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Why Renting is Better than Buying a Home

efinancedirectory.com — When you rent, most people mistakenly assume the decision is made out of necessity, not rationality. But there is a very good reason to rent in today's bubble-stricken market: median incomes do not support median home prices.

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  • mrbubbleboy, on 10/10/2007, -10/+41The graph really shows how small the 80's and 90's housing bubbles were in comparison to this monster bubble. Also shows that incomes were no where near keeping pace with the explosion in home prices. Here is another great housing bubble graph that compares home values with GDP. http://www.housingbubblebust.com/Fed/GDPvsHSG.html I think just between these two graphs there is pretty compelling evidence that we are going to see price corrections >30% nationwide...which is truly unprecidented. I'm glad I don't own property right now. Also, if you like housing crash news, this guys daily housing bubble links are the best. I read them every day. http://patrick.net/housing/crash.html
    • Sirocco, on 10/10/2007, -6/+15>> I'm glad I don't own property right now.

      Why not? As long as it's paid for (or you have a locked interest rate) and you hold on to it there's nothing to worry about. What you should have said was "I'm glad I didn't purchase land recently."
      • Starflyer59, on 10/10/2007, -18/+2"What you should have said was "I'm glad I didn't purchase land recently."

        They started making more?
      • aliengoods, on 10/10/2007, -4/+3No. If it's paid for you're fine, but if you paid $300K for a house, still owe $250K, and it drops to $170K, then you're down quite a bit, regardless of how low your locked in interest rate is. You can hold onto it and wait for prices to increase before selling, but it may take a decade or more for the prices to go up to the boom level you purchased at. And if something happens in the meantime and you can't make your mortgage payments (loss of job in a bad economy, illness, etc), you're screwed.
        Like bubbleboy, I'm very glad I don't own a house, and those people that bought in the last 5 years are complete suckers.
        • lOvOl, on 10/10/2007, -1/+3Not true. If you just bought a house for 300K and paid in full and the value of the house overnight goes to 150K, then you just lost 150K that could of otherwise been invested better elsewhere. The funny thing is, all our debt is unrealized inflation waiting to happen as the dollar tanks. When the Fed talks about adding "liquidity to the market" what it means is it is masking inflation by allowing people to take on more and more debt. When you get a 300K loan for some house, all that is exchanged with the bank are a few numbers. These numbers are then used to hand our more numbers to other people to finance a loan on a 300K house. The cycle repeats itself indefinitely until the pyramid scheme all comes crashing down.

          If the United States mint, literally printed the money itself, then the inflation would occur almost overnight, but since all of the inflation is hidden in debt, the broader economy does not realize it until that debt (i.e. numbers in some database somewhere) needs to be converted into dollars for use in purchasing real tangible goods. When the ponzi scheme gets out of control, either the government has to bail out the people at the bottom of the Ponzi scheme (by basically printing more money), or else the debt vanishes into thin air as a loss in some account ledger. When this gets out of control, people stop working productive jobs and instead by and large become involved in careers like finance to make a quick buck. Eventually, people find out that everyone is simply swapping numbers with each other and nothing is actually being made or maintained anymore. Then your country is essentially screwed until people figure out how to work productively again, rather than devoting their entire careers to areas like finance or law or any of the other parasitic professions that don't create real wealth.
          • EclipseGSX, on 10/10/2007, -1/+1Of course what he says is true. This crisis doesn't exactly affect people that are paying for houses in full...
          • senatorpjt, on 10/10/2007, -0/+2Yeah, and if you're paying $1000 a month in rent, you're down $150K after 12 years, with absolutely nothing to show for it.
    • schnikies79, on 10/10/2007, -2/+15My parents have a fixed interest rate on their home at a low rate. Why not own it? They are having no issues what-so-ever. Not everyone was silly enough to got an ARM.
      • ztexas, on 10/10/2007, -4/+16Nobody is suggesting your parents sell their house and start renting. But it would be folly to buy a house now, knowing that housing prices have only started to fall after the biggest run-up in modern history. Why buy a house today when you can rent one more cheaply, avoid pay property taxes and maintenance costs, and purchase an equivalent (or better) house in a few years for less money. This is likely to happen in most markets.
        • schnikies79, on 10/10/2007, -0/+7That makes sense. Thanks for clearing that up.
    • jcaino, on 10/10/2007, -0/+8i purchased a house recently and im glad i did. the market in pennsylvania is probably one of the best around, with housing prices more or less the most reasonable in the nation. its not paid off, but i over-pay each month to knock off more of the principal. oh yea, and i have a fixed rate. for the same price, i have a TON more square footage than anywhere i could rent for no where near the same price. not only that, but it gives me projects to do. and i don't have to worry about a landlord coming and bitching at me because i have a pet.

      edit: i dont see prices falling FAR in pennsylvania either...its about as low as it will/can go. like i said, it has been fairly steady here without the exagerated bubbles that have been experienced elswhere
      • zeldafan, on 10/10/2007, -0/+1It depends what part of PA. I live in the north east part and the market here (while not nearly as terrible as most of the country, like you said) has steadily been going up over the last few years. [But that's also because everyone moving in is from either New York or New Jersey.]
    • umdigger, on 10/10/2007, -0/+1One of the most important things to learn is the difference between an investment and a speculation. Right now I would consider PROPERTY an investment, but a HOUSE a speculation.

      There is only so much land on Earth.
  • elshizzo, on 10/10/2007, -19/+14this is very strong proof that housing prices are going to fall, and going to fall FAR.
    • jdbeast00, on 10/10/2007, -2/+9PROOF? you got to be kidding me. somewhat likely is more like it.
    • masgrada, on 10/10/2007, -1/+1Not proof.
  • Indyanna, on 10/10/2007, -10/+37Other reasons renting may make more sense for a lot of people: no property taxes, renter's insurance rather than house insurance, no maintenance or upkeep.
    • jdbeast00, on 10/10/2007, -8/+37No tax break and nothing to show for your rent payments are on the flip side
      • aliengoods, on 10/10/2007, -2/+8What do you have to show for your homeowners insurance? Or your property taxes? You act like every dime you spend owning a home goes into the house. Also, you can get a renters tax break in some states. Depending on your income, you can even get a refund.
        • senatorpjt, on 10/10/2007, -0/+2Homeowners insurance and property taxes are paid by the landlord and the cost passed onto you, with markup.
      • pintomp3, on 10/10/2007, -0/+10the tax break isn't for ownership. you don't get a tax break on the principle, only the interest. it's a government subsidy for the banking industry.
      • nonymous666, on 10/10/2007, -0/+5The tax break should be abolished. The original reason for it was to encourage early growth of the country. Looked around recently? We're pretty well grown up and crowded now. If you want a house, then buy it; there's no reason why the government should be subsidizing it by refunding taxes back to you. Unfortunately, the tax break has become a tradition that the public and the banks will never give up.
        • WilliamDavis, on 10/10/2007, -1/+1"there's no reason why the government should be subsidizing it by refunding taxes back to you. "

          You have it backward. There's no reason why I should be giving them the amount of taxes I do in the first place. By giving taxes back to me, they are simply stealing less of my money. Granted, they shouldn't be deciding how and when, but I'll happily keep whatever I can.
      • brainScan, on 10/10/2007, -0/+2Where I live property costs twice as much now as it did several years ago. So it doesn't pay for me to buy overpriced property when I can rent it much cheaper. What do I have to show for it when I move out? A big fat 401k balance from all of my extra savings diverted into stocks as opposed to real estate!!! My stocks will grow at a higher rate than real estate (which barely edges inflation on average, and probably won't beat inflation over the next decade with this bubble bursting).
    • sniper6121, on 10/10/2007, -8/+6It makes since to buy a home other than renting. He says "Save your money. Rent a home you are comfortable living in for a few years and you will be able to buy a lot more house once the market ends its freefall and the dust settles." Well you can wait, but interest rates will be 10+% just look at the 1980's interest rates where higher than 10% then they came down and when they come down you refi your home. Plus Renters are raising rents since people can't afford their housing bills.
      • krusader3z, on 10/10/2007, -4/+11Buried after 3 words.
      • OHiggins, on 10/10/2007, -0/+1Nothing in what I just read made any sort of coherent thought.
    • bratpack8, on 10/10/2007, -2/+7Yeah, you tend to pay the landlord's property taxes and his insurance in your rental payment. And if there is an HOA or COA, you'll be paying for that in your rent also.
      • brainScan, on 10/10/2007, -0/+2True... I'm also paying my landlord's mortgage payment, which is from 1999. If I bought my own place in 2007, the mortgage would cost twice as much as my landlord's. Renting is way cheaper for me!!! Another added benefit to renting, when I move out, it will cost me $0, not realtors fees and closing costs.
    • andrgo, on 10/10/2007, -6/+1Only a tool would believe something like this article.
  • EclipseGSX, on 10/10/2007, -2/+24It's amazing to me seeing some people I work with trying to sell their homes/condos right now. They're absolutely convinced they're going to get top dollar for their property, and are wondering why they're only getting a few prospective buyers, and all the offers have been at least 10% below the asking price. I don't expect prices to come down much in the next couple of months, but over the next couple of years people are going to realize the pipe dream they were living during this bubble.
    • lOvOl, on 10/10/2007, -0/+1On Wall Street there is a saying that Bulls and Bears make out fine, but Pigs simply get eaten.
  • airiox, on 10/10/2007, -2/+37Cool, hopefully in a few years when I'm ready to buy a home, the bubble will be near its trough.
    • neodorian, on 10/10/2007, -1/+3Same here. I had the chance to buy something (which would have been a bad decision) a couple of years ago. I didn't feel quite stable enough to take the plunge and I held off. Now I'm glad because I just started a new job and in a few years should be in a lot better shape. Combined with the trough of the bubble, I should be in a lot better shape to buy.
  • 0rion16, on 10/10/2007, -6/+19So its good that I'm poor right now?
    • merm, on 10/10/2007, -0/+4Not really, you should be saving so that you can buy the dip.
  • futureisours, on 10/10/2007, -14/+43If I went by that logic, I wouldn't have earned about 50% on my home investment over the past two years. Check your local markets as the bubble isn't everywhere.
    • StarManta, on 10/10/2007, -8/+5Of course the bubble is bursting at different times in different places, but I think it's foolhardy to expect that *your* area won't burst. If I were you I'd be selling.
      • mike17032, on 10/10/2007, -8/+5Enjoy pissing away that rent money every month.
        • killeryugi, on 10/10/2007, -2/+7Enjoy pissing away interest every month, paying only pennies on the principle!
        • Locke2053, on 10/10/2007, -0/+6Did you read the article? Only an idiot would consider renting "pissing away" money after reading an article about how buying could cause EQUITY to vanish. I would rather "piss" away $12k on rent per year than have $50k in equity evaporate by owning in a down market.
          • MiNGLED, on 10/10/2007, -4/+2House prices may fall in the short term but have always risen in the long term. If you buy a house to live in and not as an investment, you have little to worry about.
      • cliffzdude, on 10/10/2007, -1/+5He said he's made about 50% in two years, now that is a paper gain, but still... To assume that as the market falls, it'll fall back another 50%+ then sell would be foolish.
        As per you logic, if futureisours bought at 100k, his home is now worth 150k, he should sell now and rent. Ok, now he'll take a hit on commission. He'll have to pay to move. He'll have to save and be ready to re-buy and pay more commissions again, and he probably has a good interest rate, once everything comes back to normal rates will probably be much higher, if we're playing the guessing game that is.

        Bad financial reasoning. If you have a house that's gained 50% equity, it'll be rare you'll give it ALL back, say nothing for give it all back and lose more.

        Futureisours should sit tight, pay extra on his mortgage and enjoy living in a house that can be called a home.
    • masgrada, on 10/10/2007, -1/+4Did you sell? Or just SAYING your house is worth 50% more?
    • BigDown, on 10/10/2007, -0/+2Dear Budding Eyesore:

      Sell it now before you lose that return!
    • drwh0, on 10/10/2007, -0/+1You're absolutely right. The figures are based by the average across the entire country. You need to look at the housing prices in your particular area. For me, housing costs are rising a lot but are still very reasonable compared to the median salary. Atlantic Canada (Moncton in particular) has much lower housing costs than the rest of Canada or the US. I live in a city and I got a wonderful house for 125k. I couldn't get half of the house I got in Toronto, Alberta or New York for 250k+.

      So yes, look at the trends in your area. The bubble will burst though, just see where your area is. If people realize they can no longer afford to buy a house and stop buying, then the prices will fall.
    • samssf, on 10/10/2007, -0/+144%. You forgot to subtract realtor fees when you sell it. And if when selling your current home you bought another, you'd lose more money on the closing costs for the new home.
  • maretten, on 10/10/2007, -14/+1...Or just don't be poor.
  • afractus, on 10/10/2007, -32/+33This guy is a moron.
    The only thing this graph shows is that a home is the best investment you can ever make.
    Like stocks it is always going up (although ups and downs short-term)... Except it is higher than the average 7 percent a year

    You would be crazy to not by a house?
    • asianautica, on 10/10/2007, -8/+29By your logic, you'd be crazy not to buy a .com stock in 2000. After all, it always goes up. If a 20 years historical chart doesn't convince you of the logic of fundamental in asset classes, nothing will.
      • axiomflash, on 10/10/2007, -7/+4By your logic, housing is going to go away?
        • asianautica, on 10/10/2007, -1/+6Did MSFT CSCO QCOM go away? My logic is fundamental always win. Take any asset class and look at their 100 years history.
    • clark1001, on 10/10/2007, -1/+9Depends how long term you are thinking. The financial success of the United States will eventually prove to be the biggest bubble in the history of economics.
      • Samer, on 10/10/2007, -0/+1Very good observation when one considers the US dollar is no longer backed by gold and silver. Money without an intrinsic value--money that can be printed at will--has, without fail, been abused by the governments that issue them, and whole empires have collapsed under the weight of hyperinflation. Fractional-reserve banking defines bubbles.
    • liquidfirex, on 10/10/2007, -1/+13... Can you not read a simple graph? Look at the deviation of Income vs Home price... yeah you see that? notice how little it deviated for 30 years? Now look at '95 on.. the deviation is increasing.. a lot.. over a short period of time. People and banks simply cannot close a gap that big, that fast. If wages go up, sure housing can go up in price, the differential will be about the same, but that isn't happening.
      • WilliamDavis, on 10/10/2007, -1/+1
        Median income isn't the only thing to look at. With a large number of baby boomers retiring, median income does not equal spending power. A lot of those people did well in stocks over the last 30 years or so, and they're retiring while making rather high wages - keeping median income figures in check as the younger people are making lower wages.

        Now, I wouldn't buy property in a ton of places right now. However, if you're in an area where retired boomers will be moving to, I think you're in for a soft landing instead of a bursting bubble. Think about it... boomers that bought real estate in NYC 30 years ago are going to realize a huge gain on it. They can move to florida and buy twice the house for the same amount they sold for in NYC.

        I'm not saying there's no bubble. I think there's a giant one, but there's more to look at than median income versus median home prices.
    • tmspecial, on 10/10/2007, -2/+17You are probably one of the morons who bought overpriced real estate in the last couple of years. Now you are desperately trying to find an even bigger moron to sell it to.
    • BigDown, on 10/10/2007, -0/+5Dear Assfraction:

      The moron who buys at the peak of the biggest housing bubble in the history of our nation will, in the long run, be lucky to break even. Your $$ would have done better in a savings account. However, the prudent individual who rented and waited out the storm could use her savings to buy a house after the crash and be much better off.
  • mlarsen, on 10/10/2007, -6/+46renting is good in the short term, but you make more money at the sale when you own a house. If you rent your whole life you received no return on your $, at least with home ownership you get tax breaks and the possibility to sell it for a profit.
    • user12345, on 10/10/2007, -18/+4tax break? Only people who lack basic arithmetic skills think that the "tax break" of holding a mortgage is any sort of a good thing.
      • expat001, on 10/10/2007, -2/+4What?
        • p0und, on 10/10/2007, -1/+6paying thousands in interest for your mortgage makes up for any "tax break" you may receive. user12345 is right.
    • Rikkochet, on 10/10/2007, -10/+14Bang. Someone finally says it.
      When you own a home and pay a mortgage, the majority of that money translates into equity and some is interest.
      When you rent, you are paying 100% interest on someone elses mortgage. At the end of the day you have NOTHING to show for it.
      • shaunhey, on 10/10/2007, -6/+7...and by the time it matters, you're dead... Good luck taking that house (or equity) to whatever afterlife you believe in...
        • seinman, on 10/10/2007, -5/+9Good luck passing that rented home on to your children.
          • shaunhey, on 10/10/2007, -0/+6Hey, I didn't get a house passed down to me... I work for what I have. My children will have to do the same! Besides, so many people lose all of that equity when they spend their last 12 months of life in a "waiting to die" hospital. Just take me out back and shoot me once I start "waiting to die". Someone will appreciate the oxygen I'm no longer breathing :)
        • whorunbartertwn, on 10/10/2007, -0/+5Depends on your situation. We bought a house in 1998 for 140kish, sold in 2005 for 360kish after deciding the house was too big. Now live in a townhome, and kept the equity.
        • mike17032, on 10/10/2007, -4/+7Sorry, but most people that buy a house make out on it. You are just pissing money away renting your whole life.
        • senatorpjt, on 10/10/2007, -0/+3I think the idea is that by the time you're ready to retire, you've paid off the mortgage. It sort of like saving for retirement, at which point you're only left with paying rent to the government (property taxes), and maintenance.
      • BenHanby, on 10/10/2007, -3/+9> At the end of the day you have NOTHING to show for [your rent payments].

        BS. In today's market you'll likely have a large pile of money to show for it at the end of 5 years. You risk losing a great deal of money by buying an highly inflated asset.
        • mike17032, on 10/10/2007, -7/+3Keep thinking that, land lords love people thinking that way.
          • asianautica, on 10/10/2007, -1/+4People in San Diego who think like that the last 2 years saved around $50k+ compared to buying the same home. So yeah, they love thinking that way too. Can't beat paying 50 cents on the dollar.
      • perryjoyce, on 10/10/2007, -0/+19Totally missing the point of the article. He's not saying that buying a home is bad, it's that buying a home NOW is probably not a good idea.
      • mikejna, on 10/10/2007, -0/+3The majority does NOT got to principal at first. At first, you're paying almost all interest. It takes a while for that to change.
    • felch, on 10/10/2007, -0/+6You're not accounting for the general mobility of a renter. The commitment is almost never over a year long and you have the ability to simply pack your ***** up and _go_. There are benefits that are unmeasurable. And like the previous poster said, when you're dead, whatever equity you have, you're broke.
    • BigDown, on 10/10/2007, -1/+6Dear Lars and Rikko:

      No, the majority of your house payment goes to interest. If you are one of the many currently paying a neg-am i/o loan, then all of your payment goes to interest and your principal is growing every month. In that case, you are depending on appreciation to save you when your loan resets and you have to sell. Since the appreciation over the last 5 years was just an artifact resulting from overleveraged credit markets, it is now going in reverse. That's why so many fools have to sell now and are being foreclosed on, sending house prices back to affordable and proper prices at break-neck speed. If you bought a house any time from 2002 to now, you would have been better off renting and saving your cash.
      • Azuroth, on 10/10/2007, -0/+1And it's those fools that are being foreclosed on that allow people like me to purchase a house well below the median value and completely throw this entire argument out the window. Nothing like buying a house on a 100% financed, 30 yr. fixed loan, and immediately owing 40% of the house's value. Even if prices drop back to the 1970's level, I've still made money.
    • mcduckov, on 10/10/2007, -0/+2The differential between renting and buying where i live amounts to about $1,000 a month when all is said and done. Calculate that for 30 years at 7% and tell me the end result is nothing of value.
  • wisam, on 10/10/2007, -19/+5Buying a home means that if you loose your monthly income for some reason you're not homeless. It's some sort of security.
    • user12345, on 10/10/2007, -1/+12what planet are you guys from? Are you assuming people are actually buying there homes outright and actually hold the deed?
    • MrTsLoveChild, on 10/10/2007, -0/+12uh...there's that little nuisance of the mortgage.
      yeah...kinda have to pay that every month.
      • senatorpjt, on 10/10/2007, -1/+1Well, you can take out a home equity loan to pay the mortgage short term. Say, if your mortgage payment is $1000/month, you can take out an equity loan for $20,000, and use it to pay off both. It's of course not an economically smart move, but it gives you a year to get back on your feet.
    • brstilson, on 10/10/2007, -0/+6Unless of course you don't pay your mortgage, then the bank ends up kicking you out.
    • BossKey, on 10/10/2007, -0/+5^^^ That was a demonstration of the kind of math that led so many people into shockingly awful loans.
    • nixfu, on 10/10/2007, -6/+4>Are you assuming people are actually buying there homes outright and actually hold the deed?

      We only have 5 more years to go.. got a 15 year loan (what people USED TO DO back when people like grandma had common sense) , and our nice house will be paid off before our kids are even out of grade school.

      With no house payment and a fully paid for house.... will paying for college be a problem? Nope, will paying for trips to europe every year be a problem? Nope, will buying a new BMW every 24 months for CASH be a problem? Nope.


      You kids just think to short term. Goes along with the false assumption that young people have that they will live forever.
  • scottykempf, on 10/10/2007, -15/+8Sure, throw away money on rent instead of maybe losing money if your house goes down in value (Of course, if it goes down it will at some point go back up.)
    • BigDown, on 10/10/2007, -0/+3It may, at some point during your lifetime, go up. However, if you bought any time from 2004 to now, it probably will never go up enough to have made it worth it. Sorry.
  • catalysis, on 10/10/2007, -6/+17Renting is only better than buying if you pay less than you would pay on interest to your mortgage.

    If your mortgage interest is less than a rent payment, then the extra would go into equity and you could deduct the interest from your taxes.
    • whorunbartertwn, on 10/10/2007, -1/+5It's not that simple. You get a standard deduction (I believe it's over 10k for married filing jointly) so the advantage gained tax-wise is actually the difference between what you're deducting and what you'd deduct as standard anyway. Like if you're married and paying 14k in interest+taxes that you can deduct the advantage is less than 4k since you'd be deducting 10k anyone if you had no deductions and didn't itemize.
      • rockefeller2, on 10/10/2007, -0/+5that's right. I bought my house in 2005, and thought I would get a fat check back on my 2006 taxes, but tax software told me I was better off with the standard deduction, verses itemizing and taking the mortgage interest deduction.

        I guess it just depends on how big a mortgage you got. Mine was only 115,000.
    • merm, on 10/10/2007, -1/+4Not only that, but if the actual value of your house goes down, then over a 5 year period for example you could be way better off renting. It depends on the value of your home, and the rate at which you could rent the same thing.
    • samssf, on 10/10/2007, -0/+1Haha, moron. People always think there's only two numbers to look at. Have you considered home maintenance? HOA? What about the cost of selling a home? You don't get profit for a home unless you sell it. Selling it usually costs 6%. Buying might be better if you're going to live there for 20 years.
  • nwoolls, on 10/10/2007, -35/+58This guy is retarded. Renting is throwing your money away. Buying a home is an investment. There is NO comparison.
    • user12345, on 10/10/2007, -19/+9seriously, only a total retard thinks buying a home is an investment. It is the biggest liability you will ever "own", douchetard.
      • schnikies79, on 10/10/2007, -6/+14When it's paid off, it's not a liability, it's a huge asset. Learn some economics before you speak.
        • acarr, on 10/10/2007, -4/+7seriously though, how many people are going to pay off their $650k home in 30 years????? answer: not many.
          • nixfu, on 10/10/2007, -2/+6Um... Anyone who can AFFORD it.. if you can't afford the payments on house with a fixed 15 year loan, your head is bigger than your wallet and you need to cut your self down a few notches. Our grandparents didnt buy massive homes, they bought nice reasonable sized houses and only had 10-15 year mortgages.

      • Starflyer59, on 10/10/2007, -2/+9The biggest liability you will ever own is your brain.
      • mike17032, on 10/10/2007, -4/+3Sounds like someone is bitter over not being able to live in a house.
    • MrTsLoveChild, on 10/10/2007, -7/+16i'm kinda sick of people not only buying into, but also passing along the myth that a house is the best investment you can make.

      take the money you're dumping into a mortgage (and home owner's association fees, and interest, and insurance...) and put that in a marginal investment account. you'll come out WAY ahead renting and investing competently.
      • mike17032, on 10/10/2007, -6/+4Of course living in a van down by the river while you do this has its downsides.

        A house is the best invenstment you can make because you can use it while its gaining you money.
      • phronko, on 10/10/2007, -0/+6Don't forget a few thousand dollars in real-estate and lawyer fees.

        But if you work it out and still end up with less money thrown away by buying than by renting, buy. It all depends on one's current situation, when they plan on selling, and uncontrollable factors like how much value the house will gain, but in the end it's just comparing those two numbers.
      • herchenb, on 10/10/2007, -0/+1exactly. i take all the money you throw away on interest, homeowners insurance, property taxes and maintenance and I put that into an investment account. 100% liquid and i can move it around as i please. my rent in san francisco is about half what my mortgage would be for a similar place. yes, i'm throwing away the rent money, but the savings i get from paying waaay less than a mortgage i invest. plus i have the added benefit of being completely liquid.
    • blitzer, on 10/10/2007, -0/+10It depends. Buying a house has taxes, insurance and interest costs which may actually cost more than rent. Do the math.. see what works for you.
      • senatorpjt, on 10/10/2007, -0/+1Uh, landlords don't have to pay taxes, insurance, and interest? All the math necessary is that in one case, you're paying it directly, and in the other, someone else is paying it, taking a profit, and charging you for both.
    • tmspecial, on 10/10/2007, -11/+10You are probably one of the morons who bought overpriced real estate in the last couple of years. Now you are desperately trying to find an even bigger moron to sell it to.
      • dtilford, on 10/10/2007, -2/+10Dugg down for telling two different people the same thing copied and pasted. Even if I agree with you, it still makes you a jerk.
    • DrMonkeyLove, on 10/10/2007, -2/+19If only buying a house was actually a real possibility in this overpriced housing market. Yeah, I'd love to be a homeowner, but damned if I'm going to pay $400,000 for a house that's only worth $200,000. I can afford $1000 a month in rent. You can't buy a house in my area for less than $2000 a month. Renting isn't throwing money away when the only other option is to buy an overpriced house and drown in dept.
    • Misanthrope, on 10/10/2007, -2/+7I don't feel like paying money to have a roof over my head is "throwing money away". Perhaps there are "better" ways invest the money...but it just doesn't make sense at the moment. I love how people act like you aren't getting anything for your rent money. I suppose buying ANYTHING that you won't get a monetary return on is "throwing money away". I see it as I'm paying a certain amount of money to have a place to live for a month...it's been working out pretty well for me. Every month, I manage to have a roof over my head and I'm happy. I just don't see how that's "throwing money away".

      Maybe listening to your mom and dad's words of "wisdom" wasn't the best option this time, because you sound like a jackass.
    • Locke2053, on 10/10/2007, -2/+8Let me rephrase that for you: Renting is a small expense. Owning is small expense AND a large investment THAT CAN GO DOWN, and will likely go down buy a whole lot in the next few years.

      I hope your parents don't let you play with real money if you honestly think the way you write.
      • mike17032, on 10/10/2007, -5/+1You must be a kid, as renting is no small expense.

        When you are paying rent, someone else is making money off of you.
        • BigDown, on 10/10/2007, -0/+3Hey Mike:

          My landlord just got his property tax bill for the year. It's more than 4x my monthly rent. Oh, and my rent doesn't cover his monthly interest payment either. Oops!
    • samssf, on 10/10/2007, -0/+1nwoolls, you are the retarded one. Are you not intelligent enough to realize that just because you gain equity in a home over time does not mean that it's a good investment? Your argument is incorrect.

      When you have a mortgage, you "throw money away" to the banks. You "throw money away" to realtors. You "throw money away" for closing costs. You "throw money away" for maintenance fees. Trust me, just because you "throw money away" on rent doesn't mean its less than the money you throw away when you have a mortgage.
  • InfiniteNothing, on 10/10/2007, -3/+28There are way too many intangibles to ownership. My favorite lately is home improvement. Customizing your dwelling is awesome (like hard wired Cat 6). In my last apartment I lived above noisy renters who smoked and made my apartment stink.
    • shaunhey, on 10/10/2007, -2/+3Renting doesn't mean only apartments... I rent a 4 bedroom house on a nice lot for about 500/mo cheaper than I could buy it for...
    • InfiniteNothing, on 10/10/2007, -0/+3Yes but your improvements (like a dimmer switch, cat 6 cables, reverse osmosis filter, spa, better windows etc etc) become the property of the owner if they are even allowed. Also, sure that rent is 500/mo cheaper now but in 10 years it's going to be $500 more expensive
      • shaunhey, on 10/10/2007, -0/+3Nah, just like when I moved the last time (see, I have that freedom to move every couple years and not have to pay 3%+ to a realtor), I took what improvements I wanted with me. Dimmer switch? Sure, I'll slap the old switch back in (not really -- it wouldn't be worth the effort). But that $100 light fixture? Yep, it's in the new place :) The nice stainless appliances? Yep, the old crusty white ones went right back in and took mine with me... I will give you this -- I would really like to knock out the wall from the kitchen to the living room. I don't think the landlord would appreciate that :)
      • InfiniteNothing, on 10/10/2007, -0/+3You do realize that you had to pay (time or money) to reverse those modifications right? It takes alot of coats of paint to get a wall back to white. There's much to be said about the benefit of customization.
        • shaunhey, on 10/10/2007, -0/+1I think I can afford a weekend to reverse those modifications... I make pretty good money, but it sure isn't 3% of the cost of the home for 1 weekend of work... I can even spring for the nice new rental moving truck :)
      • BigDown, on 10/10/2007, -1/+1Is it really worth it to lose hundreds of thousands of dollars? Just rent a decent house and save your cash (too late for you, I know, but not for others).!
      • senatorpjt, on 10/10/2007, -0/+1Sometimes if you ask your landlord, he'll discount your rent for a month to pay you for these sort of improvements.
    • dlsspy, on 10/10/2007, -0/+1I ran cat5 through my rental years ago. I just built a decent ramp in my back yard. I'd rather buy a house, but short of the investment, I'm not missing much. I'm also not dealing with the housing market risk.
      • InfiniteNothing, on 10/10/2007, -0/+1Aha, you can't escape the market risk. After all, there's nothing to say that inflation won't skyrocket and increase the price of commodities like land (both rent and housing) and such. Maybe your paycheck goes up to match but think of if you bought a house now, you're paycheck goes up and your house doesn't, you're looking pretty good.
  • TheSabre, on 10/10/2007, -2/+61My monthly rent is $1400 and that's cheap for my area. My wife and I have a small one bedroom apartment. I know people with houses that have $1100 mortgages. So, no, I don't pay property taxes or anything, but renting is still horrible. Furthermore, I get no capital appreciation, no home ownership investment, nothing. Each month, my rent goes into the pocket of another investor... just as if I was staying in a hotel room every day.

    I can't wait to buy a house...
    • serpentor, on 10/10/2007, -4/+6Well said! Renting is long term hotel. No equity building or capital appreciation whatsoever. This argument is old and wrong.
    • StarManta, on 10/10/2007, -5/+2These kind of rent numbers always make my mind boggle. I pay $550, and I live _alone_, in a two-story loft.

      If you don't want to move to a cheaper area, you have no right to bitch about rent prices. You're making a choice to live where you do.
      • mike17032, on 10/10/2007, -4/+2My mortgage is 300 a month, and that was with 0 down. Way to piss away that 550 a month on rent.
      • brhad56, on 10/10/2007, -1/+5And your apartment probably smells like cat piss and you can hear your neighbor snoring through the wall.
      • brhad56, on 10/10/2007, -2/+2And your apartment probably smells like cat piss and you can hear your neighbor snoring through the wall.
    • akula696969, on 10/10/2007, -0/+5
      Did the people with the 1100 mortgage just purchase their home recently, or have they had this mortgage for many years now? Can you purchase a home in the same area you are renting for less than your rent?

      These are the facts that I think you are 'hiding' from everyone.....
      • TheSabre, on 10/10/2007, -0/+3I'm not hiding anything from anyone. I just wasn't about to give the life story of everyone I know. If I was hiding something, I wouldn't answer your question like so:

        These people have had their mortgages for a while. I can purchase a house with a mortgage less than my rent, but at this time, I can't afford the 20% down payment on one. I don't have enough capital to work with, which is why I said "I can't wait to buy a house".
    • BenHanby, on 10/10/2007, -0/+6And they have a $1100 mortgage because they bought in 1999? What do you suppose their mortgage would be if they bought it today?
      • mike17032, on 10/10/2007, -4/+1Lower, as interest rates are down quite a bit since then.
        • johnny23, on 10/10/2007, -0/+4you mean lower if there has been no appreciation on the value of the property right?
    • BigDown, on 10/10/2007, -0/+1Hi Sabre:

      If you wait a couple years to buy, then you can have a low mortgatge payment too!
  • inurb, on 10/10/2007, -14/+39Owning is always better then renting. It's just that there were idiots that lived beyond their means and purchased houses that they couldn't afford to being with. Owning > Renting. If they bought houses that were within their means then they wouldn't be in the financial crisis they are today. I love wanna be real estate moguls,because it gives me more opportunities to buy real estate when they default on their payments lol.
    • ztexas, on 10/10/2007, -2/+3Agreed that too many idiots borrowed too much money and went beyond their means.

      But it's not always better to buy rather than rent. In many US and European housing markets, it _impossible_ for a person earning the median income to buy a house (or even a condo in many cases). Prices are still too high. There is lots of room to fall. See the housing bubble blog for lots of stories how this is happening now. For a long time, the MSM didn't cover the RE crash at all, but people with some sense have long realized that it's just a matter of time.
    • whorunbartertwn, on 10/10/2007, -1/+5Owning can be better than renting, but not always... what if you might move in a few years? Even a sideways market would kill you with real-estate commisions. What if you don't care for the time involved in caring for a yard or interior?
    • sorens, on 10/10/2007, -0/+6No, owning is NOT always better than renting. It depends a lot on other factors, but remember that all the money you're putting into a home you own doesn't all come back in your pocket when you sell. For a good explanation, check out this recent NY Times article: http://www.nytimes.com/2007/04/11/realestate/11leo ... . Better yet, check out the cool calculator tool that tells you whether it's better to rent or buy given a set of variables.
    • Waytnc, on 10/10/2007, -1/+2Not to mention all of the fraudsters who lied on their mortgage apps so that they could qualify for a payment that they couldn't afford! I don't hear too much about the fraud issue, all I hear about how people were taken advantage of by their broker or Realtor, but there was plenty of fraud committed by buyers and sellers during this boom. I believe these people should be prosecuted. I'm with you, waiting it out and laughing all the way down. I am in central Florida and new construction prices have already fallen about 20% in my area. How looooooow will it go!
    • samssf, on 10/10/2007, -0/+1"Owning is always better than renting" I'm tired of you ***** that keep saying that. If you own a home and have no mortgage payment, then yes, sure. People rarely mean owning without a mortgage. We're talking about buying a home and getting a mortgage from a bank at 6% to pay for it. In that situation, buying is not always, or even often, better. I love how people think they'll buying a place and at 5% appreciation come out ahead of renters in 5 yrs. They don't consider maintenance, realtor fees, HOA, insurance, taxes, or any of that. You lose 6% upon selling a property just to realtor fees. Then you gotta play closing costs on your next home, unless you plan on renting again. Come on people.
  • slonrgjon, on 10/10/2007, -2/+18i hate subprimers
    • turbomofo, on 10/10/2007, -0/+1haha me too!
    • BigDown, on 10/10/2007, -0/+0Remember that prime borrowers can also get neg-am i/o loans. It's not just subprimers. It's anyone not making a FULL (principal + all interest) mortgage payment each month.
  • tablelegs, on 10/10/2007, -7/+9Shallow. This may apply for certain areas, but in many places (Vancouver for example), the real estate market is extremely lucrative and is the best investment you could make.
    • ztexas, on 10/10/2007, -0/+4Nonsense. Vancouver is a contender for real estate bubble capital of the world.
    • BigDown, on 10/10/2007, -0/+3Yo Table Head:

      That won't last for long!
  • woofers07, on 10/10/2007, -10/+7um.. what about the whole investing your money in collateral thing vs. crapping away your money to a greedy landlord?
    • samssf, on 10/10/2007, -0/+1Just another uneducated comment.
    • clarkeman, on 10/10/2007, -0/+0Greedy Landlord? Is that like a greedy homeowner who hopes to realize a profit when they sell their home?
      Moron.
  • shoover, on 10/10/2007, -18/+13This guy is full of BS. Just because housing went down a bit in the last few years doesn't mean that housing is going to go down to pre-2000 levels now, that is just ludicrous. Extend the graph back 50 or 100 years before that and it will become *obvious* this guy is a nutcase.

    But sure, continue to rent... That way you'll inflate the rental market and I'll make more money off you.
    • asianautica, on 10/10/2007, -0/+7As you requested: http://lilurl.com/?aqe . This chart goes back to 1890 and inflation adjusted, price didn't change between 1890 and 1997.
    • akula696969, on 10/10/2007, -0/+3There are people that have lost 35-45% of their equity in the last few years in some areas. Is this what you consider "went down a bit"? Think about the people that are selling their house for 100k-200k less than they owe with no seconds. People are hurting big time and we find the best thing to do is say it will get better or marginalize the problem.....
      • turbomofo, on 10/10/2007, -3/+2if somebody sells for that much less, that is their problem...they should just stay there. im hunkering down, that is for sure.
        • asianautica, on 10/10/2007, -2/+4That's the problem, not everyone can hunker down. If the could, foreclosure wouldn't be going through the roof right now.
    • sam5271, on 10/10/2007, -0/+3I lost a 100,000... which was about 35 %... hey shoover... I told you to cut down on the dope man... your not making sense anymore..
  • dpottz, on 10/10/2007, -5/+30Renting may be throwing your money away, but the point of the article is that buying a home right now will mean that you throw away even MORE money by buying than you would by renting.
    • Bossy, on 10/10/2007, -1/+12Agreed. I think all the other commentators are pissed at themselves for being the victims.
    • DeucesWild, on 10/10/2007, -2/+4Thank you. I was beginning to wonder if everyone here worked in the housing industry and was trying to keep it afloat. Like this 'hinkleti' guy four posts down "Buying now is like buying on sale." What sale? I don't see any sale just $500k and up homes here in Socal. Meh, I don't care anymore. Two more years and I won't even be living in this country anymore.
  • shanethetrain, on 10/10/2007, -6/+6afractus is correct. There is an important question that you need to ask here; why would housing prices decline? A decrease in the demand for property. True, renting is an alternative to purchasing a house and has it's pros as well, but the cost of property is always going to be increasing due to demand. The only thing that this article is pointing out is that it is becoming harder and harder for Americans to purchase a house due to wages not keeping up.

    Why is this? Since the 80's, we've gone into an international trading market and prices for products have become much more competitive. Companies have to keep costs down and we get the short end of the stick.

    The best thing that you can do in this scenario is tell your boss that you want a raise and jump in the housing market so that you can catch a ride on the next bubble.
    • sam5271, on 10/10/2007, -0/+3Economics my friend... Its all cause and effect... if people aren't making money to buy... houses are expensive... then people won't buy any more, and houses will sit.... if you have to sell your house, then there are no buyers, then you will drop your price, your neighbors will also, and next your city and town... when a small town has 300 houses on the market sitting for months, and you have may be 20 buyers... every seller will be fighting to drop their prices and sell their house... a lot of people can sit on their house, if they live in it.. but if you move to a different city/state.... then you r screwed... like I was... I was paying about 3000 a months b/w tax and mortgage....etc every month....
  • batmanjr, on 10/10/2007, -4/+4You only lose or gain money at the time you sell your house. And by putting spending your money on a mortgage, rather than rent you are going to get that money back in the way of equity. And if things are really tight or other investment opportunities come up, you can borrow against the value of your house(not something I would recommend, BUT it is still an option that the renter does not have).

    Sorry, but looking at that graph it seems that the down periods are short and up-swings are longer lasting. The average is always going up. Hmmmm, can't see how that is bad. It just shows that there are worse times than others to buy, but things always look up.
    • Dekey, on 10/10/2007, -1/+0>>The average is always going up.
    • samssf, on 10/10/2007, -0/+1Why are all you people who say buying is better so retarded. People say "when you buy you get money back when you sell it" Yeah, HOW MUCH? just because you gain equity doesn't mean *****. When you have a mortgage the bank gets a *****-ton of your money in interest. The realtors get 6% of the sale. When the sale is done, you'll likely lose most the money you made. You also have to take into consideration the amount you lost in interest to the bank. And the amount you paid in HOA fees. And the money you paid for mortgage insurance.
  • hinkleti, on 10/10/2007, -10/+6Buying now is like buying on sale. Sure prices could go down further, but you still stand to make a profit if your intent is to buy and hold long term. All markets have ups and downs, usually they go two steps forward and take a step back then go forward again. Buying a home today is like buying equities in 2001-2002 when the S&P 500 was way down from its pre-bubble highs. People were afraid to invest in stocks at that time, but in 2003 the S&P went up 26 percent, then 9 percent in '04, 3 percent in '05 and 12 percent in '06.
  • scottykempf, on 10/10/2007, -12/+12You are either paying your own mortgage or you are paying your landlord's mortgage. Your choice.
    • BenHanby, on 10/10/2007, -2/+10You are either sitting on an asset that's going to lose 30% of its value, or you are accumulating cash while the prices come down. Your choice.
      • mike17032, on 10/10/2007, -6/+1History has shown, time and again, that it doesnt work like that.
    • turbomofo, on 10/10/2007, -2/+3well said
    • persecutor, on 10/10/2007, -0/+3I choose to pay for my landlords then... why? With renting I don't have to mow lawns, shovel snow, fix roofs, replace windows, repair or fix appliances, or deal with all the other hassles associated with owning a home. And.... when I get tired of of the place I'm at (if I do), I can move into a newer apartment without having to worry about selling an existing home during a period where it's a "buyers market". I guess we all have priorities, mine is more of the 'time' variety rather than income return.
  • blitzer, on 10/10/2007, -6/+7Once you buy a house you are "in the market" pretty much for the rest of your life. When prices go up and you want to move, your house is worth more but so is the house you are trying to buy. Its a zero sum game. The same happens on the downside.

    Very few people are moving in and out of the housing market... its not like stocks or bonds.
    • InfiniteNothing, on 10/10/2007, -0/+3Many many people move to somewhere cheap and small when they retire
    • serpentor, on 10/10/2007, -0/+4Tell that to my future in-laws, who have made mega bucks buying the run-down house in the high-end neighborhood, renovating, and selling for huge profits (NY metro). Over and over again, it's like printing money..
    • bratpack8, on 10/10/2007, -0/+1Trades in a free-market, such as real estate, are not zero sum situations. I don't follow that logic.
    • assmonkey123, on 10/10/2007, -0/+2makes perfect sense. The average person buying or selling will see something near a zero sum since they will sell and buy back to back. If prices are high they sell high and buy high if prices are low they sell low and buy low. People who retire and flip houses have a slightly different interest then the average family just trying to find a nice place to live and have a fairly stable investment.
    • samssf, on 10/10/2007, -0/+1Yup, I dont know why people aren't smart enough to realize this. "OH I gained 15% on my home!!! I Made money!!! Renting is stupid!" Right. and when you sell that home to buy another, the new home will be more than what it was when you bought your first home. It's zero sum except for a small few. When you factor in that, along with the fact that you pay maintenance fees, HOA fees probably, mortgage insurance, and every time you have to move....you have to pay 6% to sell your home... it actually is better to rent unless you can get a decent deal on a home and commit to living there until the day you die (right).
  • serpentor, on 10/10/2007, -3/+6Rent where I live is $1600 for a 1-bed. My mortgage payment on my 1-bed is $900. This obvious benefit to buy (or have bought) doesn't even take into account equity building, equity appreciation, & the mortgage interest tax writeoff. If I were renting, I'd have built less equity (in the bank), less asset appreciation, no tax writeoffs, and have thrown excess money out the window with every rent check.

    People have been clamoring along about this renting vs buying for at least the past 6 years. Those who bought into this argument way back then lost out on HUGE GAINS. Massive US$ inflation underway means you want your money in HARD assets (gold, silver, commodities, AND real estate).
    • kalikkalik, on 10/10/2007, -2/+2Huge gains...and, of course, significant losses in most markets, if you purchased between 2003-2005...many areas have corrected prices which the market couldn't bear.
    • BenHanby, on 10/10/2007, -0/+5> Rent where I live is $1600 for a 1-bed. My mortgage payment on my 1-bed is $900.

      House prices are currently far beyond any historically known relationship to rents. The example you cite is highly atypical at best.

      "One ratio—house prices now equal 3.8 times median income—seems too high by historical standards. The other—rental income to house prices—seems too low to offer property owners a decent return, suggesting again that houses are badly overpriced."
      -The Economist, Aug 24th 2006

      The situation has grown much worse in the last year.
      • mike17032, on 10/10/2007, -3/+1Rent prices follow property prices.

        Just about anywhere you look, the rental price is going to be higher than the mortgage of the same place. If it wasent, it would make a lot more sense for the landlord to just sell the place.
    • perryjoyce, on 10/10/2007, -1/+2My parents bought their house in 1975 and their mortgage payment is $900. Something tells me you didn't buy in the last five years, that's for sure. Very important piece of information, don't you think?
      • mike17032, on 10/10/2007, -1/+1I did, and my mortgage is 300 bucks. Yep, 300. And you cant rent a place around here for less than 600.
    • tmspecial, on 10/10/2007, -0/+1A low monthly payment like that probably means that you are locked into a 50 year mortgage. Also, you have to pay for property tax, home insurance and repairs that renters don’t have to worry about.
  • Calcularius, on 10/10/2007, -19/+14Renters are suckers.
    I'm sure this will get dugg down because there are more suckers than not.
    • justo, on 10/10/2007, -0/+2no, you'll be dugg down because it's an ad hominum attack, which, even though may be true, is not backed up with rationality but with seeming name calling and hatred. give using a different tact on delivering your information and viewpoint a try and your comment may instead be promoted and dugg up
      • Calcularius, on 10/10/2007, -0/+1You're assuming I think getting diggs is more important than being right.
  • dicerandom, on 10/10/2007, -5/+8What a load of crap. The graph clearly shows that housing is an excellent long term investment with as close to a guaranteed profit as you'll ever see. Short term market fluctuations over 5 or 10 years mean nothing when compared to the 30+ year terms you're talking about with a house. Additionally, whether or not there is a correction and the magnitude of that correction will depend upon your local area. Personally, I live in the silicon valley and we're in the middle of a tech and bio industry boom here. Nothing as insane as the dot-com bubble, but it's definitely noticeable and I have no doubt that our real estate market will stay solid as a result. I imagine that the same will apply to NYC and the LA/SD area as well as other tech and bio industry centers.
  • SoCalMario, on 10/10/2007, -8/+21I don't regret buying my home no matter what this article says. It feels good owning your own place. Especially when girls know you own your own place! ;)

    ~mario
    • expat001, on 10/10/2007, -2/+5Thanks mario,

      But the girls don't really give a ***** when you are paying them to be there.
      • bratpack8, on 10/10/2007, -0/+6Hey, as Charlie Sheen eloquently put it, you don't pay hookers for sex, you pay them to leave.
    • samssf, on 10/10/2007, -0/+1"Feels good". Yeah, that's a good reason to make a financial decision.
  • jeffyboy, on 10/10/2007, -2/+6Except the median income metric isn't valid any more. People buy houses today based on the median income of two people, not one. Once housing gets out of reach income-wise for two people, it could be a bigger issue.
    • tmspecial, on 10/10/2007, -0/+1So what are singles supposed to do???
  • expat001, on 10/10/2007, -1/+16I was just in Oakland and there are several new Condo's going up downtown, and a 2 bedroom starts at 720,000$ plus HOA fees of over 500$ a month?!

    Who the hell can afford that? Do the quick math of 20% down, 144,000, plus a 30 year fix at 7.8% for the remaining 576,000 is 4164$ a month PLUS 500$ a month in HOA fees. bringing monthly payments for a new 2 bedroom condo in Oakland, CA at 4664$ a month! Jesus, plus you are out 144,000 grand up front.
    • fatoprah, on 10/10/2007, -1/+0There are also some that are $499k in Oakland. $499k, $720k, in 20 years it will seem like a deal.
    • Kyderdog, on 10/10/2007, -0/+1Then don't be a chump and buy out of town..
  • zarex, on 10/10/2007, -0/+9No one has mentioned the awesome tax writeoff of mortgage interest - basically reducing your net payment by a third. This is a big deal for home owners, and renters don't get this benefit.
    • bratpack8, on 10/10/2007, -2/+1But their landlords do!
    • aeropl, on 10/10/2007, -0/+1Yeah but the mortgage deduction only can be used against reportable incomes. Drug dealers and strippers, like most of the people here, only have cash so no dice.
  • pruhawaii, on 10/10/2007, -6/+5Keep renting Sherlock. See you in thirty years, when you are still renting. Plus real estate is a local matter. In Hawaii, we have a low-rate of sub-prime loans and prices continue to climb at healthy rates, sign of a balanced market. Lots of baby boomers retiring over here and investors from Asia are keeping the market healthy.
    • Prosequi, on 10/10/2007, -0/+4Interestingly, investors and those in retirement are the ones causing the drop in prices in Florida as they leave the area causing a drop in demand as supply is peaking. There is a new term for these retirees, "half-backs" who moved to Florida from the Northeast only to move to the Carolinas after a couple of hurricanes and the realization that the grandkids will not be flying in every month. The point is, investors and retirees do not create a stable market like good jobs do.
  • esaks, on 10/10/2007, -0/+9In some market's it is much better to rent now than to buy, many parts of California fit this bill. It doesn't matter if you're monthly payment is going towards a mortgage, you lose all your equity if the market value of your home goes down. I hate it when people say a house that they live in is an investment or an asset. It is NOT even if the bank says it is. The only real estate that is an asset is a property that is performing and paying you every month. Also since the economy is bound to take a hit soon, losing your job is far less of a problem when you rent than it is if you have to pay a mortgage. On the other hand since interest rates are bound to go up soon to combat inflation caused by the massive injection of liquidity by the Fed, a low interested fixed mortgage may become an asset in the near future. 6% or 7% fixed is going to become very rare soon so being able to payback in devalued future dollars is a real asset. Inflation will knock off a huge part of your loan if left unchecked.
  • LeeSoong, on 10/10/2007, -9/+2rent - slave nation, buy a home in cash -rent makes your landlord and government richer, mortgages turn banks into slaveholders.
    live free of debt and live free.
    • Misanthrope, on 10/10/2007, -0/+3You're so dumb it's painful.

      Golly, let's all pony up the ***** cash for a god damn house! Why not, we'll be living free!

      Listen, I'm sure you're some wealthy *****...and bully for you man. But I'm not, and most people out there can't just run to the bank and pull out 200k...it's just not reasonable. So please, for the good of everyone, just shut up.
    • InfiniteNothing, on 10/10/2007, -0/+4He can't be super wealthy if he doesn't understand leveraging
  • apologeticus, on 10/10/2007, -6/+3I refuse to heed the advice of an author with a division heading that reads: "The correction has already began." If you don't even have a passing familiarity with your mother tongue, then don't waste my time writing something.
  • pinguwin, on 10/10/2007, -1/+5Renting isn't always a sucker's bet. I know of several people, who rent who have way more in terms of assets due to their choices. It is difficult for most people to take the money they have saved from renting and invest it instead of spend it, but if you can, you can do quite well. As far as those who talk about the intanglibles, pride, decorating, etc, I have no doubt those are very real and valuable for many but not everyone holds those same values. Works for some, not for others. I hardly think the people I know who choose to rent are "suckers" (two of these "suckers" have been on a round-the-world trip for the last three years with decent, but not outrageous, incomes when they rented).
    • rockefeller2, on 10/10/2007, -0/+0Why would someone pay rent while they were on a 3 year round-the-world trip? If I was going to be gone that long, I would throw all of my stuff in storage or sell it all.
    • samssf, on 10/10/2007, -0/+1Renting is usually better than buying, people are just too stupid to think of all the factors and play into this comparison.
  • kalikkalik, on 10/10/2007, -2/+15And the divide increases...

    Contrary to popular belief, a home is (usually) not your greatest asset. For most people, is is their greatest DEBT. When you sell it and make actual money, THEN you can say it was an asset. You may have built up what some folks call "equity", which means "imaginary money", which also assumes that you owe less than what the current market would PROBABLY pay for your house. Its not assured....which is what people are starting to realize in a market like this.

    Equity != Money

    Your homes' value is always subject to change....
    • Prosequi, on 10/10/2007, -0/+4I see that at least one person has read Kiyosaki. It's not an asset unless it puts money in our pocket each month - therefore, your house is definitely not an asset.
    • whorunbartertwn, on 10/10/2007, -2/+0So if I've owned a house for 10 years and it's now worth $300k, and I owe a mortgage of $200k, then get a home equity loan for $50k to start up a business that is successful enough to live on, is it all my imagination that I'm paying my bills and eating out with the income stream of that business? Like some Matrix situation?

      There is good debt and bad debt, leveraging one asset (yes it IS an asset despite your Kiyosaki regurgitations) to achieve goals isn't always bad.
    • samssf, on 10/10/2007, -0/+1Let's not forget that you also usually have to pay someone else to sell your home. So to get money from your "equity", you have to pay someone. Great.
  • Calcularius, on 10/10/2007, -9/+4It astounds me how dumb people can be.

    One of the amazing benefits of purchasing real estate for investment purposes, it that you can reap the gains from the value of the entire property without having to invest it's total value.

    Example: I purchased a $200,000 home with $20,000 down. Over the past 6 years I've spent about another $70,000 on the mortgage, etc. The house is now worth about $340,000. I can sell and make $140,000 profit after only spending $90,000 on a $200,000 investment. Tie that with our generous lack of captial gains taxes on sales of primary residences and you've got the best investment strategy there is.

    Try buying $200,000 worth of stocks, bonds or anything else with only $20,000 down.
    • kalikkalik, on 10/10/2007, -0/+5So this is assuming that people have an extra 11k per year to drop on their mortgage?
      Keep in mind that almost all home loans are structured so that you pay very little principal initialy...for a large number of years. So that extra 70k came from your wallet on top of the mortgage...and you're also assuming that the home in question has increased in value by 70% in just 6 years? With this market?

      Count yourself very well-financed and extremely fortunate that you both have
      1) An extra 70k lying around
      2) Your homes' value increased dramatically and did not lose value in the past year

      ....count your lucky stars!
      • Calcularius, on 10/10/2007, -1/+1WTF are you talking about?!?
        That "extra 70k" was not "on top of" the mortgate, it *WAS* the mortgage, stupid.
    • slothlovechunk, on 10/10/2007, -0/+6You completely missed the point of the article.

      He is saying that you are not going to make that 140k profit in the next 6 years, instead you are going to owe this money and not have the equity.
      • Calcularius, on 10/10/2007, -0/+1Even if the house has not increased in value at all and I sell my house for an even $200,000, I have lived in a house for 6 years for free. You people are retarded.
    • Calcularius, on 10/10/2007, -1/+4Also, forgot to mention the wonders buying a home does for your credit rating.
      • ExSlashdotter, on 10/10/2007, -0/+4On the other hand, renting and becoming totally debt-free does wonders for your credit rating too.
    • ExSlashdotter, on 10/10/2007, -0/+5You saw you bought your house for $200k and now its worth $340k. Did you read the article? There was this line graph at the very beginning...

      Home prices are artificially inflated at this point. They're not actually worth what everyone says they're worth, hence the crashing price.
      • Calcularius, on 10/10/2007, -0/+1Not where I live. There are houses all around me, just like mine, selling for that much.
    • masgrada, on 10/10/2007, -0/+3With the current market we won't see a 70% rise in six years. If you instead had a normal, generous 15% / 6yr raise in value, you would then be out $40,000.

      Congrats on investing at a good time and getting out when you did.
  • albinorhino101, on 10/10/2007, -2/+13wow and my main reason for renting is so i can take a massive ***** at 2am, clog the toilet and call somebody else to come and fix it.
    • DeucesWild, on 10/10/2007, -0/+1Best post of the day.
    • crapmatic, on 10/10/2007, -0/+1Ha. When I had my first apartment in Las Vegas, we had a toilet clog. The front office refused to send over maintenance and said "no, we don't plunge".
  • philforhumanity, on 10/10/2007, -2/+1Old news: http://www.philforhumanity.com/To_Rent_or_Own.html
  • hinkleti, on 10/10/2007, -2/+2Blitzer, people are moving in and out of the market all the time. There are lots of first time home buyers out there as well as people moving out of homes and into apartments, assisted living facilities or whatever depending on their personal situation. And it's not necessarily a zero-sum-game. The cost of housing varies widely across the country and even within the same metro area. Somebody moving from an urban real estate market (like San Fran) into a lower-cost area (like Indianapolis) would find that they can buy a comparable home for much less, which means they can pocket the excess capital gain from the sale of their urban dwelling.
  • drburk, on 10/10/2007, -0/+11The biggest issue may be the uneducated buyer. I've talked to several struggling owners who thought they could dump 50% of the income into a house. The buyers were brought in under the pretense of a low monthly payment, no one mentioned insurance and taxes, HOA fees, water (for the new lawn), sewer, and so on. Suddenly there is a layer of $150 - $200 on top of the low payment and it isn't low.
    When I got the mortgage I insisted that everything include these figures. It made my builder squirm each time he said my payment amount I said plus $175 for other items. Just before a co-worker bought her first home I asked what her mortgage payment was going to be (I am that rude) she said $1000 plus whatever my taxes, HOA fees, and insurance is. She didn't know these were in the monthly payment and made frantic calls to her mortgage company when the first payment was due. She is a single mom with 2 kids earning $36,000 a year with 5% down with an ARM. Didn't ask questions, bought spur of the moment, didn't educate herself first.
    • Waytnc, on 10/10/2007, -0/+2Good point.....I recently read an article which indicated that first time home buyers are a greater risk than someone that has previously owned a home.
  • bratpack8, on 10/10/2007, -1/+5Based on the very realistic notion that the morons in DC will continue to inflate the money supply (it has risen by 800% since 1980), I am suspicious that there will be a huge correction. If you can buy a house using a fixed rate mortgage, it is a great investment because your payment stays the same over 15, 20 or 30 years while the dollar falls (and other prices rise). Whenever there is massive inflation, the last place you want to store your wealth is in the dollar, so that is why raw materials and non-dollar assets rise. These include gold, oil, and real estate. I'd rather have 5 houses than a ton of cash in a bank getting less interest than the true rate of inflation.
  • portmanwills, on 10/10/2007, -3/+3Yawn.
    - Real estate is one of many investments. People have moved more of their discretionary investment dollars into real-estate. Try plotting the percentage of discretionary investment dollars spent on real estate.
    - People purchase homes with wealth in addition to income. Try plotting median wealth.
    - Try plotting the media income of _home buyers_, not the population at large.
    Take a basic statistics course, a basic economics course, and then call us in the morning.
  • slothlovechunk, on 10/10/2007, -2/+9What kind of retarded markets are you guys living in where rent is more than buying?

    In my market, with property taxes, home-owner's association fees, housing insurance, you are probably paying 50% more to buy. If you are only paying a very small proportion of that amount towards principle, the renter has much more money every month to invest in perhaps more lucrative investments.
    • asianautica, on 10/10/2007, -0/+1I'd like to know as well. I'll buy 10 and let my tenants pay for my houses. Income and equity from day 1, unbeatable combo.
      • Kyderdog, on 10/10/2007, -0/+1Until 9 of them trash your houses and you have to run them out...
    • irvman21, on 10/10/2007, -1/+1I could exceed my mortgage payment on my house by approximately 40% if I were to rent it out rather than live in it. Also, before you ask, I'm on a very standard 30 year mortgage, though I did get it at 4.25% so that helps.
      • asianautica, on 10/10/2007, -0/+2RE is all local, and in my local area, $400k places can rent at best for $1500/month. Do the math and you'll see renters are living in the place 50 cents on the dollar.
        • slothlovechunk, on 10/10/2007, -0/+2Yeah, that's about right.

          It's cheaper to borrow the house than to borrow the money.
    • drburk, on 10/10/2007, -0/+0Many markets in the midwest have seen rent prices soar as demand soars (when you forclose your limited in your buying choices and many folks end up renting. I pay $25 less a month to own then I would for a 2 bedroom apartment. When the area went on a forclosure boom my rent jumped $85 a month and I moved out.
    • samssf, on 10/10/2007, -0/+1And everyone forgets the cost to sell the home =) Usually people pay 6% for this service.
  • revolved, on 10/10/2007, -2/+7If you can comfortably afford to buy the house you want, and are still renting, than you're a sucker.

    But if you live in an area where you can't afford the house you want, or even a decent house that you sort of like, and you overextend yourself and buy a house anyway and can't afford to do anything in life but pay your huge mortgage every month...then you're a sucker, too.

    People think that the only consideration is the monetary investment that buying provides. But if you live in an area where you're making a high salary and still can't afford to buy even a decent, livable place, you're better off renting and using the extra money you have to invest in other things: things and experiences that make you happy, travel, and the peace of mind that comes with not having to worry about money and making that next mortgage payment.
  • imacommi, on 10/10/2007, -0/+12This is a buy vs rent calculator that the NYT put up. This pretty much includes everything you could ever think of. Great resource, it turns out in todays environment it's better to rent unless you plan on living at the residence for over 15 years or so. food for thought.

    http://www.nytimes.com/2007/04/10/business/2007_BU ...
    • asianautica, on 10/10/2007, -0/+2wow, very good page. Here's the calculation for San Diego: http://www.nytimes.com/2007/04/10/business/2007_BU ...

      Base on this, I have to live in it for 28 years to break even.
      • emjaymj, on 10/10/2007, -2/+1The thing is, the equity in that house can be put towards the future purchase of a different home, should you decide to move. Assuming there isn't a massive drop in property values over your lifetime, I'm pretty sure you plan to live in SOMETHING for more than 28 years.
    • blackinthmiddle, on 10/10/2007, -0/+0Well and that's the point. The author says renting is better because house prices are going down. My response is this may be true if you don't want to stay in your house long. However, if you're planning on staying a while, then it doesn't apply as house values will go back up again.
      • BigDown, on 10/10/2007, -0/+0You can get the hose for WAY CHEAPER if you wait a while and rent.
    • ExSlashdotter, on 10/10/2007, -0/+128 years to break even in Tampa, FL too.
    • covertbadger, on 10/10/2007, -0/+1Good calculator. I'm in the UK but put my figures into it anyway, approximating property tax for council tax. Turns out that, assuming my house appreciates at 7% a year (which is conservative in London and the surrounding areas - population density and City bonuses are keeping demand higher than supply, which keeps the prices rising), the three-bedroom house I bought this year will break even in 7 years, even assuming the rent on my grotty old 1-bedroom flat never went up. If rent went up 5% a year (lower than the rate of appreciation in the area), I'd break even in 3 years. Given that I love my house and plan to stay there >10 years, I think I can be happy with that.
    • samssf, on 10/10/2007, -0/+1Yup, it comes down to how long you wish to live there. I hate everyone who says it's always better to buy than to rent. Usually it takes AT LEAST 10 years for a home to pay off. Right, who the hell is going to live in the exact same home for 10 years? People used to do this, and if you're middle age and live in a small town, then possibly. If you're into tech, young, like traveling, etc... there's a good chance you'll want or need to move within 10 years.

      Renting > Buying folks.
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