What if we just rent for the long haul...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Rent and invest your money in stocks. Higher return.

Exactly.

Or, you know, own and invest your money in stocks.

I can walk and chew gum at the same time.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

FYI a mortgage payment is typically bundled with the property taxes and insurance. The sums you see on redfin estimates will include those estimates. Renters are also not immune to maintenance costs like yard work and renters ideally should have renters' insurance too.

Still, we get it, dude. You're justifying your decision not to buy but instead spend a fortune each month on rent that goes away forever. It's fine. It's working for you right now, psychologically. I did have a prof in a RE class at Wharton who covered the costs of owning/renting and concluded that in a typical market you need to own for five years to break even due to transaction costs but after five years it's better to have owned. But that was a typical market in the early 2000s. Are we in a typical market? Is DC ever a typical market? I'm reminded of the old saying that no one ever went broke buying California real estate, which isn't entirely true but if you held your ground and stayed put, you came out extremely well.

But I will agree the market is in touchy place right now. We do have a significant undersupply of housing combined with higher interest rates that's keeping prices high. We also have persistent inflation. We also have a strong economy and buoyant stock market. Some cities are seeing softening real estate prices. Others, however, are very resilient, like DCUMlandia.

When I look at all the data available, and I'm mindful that a significant portion of the real estate is now owned by people with 2.75% mortgages that they will never give up unless they absolutely have too, what it means is that in stable and desirable areas with good amenities and schools, there's a strong likelihood of continuing undersupply of housing keeping prices high. If you're looking to own for the long run, it's likely better to just buy what you can and sit. If you expect to buy and sell every few years, it may be worth it to wait a few years but even that is a gamble, more so than buying.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

When I look at all the data available, and I'm mindful that a significant portion of the real estate is now owned by people with 2.75% mortgages that they will never give up unless they absolutely have too, what it means is that in stable and desirable areas with good amenities and schools, there's a strong likelihood of continuing undersupply of housing keeping prices high.

100%. I see so many people talking about houses being overvalued, thinking that there will be a correction and then the market will "go back to normal". They cannot get it through their skull that the mortgage situation has completely changed the market for the foreseeable future, particularly for desirable areas. And as far as hopes for a "silver tsunami" go, it turns out that unkempt boomer houses that trickle onto the market at reduced prices in such areas are easy targets for individuals or companies with resources to pay cash and flip.

[Anonymous]

At some point, people need to move (even those sitting on their 2.75 rate). Im generally of the mindset renting is financially better, but I would be amenable to a rent to own arrangement and figure out how the next buyer can take advantage of the rate

[Anonymous]

OP we have a huge down payment and could easily buy but it would be an absolute horrible financial decision, unless you find a GREAT deal on a house. I hate not knowing when we’ll ever buy but I can’t imagine a scenario in which it makes financial sense any time soon.

[Anonymous]

Anonymous wrote:People put a lot of meaning into growing equity through owning. My family has owed three homes in last 15 years. I did the math and had we just rented same place and put the difference in money - down payment and extra if took to own- into market, we would have a lot more money than we do now. All homes ended up being headache if you asked me.
We didn't overpay any of them, but just simply owning a home costs a lot.
We sold all three, got the equity out and it doubled in this market in two years. It is still going up. The homes would have never appreciated like that. They were not assets.
Most people know real estate, but they don't know anything about market. Being in the market taught me a lot more than owning real estate.
I make $13k to $20k a day easily on the money I have in the market. People still keep asking me when am I ready to buy. No time soon or even never. Seeing the markets move up so fast is more exciting that owning a home. I also love my rental. My landlord is awesome. But also, like PP, mentioned, I can move right next door to the middle school and three years after that, right next door to child's high school.
I got to be crazy to take out cash right now from the market and buy a home with those interest rates.
You have to do the math to see it.
I did get a finance degree, but most of what I know about markets, came from being in the market hands on the last four years.

What goes up, will come down. Also, housing is the biggest expense in retirement, having a paid off house is not something to take lightly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

When I look at all the data available, and I'm mindful that a significant portion of the real estate is now owned by people with 2.75% mortgages that they will never give up unless they absolutely have too, what it means is that in stable and desirable areas with good amenities and schools, there's a strong likelihood of continuing undersupply of housing keeping prices high.

100%. I see so many people talking about houses being overvalued, thinking that there will be a correction and then the market will "go back to normal". They cannot get it through their skull that the mortgage situation has completely changed the market for the foreseeable future, particularly for desirable areas. And as far as hopes for a "silver tsunami" go, it turns out that unkempt boomer houses that trickle onto the market at reduced prices in such areas are easy targets for individuals or companies with resources to pay cash and flip.

I remember when interest rates were 18 percent! We have owned five houses over time, bought each one smartly (willing to pick the ugliest and worst condition house on the street in a great neighborhood) put in time and effort and profited handsomely, each and every time. When I had to sale my Bethesda home for a move my realtor said that I had to change the kitchen. It was in great condition and high quality but the younger buyers wanted all white with quartz and if I threw 20,000 at it they would eat it up. I went to Cabinet Discounters told her what I needed (cost 24,000 at the end), kept our wood floors, stainless appliances and gave the buyers and all white showroom kitchen with a designer who knew how to make it look high end without the cost. Sold in two days above asking to a young buyer who had no clue what to look for in a house, including the myriad of steps leading to the front door. Who would want those with a stroller or groceries? Lol. My point is, buy the crappy house and fix it up. That is the way to build real estate wealth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

FYI a mortgage payment is typically bundled with the property taxes and insurance. The sums you see on redfin estimates will include those estimates. Renters are also not immune to maintenance costs like yard work and renters ideally should have renters' insurance too.

Still, we get it, dude. You're justifying your decision not to buy but instead spend a fortune each month on rent that goes away forever. It's fine. It's working for you right now, psychologically. I did have a prof in a RE class at Wharton who covered the costs of owning/renting and concluded that in a typical market you need to own for five years to break even due to transaction costs but after five years it's better to have owned. But that was a typical market in the early 2000s. Are we in a typical market? Is DC ever a typical market? I'm reminded of the old saying that no one ever went broke buying California real estate, which isn't entirely true but if you held your ground and stayed put, you came out extremely well.

But I will agree the market is in touchy place right now. We do have a significant undersupply of housing combined with higher interest rates that's keeping prices high. We also have persistent inflation. We also have a strong economy and buoyant stock market. Some cities are seeing softening real estate prices. Others, however, are very resilient, like DCUMlandia.

When I look at all the data available, and I'm mindful that a significant portion of the real estate is now owned by people with 2.75% mortgages that they will never give up unless they absolutely have too, what it means is that in stable and desirable areas with good amenities and schools, there's a strong likelihood of continuing undersupply of housing keeping prices high. If you're looking to own for the long run, it's likely better to just buy what you can and sit. If you expect to buy and sell every few years, it may be worth it to wait a few years but even that is a gamble, more so than buying.

No, you do not get it. I do not need to justify anything as I actually own. But I also know how to math and that I would have been better off financially if I kept renting. But there are other reasons to own. It just depends on how much you value them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Rent and invest your money in stocks. Higher return.

Exactly.

Or, you know, own and invest your money in stocks.

I can walk and chew gum at the same time.

Most people put all their cash in the downpayment, and if your mortgage is higher than your rent there is not all that much to invest..

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Rent and invest your money in stocks. Higher return.

Exactly.

Or, you know, own and invest your money in stocks.

I can walk and chew gum at the same time.

Most people put all their cash in the downpayment, and if your mortgage is higher than your rent there is not all that much to invest..

Then buy a less expensive house and save some cash. Why on earth would anyone put every bit of cash they have in a downpayment?

[Anonymous]

Buying makes sense from putting down roots, customizing the home, buying in a neighborhood where there are no rentals, securing access to some target in boundary school. It does not, in many cases, make sense from a making money standpoint.

You are betting on the local real estate market beating the stock market. Doubling your money in 10 years is 7% annual growth. Yes yes i know taxes etc but its easier said than done to find a house thats literally doubled in ten years. Some markets have this, yes. But most markets are not like this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Rent and invest your money in stocks. Higher return.

Exactly.

Or, you know, own and invest your money in stocks.

I can walk and chew gum at the same time.

Most people put all their cash in the downpayment, and if your mortgage is higher than your rent there is not all that much to invest..

Then buy a less expensive house and save some cash. Why on earth would anyone put every bit of cash they have in a downpayment?

Well, maybe because that is what their income allows for? They scramble for a downpayment and still buy a cheap house? Not everyone lives in DCUM land.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm always suspicious of those saying renting is better because they are never entirely honest with their scenarios and it turns out they're comparing renting versus buying two quite different properties rather than the same type of property. You can certainly save money renting a small apartment in a less desirable area over a larger SFH in a highly regarded school district. But that's not the option most people face when making the decision to rent or buy.

If it was really that much financially better to rent, then vastly more affluent people would do it. But they don't. And that tells you everything.

I've only owned a house for four years but in that time I've had significant appreciation, my mortgage is almost half what it cost to rent the same property based on the few rentals in the neighborhood. Meanwhile I'm building up equity. It's a form of forced savings.

People have lost money owning houses and much of that comes down to timing, buying at market peaks and selling at market lows, facing foreclosures due to job losses, buying the wrong kind of money pit, or selling too soon after buying. Some of those factors you can control by being intelligent, others you cannot. But I will say that based on the last 10 years, people who waited for prices to come down have only lost out.

Interest rates are high by recent standards, but they could go up. Or if they go down, you can refinance. Given that there is nothing to indicate any kind of housing crash because we actually have a severe undersupply of housing, if you can swing the mortgage payments, it's better to go for it.

Renting is not always better but it is almost always better right now. If you don’t believe it go on Zillow and look at rentals that were recently sold and compare the rental price to what you would pay if you got a mortgage on them at the current rates. My impression with people tirelessly defending buying is that actually it is them who did not do the math. I own and did the math for myself. I would be significantly richer now if I kept renting and invested my money instead. But there are other advantages of owning, which is precisely why affluent people own too. They are very well aware it might not be financially the wisest but they do not care as they want to have a place they can renovate as they please and that no one can sell from under them.

There is an aspect of short term thinking when you see rents being lower than comparable mortgages if you buy *now*. But rents always go up in the long run. It's rare for rents to fall, especially for better areas, and those falls never last more than a year or two. Even if you pay more with a mortgage than rent right now, you are still building equity in the property that you don't with rent, plus you get to deduct taxes and mortgage interests, which you don't with renting.

The gap between renting and mortgage payments for a comparable property is never going to be so huge in favor of renting that you can genuinely make money off investing the differential in the market. All that is theoretical. Part of it comes down to that a mortgage is a forced savings, you have no choice but to make the payments and build up your equity. But telling yourself that if I rent I'll have an extra $1k to invest doesn't mean the extra $1k always goes into investments. Given that we still higher than typical inflation, the rent is also only going to keep going up.

Well, you are clearly another one who has not done the math for comparable properties RIGHT NOW. The mortgage for a house I considered renting for 7.2k would be almost double that (sold recently for 2.3mil). And an absolute majority of that is interest so the equity you are building is minuscule. And as a foreigner with a particular visa situation I cannot deduct any of it. Why would I buy that house right now knowing I won’t be staying there for more than 10 years anyway? You always need the full picture. Also it is very unlikely that the rent would double in the next 10 years. Many of the houses on the rental market I have been watching, have been renting at about the same rate for the last 5-7 years. And I would never have to replace the AC or roof in them.

Where do you think the money comes from to pay the interest, replace the AC or roof? Tenants are still paying and the longer you rent, the more of your rent is going toward that than quality/location.

If you don’t like interest bc it’s “throwing money away”, you should really hate rent.

For the kind of properties I am interested to rent vs but you pay more in interest than you pay in rent. I am looking at houses in NW DC roughly in the 1.5 to 2mil range. Rent for all of them is lower than what only your interest payments would be in the time horizon for which I would own or rent. I definitely disagree with whoever said above that even owning for 5 years is better than renting for the same period. I highly doubt this is true in the current market, considering the massive transaction costs and any improvement/maintenance costs. People also seem to largely ignore the opportunity cost. My 500k down payment would have gone significantly farther in the stock market in the 5 years since we bought. There is nothing wrong with wanting to own a place but it is definitely much more often than people want to admit not the best financial decision. Sure, no one has a crystal ball and I am curious how this post will age, but if I was not owning already, I would definitely not buy right now with the standard 20% down or less.

I looked at what was available in NW DC/ Chevy Chase. Seems like the rents for a $1.5 to $2M property is $8k a month on average. Mortgage would vary depending on how much equity you bring to the property. But 500k down on a $1.8M is about $10k a month in mortgage. It is more expensive than what you can rent. But it's still $8k in rent gone forever each month whereas for $10k monthly mortgage you are still paying something towards principle and building equity, so at worst it's a wash, at best it's still cheaper than renting. And with a mortgage you have a property and can benefit from appreciation.

Yes, housing prices can go south just as much as they can go north. So can the stock market.

If you just wanted to live somewhere for a few years before moving on, you do have a good argument for renting *now* because you're planning on moving in 2-3 years. But if you, like most people, are looking to stay put for a long time, it's better to bite the bullet and buy what you can. Even if you end up selling in a few years, any money "lost" will just be the equivalent of the rent you otherwise would have paid.

Add to it transaction costs of buying and selling, property taxes, insurance, maintenance costs and it is very unlikely to just be a wash. Plus you have blocked 500k in cash that could have been working for you. You can also be saving and investing the difference between the rent and mortgage. People should go ahead and buy if they value owning and don’t want their neighbors who think the same way to look down at them, but let’s please stop convincing ourselves that buying is always a good investment.

FYI a mortgage payment is typically bundled with the property taxes and insurance. The sums you see on redfin estimates will include those estimates. Renters are also not immune to maintenance costs like yard work and renters ideally should have renters' insurance too.

Still, we get it, dude. You're justifying your decision not to buy but instead spend a fortune each month on rent that goes away forever. It's fine. It's working for you right now, psychologically. I did have a prof in a RE class at Wharton who covered the costs of owning/renting and concluded that in a typical market you need to own for five years to break even due to transaction costs but after five years it's better to have owned. But that was a typical market in the early 2000s. Are we in a typical market? Is DC ever a typical market? I'm reminded of the old saying that no one ever went broke buying California real estate, which isn't entirely true but if you held your ground and stayed put, you came out extremely well.

But I will agree the market is in touchy place right now. We do have a significant undersupply of housing combined with higher interest rates that's keeping prices high. We also have persistent inflation. We also have a strong economy and buoyant stock market. Some cities are seeing softening real estate prices. Others, however, are very resilient, like DCUMlandia.

When I look at all the data available, and I'm mindful that a significant portion of the real estate is now owned by people with 2.75% mortgages that they will never give up unless they absolutely have too, what it means is that in stable and desirable areas with good amenities and schools, there's a strong likelihood of continuing undersupply of housing keeping prices high. If you're looking to own for the long run, it's likely better to just buy what you can and sit. If you expect to buy and sell every few years, it may be worth it to wait a few years but even that is a gamble, more so than buying.

No, you do not get it. I do not need to justify anything as I actually own. But I also know how to math and that I would have been better off financially if I kept renting. But there are other reasons to own. It just depends on how much you value them.

You’re wasting your time. PP sounds like an MBA in which case, he doesn’t understand math…

[Anonymous]

Anonymous wrote:Buying makes sense from putting down roots, customizing the home, buying in a neighborhood where there are no rentals, securing access to some target in boundary school. It does not, in many cases, make sense from a making money standpoint.

You are betting on the local real estate market beating the stock market. Doubling your money in 10 years is 7% annual growth. Yes yes i know taxes etc but its easier said than done to find a house thats literally doubled in ten years. Some markets have this, yes. But most markets are not like this.

Yes. And even if the prices double, there are many costs accumulated over the years of owning that most people tend to ignore when boasting about the great profit they made on their house.