Question for renters..Aren't you tired of paying someone's mortgage?

[Anonymous]

Anonymous wrote:Economically the comparison is the rent vs. the interest portion of the mortgage. Whether one pays for borrowed money or a borrowed house doesn't make a difference.

Now whether one wants to build equity through a home purchase or by acquiring financial assets is a matter of choice, and will depend one one's personal circumstances and preferences.

.... or cultural background. I'm German and in Germany everybody rents; my family always built (when they could) wealth by acquiring financial assets, notably corporate stock. My wife is Spanish, in Spain everybody buys (as in the US), and in her family they seek to build wealth by acquiring real estate. My family considers real estate a speculative investment, hers stock or bonds.

Of course both are wrong. First, every asset carries risk, real estate and stock are typically both among the riskier assets. Second, what ultimately matters is the mix of the portfolio - a one-sided portfolio is always risky. Third, the "cultural" differences ultimately relate to tax systems, or at least this is my theory. In the US and Spain one mortgage interest payments are tax deductible, which creates a strong incentive to buy - so eveyrboyd buys and it becomes a "cultural" habit. In Germany one can deduct mortgage interest payments only for a house in which one does not live oneself, hence the tax incentive is to buy and rent out.

[Anonymous]

Anonymous wrote:We rent for $2k. 2 bedroom close in.

We could probably get a loan with a 10% downpayment right now. Wouldn't be great terms. But then we'd have no emergency savings and if the water heater broke, we'd be up shit creek. So we will went for a while longer.

We rent because we feel we have to.

+1 This is us exactly. Living close-in where places sell in a day. We have little for a down payment, let alone are we able to participate in a bidding war.

[Anonymous]

My family considers real estate a speculative investment, hers stock or bonds.

Of course both are wrong

+1

None is inherently speculative, as long as the decision to purchase is based upon present and demonstrable ROI - rents, dividends or interest on bonds. Buying based on some religious belief the asset will "go up" is speculation, however.

Economists don't agree on much, but with respect to the home interest deduction, they agree it has basically zero impact on homeownership rates. Eliminate the deduction and the latter won't change much. The only thing that will change and over the short term, is affordability. Prices in general would go down for a while, hence industry's stalwart opposition to eliminating the deduction.

[Anonymous]

What this guy says. Plus, I don't want to blow my savings on a rundown place in a transitional neighborhood.

[Anonymous]

What this guy says. Plus, I don't want to blow my savings on a rundown place in a transitional neighborhood.

Er, let's try that again.

[Anonymous]

The reality is that home ownership is a form of forced savings, and as suggested by many posters here, they are renting nicer homes than they could afford buy, thereby losing any potential savings.

[Anonymous]

Anonymous wrote:The reality is that home ownership is a form of forced savings, and as suggested by many posters here, they are renting nicer homes than they could afford buy, thereby losing any potential savings.

You should go read the "how much do you have in your house" thread if you want to learn about, ahem, forced savings. Also, bankers understand homeownership lasts on average seven years. That's why mortgages are front loaded with interest for seven years. When you sell, you still owe close to the full principle, for seven years. It's a racket, nothing less.