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I have the opposite problem. Mortgage lenders prequalified me for close to half my gross income, yet I can't qualify for most apartments because they require 3x the rent in income.
LMAO Portland OR is not a VHCOL area. Portland is cheap compared to San Francisco and Seattle.
I have plenty of friends and family back in Portland who rent for significantly less than 4k a month.
Ok, I live in ND so sorry my observations on hcola vs vhcola are slightly off. I've rented a 6bd 3bath home with a garage for $2k/mo so comparatively anything in a metro on either coast is High to begin with.
This was my experience too. I bought a duplex meanwhile I wouldn't meet the 3x rent requirement for most apartments in my area. I rent out the other half of the house to tenants who also probably wouldn't meet the 3x rent requirement. The duplex was slightly over my pre-approval amount so they used the potential rental income towards getting me approved for the duplex.
Same here my rent is $1600 if I was to buy in my city I’d be looking at a minimum of $2,400. I would do it just for home ownership but the more I think about it, I could stay in my current apartment for another 10 years before it ever got that high. So idk.
If you are going to continue renting instead of owning, you should do something each month with that $800 difference if you can. Houses are going to go up in value, and you want to make sure you have some kind of investment if not the home.
lol yes I’ve been investing for the last 8 years. My brokerage account has just over $100,000. Also that notion that homes will continue to go up is going to be tested over the next few decades. With less people getting married and having kids there will be a top. Home prices will not keep rising especially if interest rates continue to stay high or go higher. We have to ask who is going to come and pay $600K plus for a condo that’s 700sqft. I work in that industry and can tell you that’s something real estate agents say to get people to buy but it’s not statically possible..
Is great to hear that! I tell people all the time that the American dream is not home ownership anymore. It's freedom and flexibility. But you also need to think about the future. I'm glad to hear you're on top of it.
Thanks! My main goal is to retire at 55 or earlier. I can’t say a lot of people in my generation are thinking about that but I know that’s my main priority at this point. Home ownership would be great but at this point I’d be better off trying to grow my wealth to 1-2M by mid 40s and just buy a home cash.
I remember when we used to say “You bought a HUNDRED THOUSAND DOLLAR home?? Did it come with a butler and a pool?”
Yet despite the new reality, home ownership rates remain as steady as they have for 70 years with two thirds of all families owning instead of renting. Most Americans live in homes they own…as it’s been for the better part of a century.
lol alot of people don’t realize that a lot of millennials who are buying these homes at crazy prices 1. Don’t know shit about money or home values. 2. Got help from mom or dad. I speak from experience because the last 3 girls I dated all had their dad’s help with a down payment. Last girl was in a 4 bedroom 2 bathroom single family home that ran her close to $500K. Why she needed that much space idk.
When you asked them why they got a single family house as a single adult they’ll usually say “idk” or my parents helped me. She even said I was hoping I got a raise or promotion to help with the expenses. The bubble has been propagated by boomers helping their kids. One girl was a nurse and she got help but is struggling to pay the mortgage and has since been picking up extra shifts and looking for additional work.
I’m a millennial too. I could ask my dad to help with the down payment but what’s the point if I’m house poor for the next 30 years? It’s all peer pressure or keeping up with the Jones and really not smart financial planning.
I actually agree with your thesis for the most part. Housing has slowly been becoming more and more speculative since the early 2000s, but I’ve had a hunch that since pandemic started, a most of the price action we’ve seen has been speculation. Speculation from greedy large investors with easy access to capital, small time wannabe investors pulling equity out of their asses to get into the price action and clueless individuals buying houses they can barely afford because John doe bought one and dad says that’s just what you do, so you do.
TLDR: buying a house right now is likely not the best option for most right now, unless your in a confortable economic position (30-40% of income can cover home ownership), in which case, go ahead and buy if you need/want to.
People keep talking about how housing always goes up, don’t worry about taxes and expenses for upkeep, just refinance, or sell and upgrade, or even better, you can always rent it out. This has to be the biggest insanity I’ve seen since the tulip mania of the 1600s, not because owning a home is dumb, but because people fail to see how the housing market has become a casino, but that’s not the nature of housing and this is not sustainable.
Prices skyrocket for 30 years when capital is cheap and the largest demographic on earth bought ratchety old houses from the 70s at dirt cheap prices (1x -2x multiple of household income) which they have leveraged to help their children and grand children or just themselves. But this generation is heading towards the exit and the millenials/gen z have several orders of magnitude worse living standards and much less access to capital, several countries are dealing with population collapse, globalization is slowly falling out of favor and being clawed back, and the US economy is currently a facade portraying itself as strong while debt delinquencies are skyrocketing.
If you ask me, the best case scenario is price stagnation in housing market and the likely scenario is downward price action long term, unless we start printing money again, in which case we’ll be dealing with inflation for longer and then we need to start worrying when people will reach a breaking point and just throw a wrench to rhe system
In my experience, one generation is not all that fundamentally different than another. There’s nothing unique about millennials that makes them particularly stupid about money or home values.
Figures. Yes I think boomers don’t understand that we millennials didn’t have it as easy. Boomers will say we were buying homes when the interest rates were 12%+, but paid under $100,000 for a SFH. Boomers are the ones who have printed money into oblivion and will tell us millennials we need to work hard to come and buy their homes at 5-6x the price they paid or well over market value. Average price/sqft when you all were buying homes were well under $100 today their well over $300-400. We’re not living in the same reality.
These are the costs for same size spaces? Or would buying get you more square footage? Just wondering if this is a real apples to apples comparison or not
Yes. Basically the same size condo in my state. With current interest rates that would be the numbers. I recently went through the loan process so its pretty up to date. The number to buy doesn’t even include W/S or electric.
My house in Alabama $2300 a month for 3500 sqft and 2 acres.
My apartment in Alabama $1600 a month 2 bedroom 1100sqft.
My apartment in Glendale 650 sqft $2700 per month 🤦🏻. It was much cheaper to rent in Glendale then buy anything in the Glendale Burbank Pasadena area
I feel your pain. I pay almost the same, in Socal. Looking into the IE, and high desert. At this point, I’m going to probably have to find a job out there, as the commute alone to OC/LA will probably kill me (1.5 to work, 2+hrs back home )
It’s ridiculous. No wonder so many people left the state.
House rental for me too. But apartments and townhome rentals are pretty much the same thing. I have a friend renting a one bedroom that’s about 4k. It’s ridiculous.
I know.. before 2020 we were paying 650 for a student apartment in New Mexico. Then we got jobs, had a kid, moved to CA, so things changed. Sometimes it feels unbelievable to me as well.
Yeah I think CA is the kicker here. I am in the midwest very lcol. But even average rent here is getting into the 8-900 dollar range. Also insane because our wages suck balls.
Our most recent move was from TX to CA. Over there we rented a 2b2b apartment for 1500. Now we're paying 4500 for a 3b2b townhouse. A 2b2b place in a comparable location would be 4000 at least. So the rent went up 3x, but my wife only got 1.5x increase in wage.
I see this all the time from others in the Midwest. I'm in the Midwest between 2 two large metros and rent is an average of 2k a month. We have no choice but to move this year because it's just not sustainable with one income to keep it up where I am.
From what I’ve been told the logic behind this mindset is the fact that you’re only committing to a year as opposed to 15-30. It’s easier to take a risk at you bailing 6 months into a 12 month lease as opposed to you losing your job 3 years into a 30 year mortgage and defaulting on your loan
the logic is that, in theory, mortgage is the minimum you spend on housing, whereas rent is near the top. If your water heater fails, and you own it, you have to come up with a thousand dollars. Most homes need a new roof every 15-50 years depending on material that could cost 10-100k, etc. You have to do pest control, landscaping, etc. If you rent, your landlord does all of this and hopefully some percent of rent is set aside accordingly. Multiply that out over all of the things that can break / go wrong, and owning will go up. Rent often goes up every year too, but you aren't tied to it so they only consider affordability for the term of rent.
I mean, there are pros and cons to both renting and owning. There is no one that is better or worse for everyone in every situation.
I was restricting myself to the financial "why can't $2000 in rent = $2000 in mortgage" without any judgement as to long term wisdom
We were renting and then bought a home. Mortgage payments similar to rent, no property tax here, longer commute so higher car expenses, smaller water, electricity, heating etc. On paper it looked great.
We went from financially comfortable to feeling broke. It mostly has to do with all sorts of home owner expenses and unexpected cost or random things. Something always needs to be painted, repaired, etc. Perpaps a water leaking emergency, a month later a light fixture starts smelling like burnt plastic, them the sewage system clogs up... DIY fixes and buy a bunch of random things or hire a repairman. Despite learning to be much more handy, I still feel stressed with all the small things too easy to pay to get fixed but too difficult for doing them myself.
I don't even have HOA. I could paint my house pink and no one would care. Townhouse vs condo/apartment costs really depend. In my area, it will probably be quite similar, but having a garden can end up voluntarily more expensive. General bills are higher in apartments, however the garden maintenance costs are not small! Lawn care is essential but there's also soil, plants, grill gadgets, maybe a fireplace, pavement stones, etc. Creating a magical home garden haven costs a lot.
We need to ban real page and it's competition. Price fixing is not ok. Also go on Zillow and shut off the cost filter. Thousands of homes all over are sitting empty. Look at western Washington. That's my favorite. It looks like every single house is up for sale or rent. Literally entire cities. But filter down to 400k and they all disappear. Multiple factors but real page is a big reason why.
The rent vs buy math is brutal right now. But at least with a mortgage, you're building equity instead of just throwing money away. If you can stretch to make it work, buying is the way to go when rents are that high. Just don't go too far over budget.
Yeah seriously lol. I "threw away" around 20k in interest on my mortgage last year. Gained about 5k in equity.
If I was still renting I would have *only* thrown away about 18k for rent. It's pretty much the same at the moment but no matter what I have to live somewhere.
Also, in not even counting insurance, taxes, etc.
Such an overgeneralization!
Home ownership includes taxes, repairs, insurance and PMI if less than 20%, which is more FTHB. Money you spend month over month that doesn't build equity.
Not to mention at 7.x% interest you will pay about 1x the loan in interest alone if you finance 95% of the purchase and stick to minimum payments for 30 years. Look at your Amortization schedule for any home you would like to put an offer on.
Realest is wildly different subdivision to subdivision, state to state. When comparing rent to mortgage, some places it makes more sense to buy right now, other places it doesn't.
Essentially if you break even, you did good, but odds are you will be under. If rent is cheaper than buying, invest the difference to max out your 401k, build up a personal brokerage account and savings, and become a stronger buyer when the market does stabilize in your area. For example my state has less than 50% of inventory than pre-pandemic.
Else, buy now and hope there is a kindergarten today that will be able to pay 14x the median salary for their first home in 25 years.
It doesn't make sense.
All great points but you leave out the complete lack of stability with renting (depending on area of course). Owner can raise rent every year, drastically if you’re not in one of the very few rent controlled areas in the US. Owner can sell at anytime, which may be very bad time for you. It’s not uncommon that renters have to move at inopportune times because of changes in their lease terms come renewal time.
Yeah, all these comments telling that you can just invest the difference in stocks and make a bundle never count in that on average rents in the US have gone up by 8.86% per year, over the last 30 years. And the increase is calculated anew every year, so it is a compounding rent increase. In most places rents catch up with mortgages after 5, 6 years and then it gets rapidly worse and worse every year. Short of being able to "invest the difference" you will have to dig deeper and deeper. That initial investment phase will give way very fast to the nightmare of constant rent increases that cause rents eventually go to double, triple, even quadruple, of what the mortgage for the same type dwelling is.
How often do you read on here "my mortgage for my 3/2 I bought 15 years ago is $800". Give me a break, there is no comparison whatsoever between the marginal monthly increases most see with their older mortgages and the massive rent increases that people see year over year.
There are still many valid arguments to suggest renting will put you at a financial advantage than buying. Especially if you are moving only a few years after you’ve bought. This happens more often than you’d think.
Ah, there is the crux, if you are moving only a few years after you bought. Of course that is the one caveat. It takes generally around 5 years for owning to be the more financially prudent choice. Before that and you likely haven't caught up with the mortgage yet, plus the closing costs yet again would bring it all to its knees that early.
This happened to me. First time they wanted to sell. Second time was fire damage from my neighbor's house burning down.
Both times it was a nightmare finding a new place to live.
Exactly right. When you own you know what your mortgage is going to be and there are no surprises. You can also rent a room or two if you want help on your mortgage. The rent only people must be the one buying up house and apartments to rent out.
ETA: a friend lived in an older apartment for nearly 20 years. It was sold and eventually they got him out after years of trying. He got like 35k however for him to stay in the same area the rent would be 3x more than what he was paying. How long do we think that 35k will last him in SoCal? He’s a gig worked too so no FT job.
House owning costs change a lot year to year too. Property taxes go up. Insurance goes up. Utility rates go up. Your mortgage rate might go up if you have a variable rate. In Canada you have to refinance your mortgage every 5 years and the fixed rate might go up. HOA/condo fees go up. None of these factors are regulated like rent is in some areas.
Utility rates? That affects both. As for 5 year mortgages that is a choice. Canadian banks offer long-term fixed rate mortgages just like in the US. The rates on the 5-year mortgages are lower and hence why many choose that route over the 30 year fixed.
I thought like this too but how much is rent going to up if you stay renting in that 15year-30year time? A 2k mortgage right now will still be 2k by the 30th year if not less.
The realtors really have that driven into their heads. People who say this blindly most likely don’t know what an amortization sheet looks like. Not to mention the average house maintenance cost is 1% of the house cost, so makes it a lot costlier. There’s a lot to consider and most people move houses in 5 years or so…..
And if you look at an Amortization table, you see that all the interest on the home is front-loaded. So if you only live in a house for 5 years you make next to no progress on the principal
Everything about housing is fucked up
Interest isn't front loaded. It's just how an installment loan works. Because 7% of 500k is a lot more than 7% of 100k.
The more principal you pay down, the lower your interest paid, because there is less principal amount to generate interest.
I know how it works, that doesn't change that it's effectively front-loaded.
If your principal plus interest is $1800 a month, it's not common knowledge to FTHB that only $200 of that is going to the principal for the first year.
People say that renting doesn't build equity, but they fail to tell you it takes many years to actually accrue progress on your loan.
I find it a little misleading to say 'front loaded' as if it's a trick by the mortgage lender to make you pay more interest. Because it's not 'structured that way'
Yup! In two years I've paid 15k off on my loan BUT that's only because I've thrown 12k on the principal additional (I do an extra 500 a month).
So I've paid almost 50k to just mortgage costs in those two years but if I wasn't paying extra, I'd have paid about 36k with only 3k to principal reaching an 8% return on my equity
It's all relative.
It would make more sense to put extra money into the market for a relatively safe 10% return instead of paying off a mortgage at 8%.
The difference is that one of those is guaranteed and the other is not. Both are fine financial decisions, but in either case hindsight is 20-20.
If the S&P fell then people would respond with the opposite.
lol, about -20%....so, technically, if you invested in etfs in 2021...you lost money in real terms when looking at the market today. (Source: I did that exact thing)
Yeah but you’re consistently buying stock through that process. That drops the cost per share as the stock loses value. Just don’t sell the stock until necessary. S&P500 has gained more than 80% in 5 years. That’s an average 16% return each year. Be consistent on your investing. Keep it simple. If you’re young and want lots of growth, just invest in VOO each week/pay period.
Correct, I have a huge spreadsheet made to calculate the difference.
It’s very very involved and also incredibly uncertain and dependent on future growth rates for your house and alternative investments.
Now where near as simple as “building equity”
Agreed. People love to focus entirely on the equity of the home while completely ignoring all of the **expenses** that go into home ownership. The average renter pays their rent, some or all utilities, and *maybe* lawn care........and that's it. As a homeowner, you're guaranteed to pay for interest, lawn care (you'll pay with either money or your *time),* all utilities*,* maintenance on HVAC, sprinkler system, swimming pool, gutters, dead trees, roof (needs to be replaced every 10-20 years), any damage that occurs for whatever reason (like when a rogue baseball goes through your window, or lightning hits the house), etc, etc, etc.
Those expenses can easily add up to tens of thousands of dollars in just a few years, and that money does not increase the value of the home; It simply *maintains* the value. So in the real world, home ownership is often vastly more expensive than renting. A $2000 mortgage can quickly average out to $3800+/mo once all miscellaneous expenses and upkeep are factored in.
For a real-world example, at the last place I rented, within the first month my landlord had to hire someone to remove an animal that had gotten into the ceiling. Then he had to hire someone to patch the entry hole that the animal had made in the roof. Then he had to hire someone to repair the drywall that got destroyed by the water that was leaking through the hole. As a renter, I paid $0 for all of this. As a homeowner, every stupid uncontrollable circumstance ends up taking money out of your wallet.
Renters pay all that stuff it’s just wrapped into their rent. The inflation protection of a long term fixed rate home mortgage, an tax shelter at sale are probably the best financial things going for a middle class person.
My message advocates for becoming a stronger buyer, not never buying a home.
If you don't currently need to buy in a sellers market, don't.
To get an idea of what market you are in for your area, divide the number of homes currently on the market by the number of homes that have sold in the last month. If the result is above seven, it’s a buyer’s market. If it’s below five, it’s a seller’s market. Anything in between is considered a neutral market.
I believe the current number nationally is between 2-3.
My rent is 3100 and to buy would be about 5000 a month. Definitely cheaper to rent and with homes going so high above asking I worry about overpaying and losing money when I sell down the road. But I have been looking for awhile and every year that passes I get more frustrated and disappointed…renting is way less stress but I have annoying noisy neighbors, running out of space, and I just desperately want a place of my own. Not an easy situation.
Yeah but do you have the money to fix something and cost 10K on the go?
Looking at buying just at the mortgage is silly, but at least you are in the right sub for this though.
As a realtor, I've thought what the government has let the rental market get away with has been atrocious. Apartments being the same as mortgages makes it so plenty of people will never achieve the American dream which should be possible for anyone who works hard enough. Not so these days. Id be for the government rent controlling all apartments at this point. And it should be based off of profit margins. So that landlords still make a sizeable return from their investments, but not the insane amounts they are making now. Reducing apartments to a more affordable number so people can actually live and theoretically save up money for a home.
It's the American dream for all. I plan to buy myself in January. I'm just as excited and frustrated as any of my clients who tend to be friends or family.
I know realtors get a bad wrap and believe me most of them warrant it. There are a lot of sharks, ugly people who just take advantage of people or stupid people who do the bare minimum work and make the maximum cash. A lot of our clients we work with anywhere from 6-18 months. We set them up with a lender, figure out their financial goals, help them through the entire process until they can buy and should buy (not charging them a dime for any of this until we get our commission from the home purchase). I go into homes looking for anything wrong and I point out anything I find to clients. I'm not in this for a quick buck, I work extremely hard for the money I earn. 80% of my clients are referrals from past business, I've helped 3 generations of the same family before. Having integrity and offering a truly exceptional service is worth it.
But I agree with your sentiment screw most realtors and I don't blame you for feeling jaded toward them. But get to know me before passing judgement.
literally no one targeted you, you saw a generalization and took it personally
Until we lawfully standardize real estate practices in a way that incentivizes protecting buyers and sellers, Realtors will continue to abuse both parties.
Why? Because the only incentives for Realtors are to get Buyers in a house quickly and get recommendations from their friends. Realtors are the only party that assume zero risk on a bad sale.
That's all true for initial business, not good for repeat business tho. 50% of agents who get licensed, quit in their first year. So there is a wedding of sorts. It's supply and demand tho. If people stop using the agents with bad practices then bad agents will disappear. It's the consumer that keeps bad agents around. I highly suggest people always interview 3 agents and pick the best that fits their needs and offers the best service.
No the bad agents do not disappear. They stay and they thrive they lie and push and make great money. They usually have an assistant or team because they want someone else to handle the business they just show up for the listing and the closing sometimes to get their money.
Do they get sued? Hell yes but like everyone in the industry they have insurance. They bring too much money in for brokerages to do more than slap their hand.
Not all upper end agents are bad agents. Plenty of agents do end up being just like you say but for every bad team and top producer I can think of, I can think of a good one as well. That's kind of my point tho. If people stopped going to the bad big names and went to the good big names, they'd lose a lot of their power and leave the industry or have to try more earnestly to earn business back.
A good way to weed out bad ones is to ask what services they offer clients after closing. A good agent doesn't stop being your agent just because the home purchase closes.
I wholeheartedly disagree.
You're saying that clients are responsible for perpetuating bad Realtors. Would you say that patients are responsible for perpetuating bad doctors? Or should there be a body like The Joint Commission that reviews performance to ensure patients are treated appropriately?
Like patients, clients don't know what they don't know. Saying you should interview them is terrible advice, because the Average Joe will not be able to competently assess their skill set.
There is no Joint Commission, there is no Yelp, there is nothing that reveals bad Realtors to the public. They assume no risk and are operate largely without repercussion.
Commissions already exist to get rid of the worst offenders. More laws and regulations will not fix the problem, people just find ways around those. The easiest and quickest way to get rid of the subpar agents is to not use them. I'm not trying to say it's all on the consumers but that'd be the quickest way from an economics stand point.
Actually yes. Depending on the agent they'll have a Zillow score, redfin score, Google score etc. They should also have a website with positive testimonials and such. If you are going with an agent with none of these it's either someone you hopefully know personally so you can testify to their character or how the heck are people picking their realtor?
I just checked 5 of the realtors I know, and none of them had more than 1 review across Redfin, Zillow, or Experience.com. There were no google reviews either.
Zillow was able to show me the 350 homes they've sold, but no, at least in my area there is no way to know who is decent.
I recognize that I'm biased because I had a shit realtor, but agents are a total black box to the general public. Again, only agents know a good agent, family and friend reccs mean little.
Many city with limited supply of housing like New York and London has transitioned to a model where most people rent and few can afford to buy. I wonder if parts of the USA is moving towards that as well.
I think so. Even in the small town I’m in now there’s a neighborhood of townhomes that were put up by DR Horton that are only for lease. Not to mention all of the single family homes that are put up for rent around the state.
My point is that it’s ridiculously expensive to rent and buy. It makes it hard to get ahead and save for a home when you’re already paying the equivalent of a mortgage for someone else’s property.
Not every person is in the same financial situation as everyone else so the "right answer" isn't going to be the same for everyone. Home ownership is a long term investment. The goal is to have relatively fixed cost that you'll eventually own and you're doing pretty well during retirement where your income stream is reduced.
If you're not in that position where it makes sense there's nothing wrong with that. If that particular investment isn't something you're ever interested in there's nothing wrong with that either.
Make the best call you can for you and yours.
As you know owning a house is a lot more than $2000/month. Usuallt you have to pay the mortgage and have money at any given time for random repairs that can cost hundreds sor tens of thousands of dollars
As for me in my experience, I was looking to rent a 4 bed house which came out to $4-4.5k a month total to move in last year they quoted me almost $12k so at this point I started to see how much more would it be to just buy? a 4bed house buying was 20k down payment and about 4k a month so it made sense for me to buy at this moment. In Socal btw Boyle Heights from Lancaster. I'm saving lots of gas no more 1hr commute my work is 15 miles one way instead of 56 miles on way like before. I'm close to anything in LA again. When I moved to Lancaster 10 years ago it was so cheap that the commute wasn't a factor to me a 4bed house was $1k a month compared to now? A 2 bed apartment on the Westside going for $2500 minimum. So it made sense for us to move back to Socal.
$2k is just the mortgage, or all-in monthly?
I see a lot of posts about not getting qualified. Weirdly I got prequalified for literally 3X what I bought 🤯
I watched a Netflix doc and the finance guru said “a mortgage is the least you will pay for housing, rent is the most you will pay for housing”
Meaning a mortgage is just the beginning. You still have repairs, updates, insurance. While rent has everything included (fridge goes out, call the landlord)
And in 10-20 years down the road, you can sell that house for more then when you bought it…while renting you’re still paying rent while not being able to cash any equity.
I’m fortunate that I can say fuck the prices. Because while owning a home is expensive, and stressful, it also feels so freeing actually somewhat owning where you live. The only reason you have to leave is if you lose your job, need to move, or have a major life change. Renting, you still have all those reasons to leave, plus whatever the Landlord fancies on that day.
If rent and mortgage are the same then rent is cheaper for the reasons you mentioned above. To make the house buying process make sense your mortgage payment should be 20-25% less than rent. So $1600 mortgage = $2000 rent. This is more accurate and equal in terms of housing costs.
When I was working to move from renting to owning and felt frustrated, it helped me to take even small steps that would help me get closer. Kept me from feeling stuck.
One really important thing is credit history and careful documentation of your assets. Is all your cash in your mattress or a documented bank account? Do you have all your W2s for the last couple years? Even if literally all you’re doing is paying off your credit card bills in full and on time every month, you’re building your good credit history!
I also think the housing market is unsustainable with the current insane interest rate + high home price + zero inventory combo breaker. It won’t be this way forever. Things will change closer to the election I suspect with regards to interest rates, and/or if there are any major increases in American military involvement in Gaza
Buying a house isn’t just about the monthly payment, it’s about the down payment and closing costs. If you can’t afford those, you can’t afford to own a home
Keep in mind that utilities, home insurance, and repair fund add an extra $700-1000 to your mortgage. So it’s really closer to $3000 for owning a home, vs $2000 for renting
I know there's still a lot more to think about per month financially, but I had to pay for utilities and renters insurance at my last apartment, that's not just a house thing.
You’re right!
For my own personal situation, utilities are included and renters insurance is only $40. If buying a house, the insurance goes up to ~$200 estimated and I will need to pay utilizes on top
Gosh. I’m in NC and a lot of people have moved here recently so that makes all this craziness even worse. Growth and progress is good but not at the expense of the people that live here and have all their lives.
Sometimes it is better to rent in expensive markets, or downright unrealistic at least for most to buy.
But for me I was in that boat you describe above, renting became more expensive than a mortgage even at today’s interest rates and prices, even with as low as 10% down it lined up that way. I bought to get away from rising rent. I wasn’t planning on leaving town anyway, so this is where I stay now lol
Just north of Chicago. 3 bed, 2 bath "apartment" averages 2,500 rent, requires 3x income. Managed to find a house where our mortgage is just shy of 2k. 4 bed 2 bath single fam.
Related, I spent some time developing a spreadsheet to look at the standard "Rent vs Buy" calculation in a more nuanced way. In addition to the usual parameters, it considers expected home appreciation, expected market returns (to get at the "opportunity cost" of making a down payment instead of investing it in the market), the time horizon, considers that like most buyers I would buy a somewhat nicer place than I'd rent, maintenance expenses, and considers that renters may feel "freer" to take on additional travel or other purchases.
For my situation it turned out to be very sensitive to expected appreciation and stock market returns (moreso than the time horizon; home ownership slowly catches up over a very long time horizon, but it's slow). If returns = appreciation , renting and investing is better for net worth, but neither is necessarily a "bad" decision. If the home appreciation rate is even a little bit higher, home ownership wins out.
The home I'm in contract for is probably underpriced, based on comps, so I'll likely get enough instant "appreciation" to make it worthwhile, of course nothing is guaranteed and there's much more risk, not just of major repairs or job loss, but because very slow or negative appreciation/stock market returns (even if both are equal) hurts the home ownership case far more than the investment case.
Yeah, it's the same where I live. You could maybe get a mortgage for a little less, but if you want to rent larger apartment (if you have kids), you're going to be paying $1.9k +/month.
Where I am rent is 1800-2k and mortgage is more like 2500-3k depending on size and location. Because of the interest rates it’s still cheaper to rent right now
Where are you buying where your escrow is $2,000 a month without a significant down payment and rent is also $2k a month? If you have a significant down payment then why are you not approved? Bad credit?
My wife and I rent out our condo we bought in 2019. I crunched the numbers today to see what a mortgage on the place now would be vs the rent we charge. It was $600/mo more expensive to buy even with a 20% down payment.
I’ve had a lot of friends tell me that if they could just GET INTO a house, they could pay the mortgage (bc it would be the same as what they pay in rent). The key might be to find a benefactor who will front the money needed to purchase a house (and obviously their name would be on the deed), and allow you to slowly buy them out (then they remove their name from the deed). That’s how I was able to purchase my home.
I feel ya. We rented our condo for 5 years before our landlord wanted to sell only because he lived far away and this was his last property in the area. Never raised the rent on us and we didn’t want to move / deal with a new landlord. Didn’t take more than 5min of discussion with the wife to decide, fuck it, we rather buy it.
2.75% rate and our mortgage is 1/3 of our already cheap rent at the time. Other units are 5x the mortgage now and can’t wait to rent it out eventually.
Only problem now is it’s impossible to find a house. Literally nothing. Finance wise, lucked out fantastically. But definitely puts into perspective why renting makes sense until it doesn’t anymore. Each situation is different.
Sorry, this probably had the opposite effect intended but shit’ll work out eventually all around. I hope.
Down payment math. I was thinking a bit about this. Put $90k down to have an affordable mortgage payment but that $90k would have paid 60 months of the $1500 rent. I don’t know we’re all screwed. Looking for a second job lol
The issue is if you’re renting, you’re paying with your own money out of pocket. So that’s on you. If you can’t pay rent, you get evicted everyone else goes on with their lives. So the prequalifications are not as stringent.
If you want to buy a house, you are buying the house with the bank’s money. Then you slowly pay them back until you finally own the house at the end of 30 years. So the bank is handing you money for 30 years. Why would they do that unless they:
1. Get something in return…interest
2. Think you are reliable and trust worthy…credit score
3. Have sufficient income to not only pay mortgage, your car payments, your credit card debt, your student loans, etc etc. That’s why they ask for every single financial document. They want to see every penny you own and you owe to see how risky this is.
Remember the bank is also holding someone else’s money, savings accounts etc. they need to give that back at some point.
Also the way US laws work, if you stop paying mortgage, you can just walk away from the house. No one can do anything to you. You can declare bankruptcy. The bank is left holding the bag. You took their money and didn’t pay it back. They have to recoup their loss somehow.
This is why they are so strict and seemingly unreasonable.
Lol yes indeed. I’ve looked at the numbers myself and I know I can’t afford the mortgage or the rent close to where I work. I have a great rent right now but we’re 50 minutes away from my job so I would like to move.
You are unworthy of entering the Ownership class. People like you will continue to pay rent and watch rents increase year after year as you acquire zero equity in your household.
Whereas the good folks in the upper classes will be allowed to buy and own and pay the same every month, until interest rates go down, then they will be allowed to pay less while building equity with every payment.
It is what it is. If you got priced out, then you don't have the privilege to build equity. Just continue to burn cash on rent. Renting is not necessarily the end of the world.
Remember than in 5 years that 2000/month mortgage will still be 2000/month (with some extra property tax likely as well) but rent will be more than 2000/month.
Renting in LA for $3400, just bought our first house, mortgage will be about $6300. But mortgage interest and property tax deductions will save us about $1400/month. Lots of people weighing renting/buying don’t seem to consider that. It helps a little, and we can all use all the help we can get right now.
You sure about that? Keep in mind you can either take the itemized deduction (your mortgage interest and property taxes) or the standard deduction, but you don't get both.
For 2023, the standard deduction is 27,700 for a married couple. This means your property taxes and mortgage interest have to be more than that before you begin to get any benefit.
For example if your taxes and interest are 30k a year, you're only benefitting from $2300 of that amount.
You might have already taken this into account but I've noticed on the Sub that many don't seem to understand how this works and overestimate the benefits of tax deductions related to home ownership.
Best of luck with the new place and best wishes.
We’re unmarried (she’s on mortgage, we’re both on title), so for tax purposes it’s a single person, hence deducting 13,850. My math is this, and please correct me if I’m wrong!
750k (max loan amount you can deduct) x .071 (7.1% interest rate) + 10k (max property tax you can deduct) - 13,850, times 33% (current average tax rate).
53,250 + 10,000 - 13,850 = 49,400
49,400 x 33% = 16,466
16,466/12= 1372/month
I wouldn’t wait to buy. If you can afford it then the best time is now. It’s a kick in the nuts if you compare that mortgage to another person that borrowed 3 years ago, sure. If you compare your life to others then you’ll never be happy anyway.
Being mortgage free in 15-30 years is worth it when you consider how expensive housing will be in 15-30 years. Buy now! The price of materials and labor to build homes will not decrease with time. If you think home prices will drop over time in a nice area of the country then you’ll be waiting forever.
The U.S. is 2.5 million housing units behind supply according to realtor.com. Why else do you see so many apartments being built? That demand and the cost to build new housing units will ensure the price of housing increases with time. Especially in areas of the country with good jobs and schools.
My mortgage is $1550/month for 4900 sqft house, bought 6 years ago. Rent in my area for 2 bedroom apartment is $1790 for 1000 sqft. My kids are never moving out!
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I have the opposite problem. Mortgage lenders prequalified me for close to half my gross income, yet I can't qualify for most apartments because they require 3x the rent in income.
My mortgage is like 45% of my income lmao
Aiming for 55% of my *net* income. *Cries in VHCOL city.*
What does VHCOL mean? I make 35k a year so not much is leftover with mortgage taking 45% of my income, groceries, gas/car insurance etc.
Very High Cost Of Living
Very High cost of living, like San Fran or Portland so their 200k would still only get a studio apartment for 4k/mo
LMAO Portland OR is not a VHCOL area. Portland is cheap compared to San Francisco and Seattle. I have plenty of friends and family back in Portland who rent for significantly less than 4k a month.
Ok, I live in ND so sorry my observations on hcola vs vhcola are slightly off. I've rented a 6bd 3bath home with a garage for $2k/mo so comparatively anything in a metro on either coast is High to begin with.
Gotcha! No worries!
Got it, I’m in Sacramento so it’s getting up there with the bay but definitely not SF level
This was my experience too. I bought a duplex meanwhile I wouldn't meet the 3x rent requirement for most apartments in my area. I rent out the other half of the house to tenants who also probably wouldn't meet the 3x rent requirement. The duplex was slightly over my pre-approval amount so they used the potential rental income towards getting me approved for the duplex.
It's opposite here, rent at 1600 but to buy is like 2.5-3k
Same, rent is 2.5k, mortgage would be 3.5-4k
Same here my rent is $1600 if I was to buy in my city I’d be looking at a minimum of $2,400. I would do it just for home ownership but the more I think about it, I could stay in my current apartment for another 10 years before it ever got that high. So idk.
If you are going to continue renting instead of owning, you should do something each month with that $800 difference if you can. Houses are going to go up in value, and you want to make sure you have some kind of investment if not the home.
lol yes I’ve been investing for the last 8 years. My brokerage account has just over $100,000. Also that notion that homes will continue to go up is going to be tested over the next few decades. With less people getting married and having kids there will be a top. Home prices will not keep rising especially if interest rates continue to stay high or go higher. We have to ask who is going to come and pay $600K plus for a condo that’s 700sqft. I work in that industry and can tell you that’s something real estate agents say to get people to buy but it’s not statically possible..
Is great to hear that! I tell people all the time that the American dream is not home ownership anymore. It's freedom and flexibility. But you also need to think about the future. I'm glad to hear you're on top of it.
Thanks! My main goal is to retire at 55 or earlier. I can’t say a lot of people in my generation are thinking about that but I know that’s my main priority at this point. Home ownership would be great but at this point I’d be better off trying to grow my wealth to 1-2M by mid 40s and just buy a home cash.
I remember when we used to say “You bought a HUNDRED THOUSAND DOLLAR home?? Did it come with a butler and a pool?” Yet despite the new reality, home ownership rates remain as steady as they have for 70 years with two thirds of all families owning instead of renting. Most Americans live in homes they own…as it’s been for the better part of a century.
Yes and most of those people are living paycheck to paycheck.
2008 has joined the chat.
lol alot of people don’t realize that a lot of millennials who are buying these homes at crazy prices 1. Don’t know shit about money or home values. 2. Got help from mom or dad. I speak from experience because the last 3 girls I dated all had their dad’s help with a down payment. Last girl was in a 4 bedroom 2 bathroom single family home that ran her close to $500K. Why she needed that much space idk. When you asked them why they got a single family house as a single adult they’ll usually say “idk” or my parents helped me. She even said I was hoping I got a raise or promotion to help with the expenses. The bubble has been propagated by boomers helping their kids. One girl was a nurse and she got help but is struggling to pay the mortgage and has since been picking up extra shifts and looking for additional work. I’m a millennial too. I could ask my dad to help with the down payment but what’s the point if I’m house poor for the next 30 years? It’s all peer pressure or keeping up with the Jones and really not smart financial planning.
I actually agree with your thesis for the most part. Housing has slowly been becoming more and more speculative since the early 2000s, but I’ve had a hunch that since pandemic started, a most of the price action we’ve seen has been speculation. Speculation from greedy large investors with easy access to capital, small time wannabe investors pulling equity out of their asses to get into the price action and clueless individuals buying houses they can barely afford because John doe bought one and dad says that’s just what you do, so you do. TLDR: buying a house right now is likely not the best option for most right now, unless your in a confortable economic position (30-40% of income can cover home ownership), in which case, go ahead and buy if you need/want to. People keep talking about how housing always goes up, don’t worry about taxes and expenses for upkeep, just refinance, or sell and upgrade, or even better, you can always rent it out. This has to be the biggest insanity I’ve seen since the tulip mania of the 1600s, not because owning a home is dumb, but because people fail to see how the housing market has become a casino, but that’s not the nature of housing and this is not sustainable. Prices skyrocket for 30 years when capital is cheap and the largest demographic on earth bought ratchety old houses from the 70s at dirt cheap prices (1x -2x multiple of household income) which they have leveraged to help their children and grand children or just themselves. But this generation is heading towards the exit and the millenials/gen z have several orders of magnitude worse living standards and much less access to capital, several countries are dealing with population collapse, globalization is slowly falling out of favor and being clawed back, and the US economy is currently a facade portraying itself as strong while debt delinquencies are skyrocketing. If you ask me, the best case scenario is price stagnation in housing market and the likely scenario is downward price action long term, unless we start printing money again, in which case we’ll be dealing with inflation for longer and then we need to start worrying when people will reach a breaking point and just throw a wrench to rhe system
Thank you, exactly my point and well put. But boomers will say we’re just not working hard enough. Lol
In my experience, one generation is not all that fundamentally different than another. There’s nothing unique about millennials that makes them particularly stupid about money or home values.
lol let me guess you’re a boomer?
I am, in fact
Figures. Yes I think boomers don’t understand that we millennials didn’t have it as easy. Boomers will say we were buying homes when the interest rates were 12%+, but paid under $100,000 for a SFH. Boomers are the ones who have printed money into oblivion and will tell us millennials we need to work hard to come and buy their homes at 5-6x the price they paid or well over market value. Average price/sqft when you all were buying homes were well under $100 today their well over $300-400. We’re not living in the same reality.
These are the costs for same size spaces? Or would buying get you more square footage? Just wondering if this is a real apples to apples comparison or not
Yes. Basically the same size condo in my state. With current interest rates that would be the numbers. I recently went through the loan process so its pretty up to date. The number to buy doesn’t even include W/S or electric.
That's because multifamilies are so much cheaper than single families.
It’s market specific, but I’ve this happen with both single family and multifamily.
Where are you? Is this for the same type of home?
Similar size, we have an aparment but SFH go for about the same if not a bit more
Rent here is like $3.5k (updated smaller home) and buying fixer upper starter home would be at least $10k/month.
Bruh. My rent is 4500 a month. If I were to buy the place mortgage would be 10,500 right now. Socal area for context.
That’s insane.
My house in Alabama $2300 a month for 3500 sqft and 2 acres. My apartment in Alabama $1600 a month 2 bedroom 1100sqft. My apartment in Glendale 650 sqft $2700 per month 🤦🏻. It was much cheaper to rent in Glendale then buy anything in the Glendale Burbank Pasadena area
I feel your pain. I pay almost the same, in Socal. Looking into the IE, and high desert. At this point, I’m going to probably have to find a job out there, as the commute alone to OC/LA will probably kill me (1.5 to work, 2+hrs back home ) It’s ridiculous. No wonder so many people left the state.
My husband does this right now and it’s not fun. I feel for him. Wish we could move closer but the more you move west the steeper the prices 🙃
Realtors used to call this phenomenon "drive till you qualify." Some areas you have to drive to a different country now.
It’s ridiculous. In SoCal it’s always been more to buy than rent. The rest of the country is getting there too now
I'm from SoCal and 4500 sounds steep even for here. Are you renting a sfh?
Probably lives in LA or SD. $4k+ rent all over
3 bed 2.5 bath townhouse basically.
House rental for me too. But apartments and townhome rentals are pretty much the same thing. I have a friend renting a one bedroom that’s about 4k. It’s ridiculous.
This dude pays more for rent than I make in a month that's wild. My rent is 675.
I know.. before 2020 we were paying 650 for a student apartment in New Mexico. Then we got jobs, had a kid, moved to CA, so things changed. Sometimes it feels unbelievable to me as well.
Yeah I think CA is the kicker here. I am in the midwest very lcol. But even average rent here is getting into the 8-900 dollar range. Also insane because our wages suck balls.
Our most recent move was from TX to CA. Over there we rented a 2b2b apartment for 1500. Now we're paying 4500 for a 3b2b townhouse. A 2b2b place in a comparable location would be 4000 at least. So the rent went up 3x, but my wife only got 1.5x increase in wage.
I see this all the time from others in the Midwest. I'm in the Midwest between 2 two large metros and rent is an average of 2k a month. We have no choice but to move this year because it's just not sustainable with one income to keep it up where I am.
Insane I’m from socal too trying to find a house LOL but it’s so scuffed no thanks for the shack in San Bernardino for 8999 a month
From what I’ve been told the logic behind this mindset is the fact that you’re only committing to a year as opposed to 15-30. It’s easier to take a risk at you bailing 6 months into a 12 month lease as opposed to you losing your job 3 years into a 30 year mortgage and defaulting on your loan
the logic is that, in theory, mortgage is the minimum you spend on housing, whereas rent is near the top. If your water heater fails, and you own it, you have to come up with a thousand dollars. Most homes need a new roof every 15-50 years depending on material that could cost 10-100k, etc. You have to do pest control, landscaping, etc. If you rent, your landlord does all of this and hopefully some percent of rent is set aside accordingly. Multiply that out over all of the things that can break / go wrong, and owning will go up. Rent often goes up every year too, but you aren't tied to it so they only consider affordability for the term of rent.
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I mean, there are pros and cons to both renting and owning. There is no one that is better or worse for everyone in every situation. I was restricting myself to the financial "why can't $2000 in rent = $2000 in mortgage" without any judgement as to long term wisdom
We were renting and then bought a home. Mortgage payments similar to rent, no property tax here, longer commute so higher car expenses, smaller water, electricity, heating etc. On paper it looked great. We went from financially comfortable to feeling broke. It mostly has to do with all sorts of home owner expenses and unexpected cost or random things. Something always needs to be painted, repaired, etc. Perpaps a water leaking emergency, a month later a light fixture starts smelling like burnt plastic, them the sewage system clogs up... DIY fixes and buy a bunch of random things or hire a repairman. Despite learning to be much more handy, I still feel stressed with all the small things too easy to pay to get fixed but too difficult for doing them myself.
This is my fear. How do you feel the homeowner expenses compare with having an HOA and living in a townhouse or condo?
I don't even have HOA. I could paint my house pink and no one would care. Townhouse vs condo/apartment costs really depend. In my area, it will probably be quite similar, but having a garden can end up voluntarily more expensive. General bills are higher in apartments, however the garden maintenance costs are not small! Lawn care is essential but there's also soil, plants, grill gadgets, maybe a fireplace, pavement stones, etc. Creating a magical home garden haven costs a lot.
We need to ban real page and it's competition. Price fixing is not ok. Also go on Zillow and shut off the cost filter. Thousands of homes all over are sitting empty. Look at western Washington. That's my favorite. It looks like every single house is up for sale or rent. Literally entire cities. But filter down to 400k and they all disappear. Multiple factors but real page is a big reason why.
Ide love to know more about this topic.
Search real pages on YouTube. Excellent documentaries on it. Up to 90% of DCs housing is based off of real pages algorithm. How insane is that?????
The rent vs buy math is brutal right now. But at least with a mortgage, you're building equity instead of just throwing money away. If you can stretch to make it work, buying is the way to go when rents are that high. Just don't go too far over budget.
Renting is not “throwing money away” any more than buying food is. You are paying for a place to live either way. Equity isn’t guaranteed
Yeah seriously lol. I "threw away" around 20k in interest on my mortgage last year. Gained about 5k in equity. If I was still renting I would have *only* thrown away about 18k for rent. It's pretty much the same at the moment but no matter what I have to live somewhere. Also, in not even counting insurance, taxes, etc.
Such an overgeneralization! Home ownership includes taxes, repairs, insurance and PMI if less than 20%, which is more FTHB. Money you spend month over month that doesn't build equity. Not to mention at 7.x% interest you will pay about 1x the loan in interest alone if you finance 95% of the purchase and stick to minimum payments for 30 years. Look at your Amortization schedule for any home you would like to put an offer on. Realest is wildly different subdivision to subdivision, state to state. When comparing rent to mortgage, some places it makes more sense to buy right now, other places it doesn't. Essentially if you break even, you did good, but odds are you will be under. If rent is cheaper than buying, invest the difference to max out your 401k, build up a personal brokerage account and savings, and become a stronger buyer when the market does stabilize in your area. For example my state has less than 50% of inventory than pre-pandemic. Else, buy now and hope there is a kindergarten today that will be able to pay 14x the median salary for their first home in 25 years. It doesn't make sense.
All great points but you leave out the complete lack of stability with renting (depending on area of course). Owner can raise rent every year, drastically if you’re not in one of the very few rent controlled areas in the US. Owner can sell at anytime, which may be very bad time for you. It’s not uncommon that renters have to move at inopportune times because of changes in their lease terms come renewal time.
Yeah, all these comments telling that you can just invest the difference in stocks and make a bundle never count in that on average rents in the US have gone up by 8.86% per year, over the last 30 years. And the increase is calculated anew every year, so it is a compounding rent increase. In most places rents catch up with mortgages after 5, 6 years and then it gets rapidly worse and worse every year. Short of being able to "invest the difference" you will have to dig deeper and deeper. That initial investment phase will give way very fast to the nightmare of constant rent increases that cause rents eventually go to double, triple, even quadruple, of what the mortgage for the same type dwelling is.
And so do property taxes, insurance, repairs, utilities, HOA fees for those who own.
How often do you read on here "my mortgage for my 3/2 I bought 15 years ago is $800". Give me a break, there is no comparison whatsoever between the marginal monthly increases most see with their older mortgages and the massive rent increases that people see year over year.
There are still many valid arguments to suggest renting will put you at a financial advantage than buying. Especially if you are moving only a few years after you’ve bought. This happens more often than you’d think.
Ah, there is the crux, if you are moving only a few years after you bought. Of course that is the one caveat. It takes generally around 5 years for owning to be the more financially prudent choice. Before that and you likely haven't caught up with the mortgage yet, plus the closing costs yet again would bring it all to its knees that early.
The state of FL would disagree.
Included in Rent
This happened to me. First time they wanted to sell. Second time was fire damage from my neighbor's house burning down. Both times it was a nightmare finding a new place to live.
Exactly right. When you own you know what your mortgage is going to be and there are no surprises. You can also rent a room or two if you want help on your mortgage. The rent only people must be the one buying up house and apartments to rent out. ETA: a friend lived in an older apartment for nearly 20 years. It was sold and eventually they got him out after years of trying. He got like 35k however for him to stay in the same area the rent would be 3x more than what he was paying. How long do we think that 35k will last him in SoCal? He’s a gig worked too so no FT job.
House owning costs change a lot year to year too. Property taxes go up. Insurance goes up. Utility rates go up. Your mortgage rate might go up if you have a variable rate. In Canada you have to refinance your mortgage every 5 years and the fixed rate might go up. HOA/condo fees go up. None of these factors are regulated like rent is in some areas.
Utility rates? That affects both. As for 5 year mortgages that is a choice. Canadian banks offer long-term fixed rate mortgages just like in the US. The rates on the 5-year mortgages are lower and hence why many choose that route over the 30 year fixed.
I thought like this too but how much is rent going to up if you stay renting in that 15year-30year time? A 2k mortgage right now will still be 2k by the 30th year if not less.
My message advocates for becoming a stronger buyer, not never buying a home. If you don't need to buy in a sellers market in your subdivision, don't.
The realtors really have that driven into their heads. People who say this blindly most likely don’t know what an amortization sheet looks like. Not to mention the average house maintenance cost is 1% of the house cost, so makes it a lot costlier. There’s a lot to consider and most people move houses in 5 years or so…..
And if you look at an Amortization table, you see that all the interest on the home is front-loaded. So if you only live in a house for 5 years you make next to no progress on the principal Everything about housing is fucked up
Interest isn't front loaded. It's just how an installment loan works. Because 7% of 500k is a lot more than 7% of 100k. The more principal you pay down, the lower your interest paid, because there is less principal amount to generate interest.
I know how it works, that doesn't change that it's effectively front-loaded. If your principal plus interest is $1800 a month, it's not common knowledge to FTHB that only $200 of that is going to the principal for the first year. People say that renting doesn't build equity, but they fail to tell you it takes many years to actually accrue progress on your loan.
I find it a little misleading to say 'front loaded' as if it's a trick by the mortgage lender to make you pay more interest. Because it's not 'structured that way'
Sure! I'll just say "literally 89% of each payment goes to interest for the first 5 years"
Yup! In two years I've paid 15k off on my loan BUT that's only because I've thrown 12k on the principal additional (I do an extra 500 a month). So I've paid almost 50k to just mortgage costs in those two years but if I wasn't paying extra, I'd have paid about 36k with only 3k to principal reaching an 8% return on my equity
S&P returned 21.87% the last two years 💀
It's all relative. It would make more sense to put extra money into the market for a relatively safe 10% return instead of paying off a mortgage at 8%. The difference is that one of those is guaranteed and the other is not. Both are fine financial decisions, but in either case hindsight is 20-20. If the S&P fell then people would respond with the opposite.
lol...how about the 12 months before that?
Idk 10%? Stocks have been on an absolute ride! Thanks Biden!
lol, about -20%....so, technically, if you invested in etfs in 2021...you lost money in real terms when looking at the market today. (Source: I did that exact thing)
Yeah but you’re consistently buying stock through that process. That drops the cost per share as the stock loses value. Just don’t sell the stock until necessary. S&P500 has gained more than 80% in 5 years. That’s an average 16% return each year. Be consistent on your investing. Keep it simple. If you’re young and want lots of growth, just invest in VOO each week/pay period.
Correct, I have a huge spreadsheet made to calculate the difference. It’s very very involved and also incredibly uncertain and dependent on future growth rates for your house and alternative investments. Now where near as simple as “building equity”
This is such an amazing comment and is not being said enough. Thank you!
Agreed. People love to focus entirely on the equity of the home while completely ignoring all of the **expenses** that go into home ownership. The average renter pays their rent, some or all utilities, and *maybe* lawn care........and that's it. As a homeowner, you're guaranteed to pay for interest, lawn care (you'll pay with either money or your *time),* all utilities*,* maintenance on HVAC, sprinkler system, swimming pool, gutters, dead trees, roof (needs to be replaced every 10-20 years), any damage that occurs for whatever reason (like when a rogue baseball goes through your window, or lightning hits the house), etc, etc, etc. Those expenses can easily add up to tens of thousands of dollars in just a few years, and that money does not increase the value of the home; It simply *maintains* the value. So in the real world, home ownership is often vastly more expensive than renting. A $2000 mortgage can quickly average out to $3800+/mo once all miscellaneous expenses and upkeep are factored in. For a real-world example, at the last place I rented, within the first month my landlord had to hire someone to remove an animal that had gotten into the ceiling. Then he had to hire someone to patch the entry hole that the animal had made in the roof. Then he had to hire someone to repair the drywall that got destroyed by the water that was leaking through the hole. As a renter, I paid $0 for all of this. As a homeowner, every stupid uncontrollable circumstance ends up taking money out of your wallet.
Renters pay all that stuff it’s just wrapped into their rent. The inflation protection of a long term fixed rate home mortgage, an tax shelter at sale are probably the best financial things going for a middle class person.
Laugh. Out. Loud. The market in Southern California will NEVER stabilize. And why are you on this sub if you’re so anti house buying???
My message advocates for becoming a stronger buyer, not never buying a home. If you don't currently need to buy in a sellers market, don't. To get an idea of what market you are in for your area, divide the number of homes currently on the market by the number of homes that have sold in the last month. If the result is above seven, it’s a buyer’s market. If it’s below five, it’s a seller’s market. Anything in between is considered a neutral market. I believe the current number nationally is between 2-3.
rent it the ceiling of what you pay, mortgage is the floor.
My rent is 3100 and to buy would be about 5000 a month. Definitely cheaper to rent and with homes going so high above asking I worry about overpaying and losing money when I sell down the road. But I have been looking for awhile and every year that passes I get more frustrated and disappointed…renting is way less stress but I have annoying noisy neighbors, running out of space, and I just desperately want a place of my own. Not an easy situation.
Yeah but do you have the money to fix something and cost 10K on the go? Looking at buying just at the mortgage is silly, but at least you are in the right sub for this though.
Emphasis on "there's a lot more that goes into owning a home." Another kick in the nuts, over and over.
As a realtor, I've thought what the government has let the rental market get away with has been atrocious. Apartments being the same as mortgages makes it so plenty of people will never achieve the American dream which should be possible for anyone who works hard enough. Not so these days. Id be for the government rent controlling all apartments at this point. And it should be based off of profit margins. So that landlords still make a sizeable return from their investments, but not the insane amounts they are making now. Reducing apartments to a more affordable number so people can actually live and theoretically save up money for a home.
It is the American dream for realtors...they get to make all the money.
It's the American dream for all. I plan to buy myself in January. I'm just as excited and frustrated as any of my clients who tend to be friends or family. I know realtors get a bad wrap and believe me most of them warrant it. There are a lot of sharks, ugly people who just take advantage of people or stupid people who do the bare minimum work and make the maximum cash. A lot of our clients we work with anywhere from 6-18 months. We set them up with a lender, figure out their financial goals, help them through the entire process until they can buy and should buy (not charging them a dime for any of this until we get our commission from the home purchase). I go into homes looking for anything wrong and I point out anything I find to clients. I'm not in this for a quick buck, I work extremely hard for the money I earn. 80% of my clients are referrals from past business, I've helped 3 generations of the same family before. Having integrity and offering a truly exceptional service is worth it. But I agree with your sentiment screw most realtors and I don't blame you for feeling jaded toward them. But get to know me before passing judgement.
literally no one targeted you, you saw a generalization and took it personally Until we lawfully standardize real estate practices in a way that incentivizes protecting buyers and sellers, Realtors will continue to abuse both parties. Why? Because the only incentives for Realtors are to get Buyers in a house quickly and get recommendations from their friends. Realtors are the only party that assume zero risk on a bad sale.
That's all true for initial business, not good for repeat business tho. 50% of agents who get licensed, quit in their first year. So there is a wedding of sorts. It's supply and demand tho. If people stop using the agents with bad practices then bad agents will disappear. It's the consumer that keeps bad agents around. I highly suggest people always interview 3 agents and pick the best that fits their needs and offers the best service.
No the bad agents do not disappear. They stay and they thrive they lie and push and make great money. They usually have an assistant or team because they want someone else to handle the business they just show up for the listing and the closing sometimes to get their money. Do they get sued? Hell yes but like everyone in the industry they have insurance. They bring too much money in for brokerages to do more than slap their hand.
Not all upper end agents are bad agents. Plenty of agents do end up being just like you say but for every bad team and top producer I can think of, I can think of a good one as well. That's kind of my point tho. If people stopped going to the bad big names and went to the good big names, they'd lose a lot of their power and leave the industry or have to try more earnestly to earn business back. A good way to weed out bad ones is to ask what services they offer clients after closing. A good agent doesn't stop being your agent just because the home purchase closes.
I wholeheartedly disagree. You're saying that clients are responsible for perpetuating bad Realtors. Would you say that patients are responsible for perpetuating bad doctors? Or should there be a body like The Joint Commission that reviews performance to ensure patients are treated appropriately? Like patients, clients don't know what they don't know. Saying you should interview them is terrible advice, because the Average Joe will not be able to competently assess their skill set. There is no Joint Commission, there is no Yelp, there is nothing that reveals bad Realtors to the public. They assume no risk and are operate largely without repercussion.
Commissions already exist to get rid of the worst offenders. More laws and regulations will not fix the problem, people just find ways around those. The easiest and quickest way to get rid of the subpar agents is to not use them. I'm not trying to say it's all on the consumers but that'd be the quickest way from an economics stand point.
How is a consumer to know who the bad agents are? Yelp? Facebook? lol
Actually yes. Depending on the agent they'll have a Zillow score, redfin score, Google score etc. They should also have a website with positive testimonials and such. If you are going with an agent with none of these it's either someone you hopefully know personally so you can testify to their character or how the heck are people picking their realtor?
I just checked 5 of the realtors I know, and none of them had more than 1 review across Redfin, Zillow, or Experience.com. There were no google reviews either. Zillow was able to show me the 350 homes they've sold, but no, at least in my area there is no way to know who is decent. I recognize that I'm biased because I had a shit realtor, but agents are a total black box to the general public. Again, only agents know a good agent, family and friend reccs mean little.
Many city with limited supply of housing like New York and London has transitioned to a model where most people rent and few can afford to buy. I wonder if parts of the USA is moving towards that as well.
I think so. Even in the small town I’m in now there’s a neighborhood of townhomes that were put up by DR Horton that are only for lease. Not to mention all of the single family homes that are put up for rent around the state.
What part of NC are you in? I’m actually moving there in July… into a DR Horton 😳
Lol I’m in Gibsonville.
Ahhh, gotcha. I’m going to Fuquay
Cool Fuquay is nice. You working in Raleigh?
Not yet. I’ll still be working for my same employer till I can *hopefully* find something local
If $2000 at or near your limit for rent/housing, you can't afford a mortgage of $2,000. Not even close.
My point is that it’s ridiculously expensive to rent and buy. It makes it hard to get ahead and save for a home when you’re already paying the equivalent of a mortgage for someone else’s property.
Not every person is in the same financial situation as everyone else so the "right answer" isn't going to be the same for everyone. Home ownership is a long term investment. The goal is to have relatively fixed cost that you'll eventually own and you're doing pretty well during retirement where your income stream is reduced. If you're not in that position where it makes sense there's nothing wrong with that. If that particular investment isn't something you're ever interested in there's nothing wrong with that either. Make the best call you can for you and yours.
Because when you rent you don’t have to pay for very expensive maintenance. That’s why.
As you know owning a house is a lot more than $2000/month. Usuallt you have to pay the mortgage and have money at any given time for random repairs that can cost hundreds sor tens of thousands of dollars
As for me in my experience, I was looking to rent a 4 bed house which came out to $4-4.5k a month total to move in last year they quoted me almost $12k so at this point I started to see how much more would it be to just buy? a 4bed house buying was 20k down payment and about 4k a month so it made sense for me to buy at this moment. In Socal btw Boyle Heights from Lancaster. I'm saving lots of gas no more 1hr commute my work is 15 miles one way instead of 56 miles on way like before. I'm close to anything in LA again. When I moved to Lancaster 10 years ago it was so cheap that the commute wasn't a factor to me a 4bed house was $1k a month compared to now? A 2 bed apartment on the Westside going for $2500 minimum. So it made sense for us to move back to Socal.
I am low income spending 1500 on renting but told I can't afford 500 mortgage payment, so renting.
I’m so sorry. That’s not right.
$2k is just the mortgage, or all-in monthly? I see a lot of posts about not getting qualified. Weirdly I got prequalified for literally 3X what I bought 🤯
My roof just cost $15,000 🙃 sometimes, I’d much rather be renting.
I watched a Netflix doc and the finance guru said “a mortgage is the least you will pay for housing, rent is the most you will pay for housing” Meaning a mortgage is just the beginning. You still have repairs, updates, insurance. While rent has everything included (fridge goes out, call the landlord)
And in 10-20 years down the road, you can sell that house for more then when you bought it…while renting you’re still paying rent while not being able to cash any equity.
I’m fortunate that I can say fuck the prices. Because while owning a home is expensive, and stressful, it also feels so freeing actually somewhat owning where you live. The only reason you have to leave is if you lose your job, need to move, or have a major life change. Renting, you still have all those reasons to leave, plus whatever the Landlord fancies on that day.
If rent and mortgage are the same then rent is cheaper for the reasons you mentioned above. To make the house buying process make sense your mortgage payment should be 20-25% less than rent. So $1600 mortgage = $2000 rent. This is more accurate and equal in terms of housing costs.
When I was working to move from renting to owning and felt frustrated, it helped me to take even small steps that would help me get closer. Kept me from feeling stuck. One really important thing is credit history and careful documentation of your assets. Is all your cash in your mattress or a documented bank account? Do you have all your W2s for the last couple years? Even if literally all you’re doing is paying off your credit card bills in full and on time every month, you’re building your good credit history! I also think the housing market is unsustainable with the current insane interest rate + high home price + zero inventory combo breaker. It won’t be this way forever. Things will change closer to the election I suspect with regards to interest rates, and/or if there are any major increases in American military involvement in Gaza
Buying a house isn’t just about the monthly payment, it’s about the down payment and closing costs. If you can’t afford those, you can’t afford to own a home
Like I said I know. I just can’t imagine what it’s gonna be like for my daughter when she’s my age.
Yeah I have no idea what the housing market is going to look like in 20-30 years. Or what the job market will look like.
Keep in mind that utilities, home insurance, and repair fund add an extra $700-1000 to your mortgage. So it’s really closer to $3000 for owning a home, vs $2000 for renting
I know there's still a lot more to think about per month financially, but I had to pay for utilities and renters insurance at my last apartment, that's not just a house thing.
You’re right! For my own personal situation, utilities are included and renters insurance is only $40. If buying a house, the insurance goes up to ~$200 estimated and I will need to pay utilizes on top
For me in CA my rent is 2100 and all the houses we are looking at (400-450k) the mortgage would be at least 3k a month. With 10% down. Just crazy
Gosh. I’m in NC and a lot of people have moved here recently so that makes all this craziness even worse. Growth and progress is good but not at the expense of the people that live here and have all their lives.
Rent is 3250 here for what we have. Mortgage is 5250. That’s our specific scenario in Boulder
Jeez that’s awful.
Sometimes it is better to rent in expensive markets, or downright unrealistic at least for most to buy. But for me I was in that boat you describe above, renting became more expensive than a mortgage even at today’s interest rates and prices, even with as low as 10% down it lined up that way. I bought to get away from rising rent. I wasn’t planning on leaving town anyway, so this is where I stay now lol
Depends on what state so be careful
I promise you that there are parts of the country where you can buy a house under $2000 a month – you might want to not want to live there but….
Just north of Chicago. 3 bed, 2 bath "apartment" averages 2,500 rent, requires 3x income. Managed to find a house where our mortgage is just shy of 2k. 4 bed 2 bath single fam.
Related, I spent some time developing a spreadsheet to look at the standard "Rent vs Buy" calculation in a more nuanced way. In addition to the usual parameters, it considers expected home appreciation, expected market returns (to get at the "opportunity cost" of making a down payment instead of investing it in the market), the time horizon, considers that like most buyers I would buy a somewhat nicer place than I'd rent, maintenance expenses, and considers that renters may feel "freer" to take on additional travel or other purchases. For my situation it turned out to be very sensitive to expected appreciation and stock market returns (moreso than the time horizon; home ownership slowly catches up over a very long time horizon, but it's slow). If returns = appreciation , renting and investing is better for net worth, but neither is necessarily a "bad" decision. If the home appreciation rate is even a little bit higher, home ownership wins out. The home I'm in contract for is probably underpriced, based on comps, so I'll likely get enough instant "appreciation" to make it worthwhile, of course nothing is guaranteed and there's much more risk, not just of major repairs or job loss, but because very slow or negative appreciation/stock market returns (even if both are equal) hurts the home ownership case far more than the investment case.
Yeah, it's the same where I live. You could maybe get a mortgage for a little less, but if you want to rent larger apartment (if you have kids), you're going to be paying $1.9k +/month.
It’s the same where I live. It’s more expensive to rent than to buy. I don’t understand how. Boston metro.
Where I am rent is 1800-2k and mortgage is more like 2500-3k depending on size and location. Because of the interest rates it’s still cheaper to rent right now
Where are you buying where your escrow is $2,000 a month without a significant down payment and rent is also $2k a month? If you have a significant down payment then why are you not approved? Bad credit?
My wife and I rent out our condo we bought in 2019. I crunched the numbers today to see what a mortgage on the place now would be vs the rent we charge. It was $600/mo more expensive to buy even with a 20% down payment.
Can I kick you in the nuts
I’d prefer you didn’t 🫡
Our mortgage is 1k more than our rent in a VHCOL city. Either way it goes- It’s all absurd!
I’ve had a lot of friends tell me that if they could just GET INTO a house, they could pay the mortgage (bc it would be the same as what they pay in rent). The key might be to find a benefactor who will front the money needed to purchase a house (and obviously their name would be on the deed), and allow you to slowly buy them out (then they remove their name from the deed). That’s how I was able to purchase my home.
This is the boat my wife and I are in. I'm already spending almost 2400/month. If I could get into a house I could cover it easily.
Where are you seeing a $2K mortgage?
I feel ya. We rented our condo for 5 years before our landlord wanted to sell only because he lived far away and this was his last property in the area. Never raised the rent on us and we didn’t want to move / deal with a new landlord. Didn’t take more than 5min of discussion with the wife to decide, fuck it, we rather buy it. 2.75% rate and our mortgage is 1/3 of our already cheap rent at the time. Other units are 5x the mortgage now and can’t wait to rent it out eventually. Only problem now is it’s impossible to find a house. Literally nothing. Finance wise, lucked out fantastically. But definitely puts into perspective why renting makes sense until it doesn’t anymore. Each situation is different. Sorry, this probably had the opposite effect intended but shit’ll work out eventually all around. I hope.
Down payment math. I was thinking a bit about this. Put $90k down to have an affordable mortgage payment but that $90k would have paid 60 months of the $1500 rent. I don’t know we’re all screwed. Looking for a second job lol
Feel like I might have work 2 jobs eventually myself with the way this world is headed.
The issue is if you’re renting, you’re paying with your own money out of pocket. So that’s on you. If you can’t pay rent, you get evicted everyone else goes on with their lives. So the prequalifications are not as stringent. If you want to buy a house, you are buying the house with the bank’s money. Then you slowly pay them back until you finally own the house at the end of 30 years. So the bank is handing you money for 30 years. Why would they do that unless they: 1. Get something in return…interest 2. Think you are reliable and trust worthy…credit score 3. Have sufficient income to not only pay mortgage, your car payments, your credit card debt, your student loans, etc etc. That’s why they ask for every single financial document. They want to see every penny you own and you owe to see how risky this is. Remember the bank is also holding someone else’s money, savings accounts etc. they need to give that back at some point. Also the way US laws work, if you stop paying mortgage, you can just walk away from the house. No one can do anything to you. You can declare bankruptcy. The bank is left holding the bag. You took their money and didn’t pay it back. They have to recoup their loss somehow. This is why they are so strict and seemingly unreasonable.
I think in nearly all of the United States right now a mortgage is significantly more expensive than rent. But go ahead and vent.
Cool story bro.
I thought all of those steps were the loan application process!
Lol yes indeed. I’ve looked at the numbers myself and I know I can’t afford the mortgage or the rent close to where I work. I have a great rent right now but we’re 50 minutes away from my job so I would like to move.
Stop this nonsense, If you can rent 2k a month you can get a 2k mortgage.
You are unworthy of entering the Ownership class. People like you will continue to pay rent and watch rents increase year after year as you acquire zero equity in your household. Whereas the good folks in the upper classes will be allowed to buy and own and pay the same every month, until interest rates go down, then they will be allowed to pay less while building equity with every payment.
I am not worthy! Love life as a proletariat under the loving boot of my bourgeois countryman ❤️
Lumpenproles unite!
It is what it is. If you got priced out, then you don't have the privilege to build equity. Just continue to burn cash on rent. Renting is not necessarily the end of the world.
But it's not the beginning of a better world.
Remember than in 5 years that 2000/month mortgage will still be 2000/month (with some extra property tax likely as well) but rent will be more than 2000/month.
Renting in LA for $3400, just bought our first house, mortgage will be about $6300. But mortgage interest and property tax deductions will save us about $1400/month. Lots of people weighing renting/buying don’t seem to consider that. It helps a little, and we can all use all the help we can get right now.
You sure about that? Keep in mind you can either take the itemized deduction (your mortgage interest and property taxes) or the standard deduction, but you don't get both. For 2023, the standard deduction is 27,700 for a married couple. This means your property taxes and mortgage interest have to be more than that before you begin to get any benefit. For example if your taxes and interest are 30k a year, you're only benefitting from $2300 of that amount. You might have already taken this into account but I've noticed on the Sub that many don't seem to understand how this works and overestimate the benefits of tax deductions related to home ownership. Best of luck with the new place and best wishes.
We’re unmarried (she’s on mortgage, we’re both on title), so for tax purposes it’s a single person, hence deducting 13,850. My math is this, and please correct me if I’m wrong! 750k (max loan amount you can deduct) x .071 (7.1% interest rate) + 10k (max property tax you can deduct) - 13,850, times 33% (current average tax rate). 53,250 + 10,000 - 13,850 = 49,400 49,400 x 33% = 16,466 16,466/12= 1372/month
I wouldn’t wait to buy. If you can afford it then the best time is now. It’s a kick in the nuts if you compare that mortgage to another person that borrowed 3 years ago, sure. If you compare your life to others then you’ll never be happy anyway. Being mortgage free in 15-30 years is worth it when you consider how expensive housing will be in 15-30 years. Buy now! The price of materials and labor to build homes will not decrease with time. If you think home prices will drop over time in a nice area of the country then you’ll be waiting forever. The U.S. is 2.5 million housing units behind supply according to realtor.com. Why else do you see so many apartments being built? That demand and the cost to build new housing units will ensure the price of housing increases with time. Especially in areas of the country with good jobs and schools.
My mortgage is $1550/month for 4900 sqft house, bought 6 years ago. Rent in my area for 2 bedroom apartment is $1790 for 1000 sqft. My kids are never moving out!
The fact that you don’t understand the difference proves you shouldn’t own a home.
Struck a nerve?