified index fund, we get about 7%” in terms of annualized returns. “Can you beat that in your area, over time, with real estate appreciation?”