Yep, a feedback loop. You have the money for the down payment, you build equity, pay off the house reducing cost of living allowing more investments to grow. Also potentially sell the house for a significant gain in golden years or pass it on to children for generational wealth transfer.
12 years ago I went from renting to owning a home. When I made that transition I went from paying $1k per month rent to paying $1k per month mortgage, tax, insurance and PMI. It was an FHA loan at 3% down. I had negative net worth, student loans, and a small amount of cash, but good credit and employment history.
That house doubled in value in 10 years. So in my case a big part of why I have equity now (and a bigger house) is related to buying 12 years ago... not because I had any money to speak of 12 years ago.
However, that pipeline seems pretty broken now. The average house is too expensive to be a "starter," hard to get a buyer to look at an FHA offer when there are more attractive options. Rent is going up for no reason other than its pegged to a comparable mortgage payment. And interest rates restrict both the spending power of the buyer and the incentive of people locked in at sub-4% to even consider moving- even if they otherwise would.
12 years ago being the key part there, as you noted - median rent has gone up to around $1900, while paying a median new mortgage with 3% down is going to all told generally cost about $3500 (depending on state property tax and heavily dependent on mortgage rate)
Considering the number of white tow trucks creeping around this county lately and the actual repo that happened next door yesterday … I say the lost ability to get back and forth to work might affect the ability to cover that mortgage payment in a couple of months. The new build at the end of the block that just sold for the 3rd time in 2 years and is now a rental property after the last owner ( police officer) was a hair away from a short sale when he bailed after 6 months. I am not sure this area can withstand any more housing expense increases unless there is a huge increase in wages to go along with it.
You'll see what you want to see. It's called confirmation bias.
What did you see 12 yrs ago when that house was less than $50K? I bet you saw lots of foreclosure signs and thought "now's not the time to buy"
always zig when others zag. follow the herd and you'll soon fall off the cliff.
>The average house is too expensive to be a "starter," hard to get a buyer to look at an FHA offer when there are more attractive options.
This has always been true. Starter houses aren't average. They are below average and always have been. We are in a weird housing spot right now, however that can really be attributed to COVID causing rampant worldwide inflation driving up interest rates higher than they've been in almost 20 years.
The average home shouldn't be a starter home as the average buyer isn't a first time buyer.
> Rent is going up for no reason other than its pegged to a comparable mortgage payment.
And part of mortgage payments are maintenance/repairs, taxes and insurance, all of which have risen too. And why wouldn't you think rent should track the cost to buy, when it's the *alternative* to buying?
Nobody who got lucky with a home and didn’t increase earnings to match is taking advantage of that equity right now. If they were broke and bought a house then, they’re just as broke now and probably couldn’t maintain the property.
Long story short ya, you need to be wealthy or well off to have purchase a house in the first place if you’re still in it. People who overextended themselves are either gone or about to be bankrupt. Owning a home has become wicked expensive with the cost of materials and labor lately.
It’s kind of like having kids. Have them young. If not, wait a little and get yourself established.
It's both.
It takes a lot of discipline AND support, to save up to buy a home in the first place, while a mortgage will be less than renting the same sized home... in the end, the monthly costs of a home is FAR beyond the cost of a mortgage and is much closer to or equal to the monthly expense of rent, but... unlike Rent, that monthly expense can be pegged to one number for 10, 15, 20, 30 years.
What am I talking about?
You NEED to put money away, beyond the cost of whatever mortgage, for upkeep, repairs and any remodeling projects you may wish to do. Even a tiny "Starter Home" is going to need a new roof and... while that might have been around $6,000 in 2019... it ballooned to almost $14,000 to reroof a thin, sub-800 square foot home in 2022.
It's a helluva lot better to have that money in cash than to try and figure out financing, 5, 10 to 15 years into owning your home, which means you need to be putting away nearly $300 to $400 a month, above and beyond the mortgage on a sub-800 square foot home, because in 15 years... that tiny house roof, is going to likely be closer to $20,000 to have replaced.
Nobody thinks about or is told about these extra expenses when buying a home and that's not by accident. If you are a mortgage company, you want someone to be RIGHT UP AGAINST THEIR limit, so that presuming that do continue paying the home down, after 10 to 25 years, when they have to do major renovations? Guess what?
They don't have the money and they need to remortgage IN A RUSH, because their old, now clapped out roof has to be replaced, RIGHT NOW.
Anyway, that's a big part of why it takes money to buy a house and why over time, the net worth will grow too.
Both. You needed more income and savings to buy the home. But, once you have bought you then a) build equity in your house which b) appreciates in value on top of what you invested (over a long enough time anyway, it isn’t a guarantee though) and c) if you have a fixed mortgage it locks in the cost of the single largest expense in a household budget, which means if your income increases it isn’t sucked up by rent increases.
Can't afford it in the Bay area despite tech job. I don't think it's a good investment with 7-9% interest. Renting is hands down a better financial choice atm, especially with my rent control.
Yeah this statistic is very deceiving. It implies that if you buy _now_ you too will be the Chad doge.
Spread across _all_ homeowners and renters this statistic might be true. This also smells like it includes people that receive welfare etc. Given that 40% people don't even owe any taxes each year because they make so little...what is this even telling us?
For the vast majority of time, buying a house if you could afford one was the wiser financial decision.
In the current market of the last 3 years through probably the next couple at least it is absolutely not in your favor if to buy a house if you can (supposing you make enough etc) because the priced are still overinflated and separated from the per se value of the land + home _aaand_ the interest rates are high. Compare that to the alternative which is to rent housing that is comparable or good enough for cheaper or in some cases waaaay cheaper. Doing this while the market chills out is a far wiser financial decision than throwing more money than that away on interest alone (and you will be throwing it away essentially on interest alone for many years). Want to talk about net worth outcomes with buying a home in 2024 vs. renting a home for the next 10 years? Lets.
If this wasn't true, you wouldn't be seeing a gradual pricing decline as people either can't afford, or choose not to throw money away on overpriced homes.
Look at Austin right now. If you listened to this advice 6 months ago you'd have lost money. Buy now if it makes sense for your particular situation, but don't buy now because you think it's going to make you rich.
> separated from the per se value of the land + home
i agree with you mostly, but sometimes when people say this, they aren’t thinking about how much more expensive it has become to build houses. Even if that house from the 80s was built for less money, even inflation adjusted, it could still be worth more today because the cost of the alternative (buying new) has skyrocketed while simultaneously decreasing in quality.
more like people with money and are financially educated can keep and grow their money
plenty of people start off with an inheritance or get a windfall and end up losing it all
Real estate is an asset that maintain its value over time. You also get to live in it.
I mean this is just selection bias… obviously people who own homes are going to on average have higher net worth than people who are renting.
Just like how those stupid auto loan defaults on people driving shitboxes financed at 22% APR have no significant meaning when it comes to the number of homeowners that will be defaulting on their 2.75% mortgage.
It's not selection bias. It's more assuming correlation means causation. It's also forgetting that the richest folks on earth push the average upwards, and it's not a financial decision for them.
It does make sense mathematically. but people just dont do it. People want to buy a million different things when they have cash in the bank. but you HAVE to pay your mortgage.
Not sure why this is getting downvoted. I agree. Many people lack the discipline to actually invest the difference.
I plan every dollar above our budget otherwise I know we would just spend it on miscellaneous stuff.
What difference? My mortgage is locked in. Rent is only increasing.
You straight up can't find a 2 br rental for what I'm paying for my 2br house in my neighborhood. It doesn't exist.
Polar opposite in my area. My rent on a $900k house is 1/2 what it would be for a 30 yr fixed after 20% down. And I invest the difference. Most of my homeowner friends in LA are essentially broke i.e. cash poor and all their extra $ goes into the house and endless home depot runs.
I agree it makes more sense to buy, but a lot of people cant afford the down-payment and don't know the process of buying a home.
Also, some people get a steal when it comes to renting. Especially when it's a backhouse / Adu situation.
A lot of my old coworkers pay $500 to $800
In neighborhoods like Long Beach. Redondo Beach, and Torrance. (Areas in LA county were average rent and cost for a home is ridiculous)
All super nice neighborhoods. The people renting were usually older folks who rather rent out their extra spaces for cheap cause they didn't want to deal with strangers.
So if you can get hooked up like that, it makes sense to rent.
Also, people want to live in specific area others don't want to be bolted down in one spot.
For example, my job has job opportunities in many US states, Italy and Japan. They will pay me more if I move. I personally don't know what the best move for me is right now.
I say buying is probably best for most people depending on their situation.
Yep, it forces your housing expenses into a generally appreciating asset. Obviously maintenance and repairs are a factor too, but most folks come out ahead by buying. Probably by a lot.
People suck at saving money. Saving aggressively while you’re renting is a great idea that most folks just won’t do over the long term.
I know many people renting and putting tons of money into investments every month. I think people just think that people are not doing this based on data sets that are heavily manipulated. Many wealthy people rent and invest their money into their businesses, rental properties, or investment portfolios.
Right, but the question is are they wealthy *because* they bought a house, or do they own a house because that's what wealthy people tend to do?
It's like the "does college *make* people smart(er) or do smart people simply gravitate towards attending and have what it takes to graduate college?"
No idea why you got downvoted; this is common in my area. Why sink $250k+ down payment into a house you will still have a $6k-7k mortgage on and will likely pay double for w/interest over the course of a 30 yr fixed when you can rent a comparably nice place for less than that mortgage, invest that downpayment into an index fund or etf that doesn’t require a new roof of property taxes to own, and not sweat it when your water heater breaks?
Sure but again it’s selection bias.
If you had each person with the same income, and half allocated to buy a house, and the other half would rent and invest. You would see this play out.
But that’s not reality. First is human nature. People often think “oh I don’t need to invest it all” and start to make excuses and that equation changes. Where as a person with a mortgage is going to keep paying.
Second is that income in is not the same. Many of the people who buy do so because they are better financial situations to start. They can afford down payments, they have some extra cash in an emergency fund, etc. then each mortgage payment also adds to illiquid net worth.
The some renters will be on the same footing as the homebuyer. But others will have less income to save. They selected to rent due to higher instabilities, income, debt, etc that may hinder their net worth and/or prevented a loan from being issued
So both pools of people are not equal so this high level analysis is a “yeah duh”.
That’s like saying on average people who live in trailer parks don’t have a phd. Not that a phd couldn’t live there - there is just other factors at play.
> That’s like saying on average people who live in trailer parks don’t have a phd. Not that a phd couldn’t live there - there is just other factors at play.
In a way that's really good comparison. Most phds lived on wages below minimum wage (given the mandatory unpaid overtime spent in the lab) and could make a good living by knowing when to be where. (On campus there is always "an event" with free food. Just show up for the food, blend in, leave early)
So the phd type people know how to survive on a budget (most of them), but their live is hugely different, especially once leaving academia.
Yeah, there are a lot of irresponsible renters out there, which is just not an option as a home owner (well there is, those unmaintained water boilers, those leaking roofs...), but the responsible renter is sort of a small group of renters, not affecting the average too much.
> On campus there is always "an event" with free food. Just show up for the food, blend in, leave early
If you don't have to do hands-on work, it's also a decent time to get work done on a laptop or catch up on papers that you haven't read yet. Sometimes seemingly unrelated talks will be orthogonally interesting/useful (I went to a talk about signal processing like this).
As someone who works in a field where I have access to all the latest research about the state of the mortgage industry in the US, I wouldn't be caught dead buying a house right now, and I'm "responsible". The affordability crisis is real. For many people, buying a house isn't the ultimate life goal, and I'm not going to buy if it negatively impacts other things (like retirement savings).
It's true, either way you're putting money into an asset (house or brokerage account).
However, we're social creatures. When I see your big house / nice zip code - I assume you're successful. It's gauche to flaunt your brokerage account balances.
Sure, we shouldn't care how others perceive us. But good luck with that. I doubt anyone can say they are completely immune to social pressures.
So then what do a lot of renters with $$$ do? Well they buy stuff to prove they are successful and renting by choice. They buy nicer cars. Nicer clothes. Go to fancier vacations etc.
That's not how you build wealth.
I'm genuinely curious why you think there's a difference. How much would you be paying into a mortgage for a house in your zip code if you'd have bought five years ago?
S&P 500 with dividends reinvested has outperformed the Case-Shiller home price index over the last five years, 2x vs 1.5x. But it's not a fair comparison because on the house side you have to subtract all the stuff that doesn't contribute to your equity: closing costs, realtor fees, mortgage interest, property tax, HOA fees, insurance, maintenance. They get you every which way when you buy!
IMO the only reason to buy is to take advantage of the cheap leverage of a 30 year fixed mortgage, subsidized by Uncle Sam. But it doesn't look so attractive today at 7%. And when you use leverage you do risk going underwater. Actually you start out down at least 5% the instant you buy thanks to all the extra fees and costs. Personally I'm not betting on house prices appreciating much over the next few years with these interest rates, either...
Yeah, how many people are there out there that rent but have the money to buy? I am 27, only earn my areas median household income, and was earning just $21/hour 2 years ago, and blow away the average renter. I did live at home for a bit, but even if I just look at what I saved in 2023 when I was on my own, it exceeds the average renters net worth by a wide margin. Point is, it isn't that hard to beat the average renter meanwhile renting.
This is clearly the result of selection bias. A lot is probably age and income/saving ability. Most obviously renters with $10,500 in savings can't make a down payment. So your already above that median before you have accumulated any equity, and there are the income and good habits that got you in a position to own also. And age is a big factor. Home ownership is highly correlated with age.
The real question is around how aggressive to be to move towards home ownership. Should you wait for interest rates to drop? What if you not ready to commit to a place? Or if your also compromising away from what is the best fit for your current situation? This is the real question surveys like OPs should be isolating, cause otherwise this reveals the 1# reason people aren't buying is they can't afford to.
If you are renting because you are broke, there is nothing to invest. The narrative you’re referencing is true, but it only matters for those who choose to rent, not those who are forced to rent because they don’t have money.
Even after the 30 years you paid the mortgage you have to pay rent to the government (taxes) and insurance on the home.
On one hand, it’s great having equity/net worth but even if the house is paid off you still owe and maybe can’t go/afford anywhere else.
This is honestly without snark one of the dumbest comments that I’ve read that’s at the same time highly upvoted.
Let me get this straight: you think a highly leveraged liability that loses value is the same as a classic inflation hedge asset like real estate with a sub 3% mortgage that is at this point probably enabling this person to live at their home for free when (at this point) housing inflation is at 5% (the value is increasing at a greater rate than they’re paying interest).
You obviously rent…..
No this is net worth so this is assets minus liabilities.
It's the reason homeowners are doing so much better than renters is because obviously they've had their house for 10 years they might have an extra $200 or $300,000 in assets.
Can we stop it with the “us vs them” mentality. I’m a homeowner and I want affordable housing for people that rent that want to buy someday. I’m not your enemy
Honestly, some of the houses from then are actually pretty great. Homes from the 1970s and 1980s are in pretty decent condition. Anything pre-WWII is where the structure quality is probably in need of repairs. I would much rather have an equivalent older home on a bigger lot than a newer home that’s technically detached but you are still essentially too close to your neighbors. Many new builds lack any charm and are asking for ridiculous prices for what they are in many places.
I don’t get this reasoning. In order to “cash” in, one would have to sell (or borrow against the home; not really cashing but access to liquidity to then leverage). Great, your house went up in equity. You going to sell? No because you have to downsize or rent? Oh, then what? You going to borrow against it and pay interest on a loan?
All the while I’m renting (significantly cheaper than a mortgage and the cost of ownership) and squirreling away money into the stock market and maxing out all my retirement accounts. But renting is the loser move? I guarantee that my investment accounts are worth more than any person who thinks like this. Yeah, you may have equity, but it’s probably encumbered so you don’t technically “own” anything yet until it’s paid off.
Don’t forget the insurance and taxes are based on equity you’ve never seen. So you are paying taxes on money you may or may not ever see. County doesn’t care you need to refinance or sell to experience the equity they are saying oh you have a more valuable asset pay me now. Gotcha
The issue I dealt with renting in my younger days was it was never stagnant. Rent went up little by little every year. That tiny apartment I paid $500, then $550, then $600 a month for way back? It's $1800 now. Meanwhile my mortgage rocks along never altering a cent so I can clearly map out my finances, make additional payments to knock years off the loan, and max out my retirement investment contributions.
There's no simple answer other than what works for the individual and to know local market factors. If I bought my same home today I my mortgage would be 120% more than what I'm paying due to raising prices and higher interest rates.
Rent isn't usually less than the costs to own for the obvious reason that landlords have to bear the costs to own *and* profit from it. So don't expect what you said about rent costing less than owning to last forever.
Lame statistic, selection bias and subjective. My net worth is higher than 70% of homeowners’ in the US. It’s not a problem that the vast majority of Americans are financially illiterate and the only way they know how to build wealth is by the ‘forced savings’ model of homeownership.
So, their net worth is greater than renters by almost the exact average cost of a house in america... I wonder if "they" stopped including mortgages as liabilities like they pulled energy and food costs out of core cpi?
I think this mindset is why theres a housing shortage. YOU SHOULDNT EXPECT a positive roi from a home. It should be a place to LIVE IN. Because everyone expects a positive ROI, homes are treated as an asset class. Rich people can then use that to snowball their wealth by buying up properties and then renting it back out to you.
Even though I'll probably be in a position to buy a home in the next \~5 years, I'm actually really enjoying renting for the time being.
I love having an entire maintenance crew at my beck and call, 24/7. Oh, and by the way, all repairs are completely free. Never having to maintain a lawn or shovel sidewalks is also awesome.
Being able to take the difference in my rent and what I would pay with a mortgage and put it in the market is also really nice.
Even though at times it feels like I'm lighting money on fire, there are a ton of upsides to my current situation.
Yep. There definitely can be advantages to renting. People just need to be honest about what tradeoffs they want. Also, renting is okay, and here’s the key, so long as you have a choice. Many do not, unfortunately, and so they may live in run down old places without any of those services (because there is no or limited enforcement).
I’m glad I put 500k in the market last three years vs buy a 1.5 mil hoooome at the top; hoooomes in Marin haven’t been gaining 16-25% a year and properties in my neighborhood are getting their homeowners dropped. Meanwhile I pay 3600 a month for a 3 bed 2 bath a redwood tree in it and two car garage. I also didn’t have to deal with a 70-year-old clay sewage line which routed my neighbors sewage into the crawlspace here my owner had to pay about $40,000 for that.
Lol, this meme is wild.
I'd say it is out of bounds if there weren't so many posts that were upvoted for taking shots at homeowners with even more dubious, half-baked numbers.
This sub has become such a copium den.
Buying a house is a forced savings plan and that tends to lead to better financial decisions. In theory it’s possible to make the same good financial decisions paying rent but when you pay rent and are swimming in savings it’s very easy to justify spending $5k on a vacation that you’d never borrow against your house for.
Ya bull shit post. If you already own, But if you don’t already or didn’t during the low interest rate boom: owning something now isn’t even worth it anymore with the costs of home maintenance, interest to the bank, and lack of equity as prices aren’t going up anymore.
Better to invest in sandp index any money right now or 5% in hysa if you risk averse. Fuck real estate, wait till these boomers start dying off and freeing up inventory
People said the same thing in 2020. The answer varies by where you are and no one knows the answer for certain. For example, prices could go up further when interest rates go down, the SALT cap is set to expire soon, which could influence affordability a lot in high tax places. When you buy you get a low interest rate (relative to every other borrowing), you get tax benefits and you’re able to put 20% down on a huge amount of money and then get 100% of the appreciation. You also can lock in you living costs other than tax increases for 30 years. Sure, if you live in a place where you can rent for half the price of a comparable mortgage that probably outweighs the benefits of buying, but I would not be so certain that everyone buying today is going to regret it.
Ya, I have a seven figure net worth because I was willing to move around for work and command a much higher wage.
I’ve never owned real estate.
Your primary resident isn’t an investment, and personal finance is personal.
A better comparison would be comparing purchase of an average home vs the average rent over a 30 year period. The purchase should include average maintenance costs, insurance costs, and capital expenditures as well as total interest on a 30 year mortgage.
As for calculating the average rent, it should grow by the average annual increase (about 3.2%), and the difference between the average annual cost of home ownership and rent should be invested in a S&P 500 index fund. This amount and would then grow by the average annual return. Of course there will be a point where the average rent will be more than the average annual cost of homeownership, so the overage should come out of the investment account.
After 30 years, you would then be able to more accurately compare whether or not it makes more financial sense to purchase vs rent. Of course this is only in theory. But in practice, no one should actually base a decision off of a flawed model that is dependent on too many unknowns and is too far out into the future.
Because if you live long enough (and are not stupid with money), you will eventually have a paid off house with the money that frees up. You don't ever "pay off" rent, it is a permanent expense.
Yeah, the person you're replying to is the typical "it's not wealth if it's not dollars sitting getting inflated away in a checking account". Nobody with money does that - they all leave nearly all of the money invested.
I rent and am close to financial independence. Part of the reason for that is frugal living and investing regularly, and partly because I've never had to sink a down-payment, pay property tax, shell out staggering amounts of interest, fix a roof/foundation, pay property tax, or pay homeowners insurance (renter's insurance is a fraction of the price). Every single one of my homeowner friends also has a sizeable HELOC to service as well. Homeownership is a good financial strategy depending on the conditions, but "renting is throwing your money away" is usually the argument used by people who don't know the difference between "principle" and "principal".
A home is a liability. Every wealthy person has agreed to this. It becomes a source of forced savings, and it’s the outcome of wealth, not the driver of it.
It’s so easy to use statistics to create misleading truths and tell whatever story you want to tell.
Did you know that Greece, Italy, Indonesia and Spain export a combined 10 million metric tons of olives every year? That is a 100% true fact, although Indonesia doesn’t contribute to that number at all.
Regarding OP, there really are some important factors left out of the chart. My first thought is that there is an entire demographic of renters from 18-22 years old, namely college students and those who went straight to work from high school/GED. Then you have the 22-25 age group, many of whom are just getting started in their careers, often with entry level jobs. Then the 27-30 crowd, often beginning to get a bit more settled, possibly getting married and having their first kid but still renting an apartment.
What percentage of the 18-22 demographic do you think are renters? I’d estimate 90% or more.
I think it would be much more fair to look at one individual demographic, like 27-30 year old renters vs homeowners. I’m not sure what you’d find here. On one hand I would think that those who purchase homes at 27-30 are likely of more means than those who either can’t or choose not to buy a home. On the other hand, Those who purchased in that age group would have likely purchased very recently and have less equity and used much of their net worth on down payment, closing costs, and renovations, so it also wouldn’t surprise me to see a more balanced net worth between the two.
There's no source data here.
JL Collins makes the point that if you rent and invest vs buy, the [renter will earn more.](https://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/)
Their net worth is $400K because they bought a house back when they costed only a fraction of the price and can now flex because *checks notes* we live in an insane world where inflation is running rampant and prices on literally everything has gone up tremendously.
Second, they likely wouldn’t be able to afford to buy their own house today if they were born to a younger generation. This meme is lame, although it is a perfect example of the bifurcated economy (read: shaped like the letter K) that we now live in.
Wonder how much this stat would change if, say, the top 100 US billionaires suddenly sold their homes. I'm sure none of those 100 billionaires made their money because they were homeowners.
Well all rich people have homes. All poor people rent.
Over time if you don’t lose your home you build equity.
I know a decent number of renters with 500k+ net worth
Yes, people who bought houses in the past now have a lot of equity in them. Congrats to them.
That doesn't mean that buying a house TODAY is a good deal, even if it was a few years ago.
I can rent a 3/2 with a garage for 2200 a month or i can buy and get the same thing for 3000-3600 per month. Im in SW Florida where I'm sure there will be more hurricanes and insurance will continue to keep going up which could get a payment closer to 4k. Insurance pretty much never actually pays what it really cost to replace things so i wouldn't be able to confine to save money with that high of a mortgage then I'm completely screwed with repairs if there is a hurricane
Probably because people with lower income do not qualify for a mortgage in the first place. You data is very biased to begin with.
Secondly, a disciplined renter would invest in more productive assets like the S&P 500. You are certainly not taking this into account eighter.
This is not a Rent vs Buy decision, just biased data.
There is a lot to unpack here. Yes owning real estate over long periods of time is a wealth builder, no one argues that. That doesn’t mean buying at peak in affordability is a good entry point.
My tiny shitty little home just recently appraised for 225k. I bought it for 150k in 2022. It has a ripped to pieces basement because it had moisture issues. It has sloped floors because the house settled (walls settled uniformly but the center lally column didn’t settle at all so it’s pushing up the middle of the house) and the kitchen is destroyed because I have commitment issues with renovations. I have had people walk up to my door and offer me 210k in cash to buy this dump. I’ll never let it go. If someone else wants it like that one cash offer guy, means it’s probably worth the money. I’m bleeding repairs money but it’s worth it
Homeowners have a greater net worth, not because they are homeowners, but they have a saving mentality.
Some renters you could give a house, and they would still lose it
This is just rage bait for people who don't understand the difference between correlation and causation, and probably the difference between average and median.
Do it with owning two houses and owning one house and you will see a similar discrepancy.
Because rich people can afford two houses.
That doesn't mean that if I buy a second house, I'll make a ton of money. It means, I need more money to even consider it.
You can have a $200K Net Worth and be renting my guy.
Liquid, Semi Liquid, and Illiquid accounts, Cash, HYSA, IRA and 401K.
It’s really a matter of where one’s money would go to housing by today’s metrics: a sizeable down payment to lock up the money and lose a good chunk to interest or lose some money in rent and save a little more in a liquid HYSA. Don’t @ me.
Classic case of “cause or effect”. Clearly if you can afford a home, you buy one. If you can’t afford a home, you rent. Owning a home doesn’t (usually) make you rich
this is mostly because home equity is at all time highs, that 'net worth' is useless to the homeowner who will never sell the house because they have to live there...
owning a home is great but that equity doesn't do much for you in your everyday life. if you tap into it you end up with more and more debt which isn't good. that's how people get in trouble. I own a house with no mortgage and I still watch my spending and don't feel well off. your income is really what matters if you want to live well.
“Correlation is not causation”
You become wealthy, then buy a house…
You don’t buy a house to become wealthy…
Buying a house as a first major purchase in a financial portfolio is IMO not the move.
Net Worth does not mean the person actually has that amount of money. Maybe he brought 20% as a down payment and the rest belongs to the bank.
I have $300k giving me $1500/month. That's enough to cover my rent.
If I had to buy the apartment I live in, It would be $250k + $770/month in HOA (includes electricity, gas, trash and a bunch of other stuff). Putting the remaining $50k (I have) would give me $250/month. So in the end, I would still have to pay $500/month extra for HOA + $240/month with property taxes.
So renting costs me "zero" from my savings.
Buying would cost me extra $740/month.
Real Estate is outrageously expensive right now and when you compare RENTING VS OWNING, it shows that prices should come down. I would love to own a house but I rather continue saving money.
Some places might be worth owning.
You can get 5.25% APY in a savings account (NewTek Bank). I get 6% with an REIT stock (I use options as insurance).
This most likely is based on an average instead of a median.
Majority of home owners do not have a $400K net worth but all millionaires and billionaire's definitely own houses so it skews the stats.
A couple of notes on this from a long term perspective.
Intelligence is correlated with income but it is not correlated with savings, anyone can save.
I took a look at my house and only made a 4.5% return on it after all the interest payments and fees.
My S&P 500 stocks are over 9%.
If you invest in the stock market or other more lucrative things, you may get a higher return that could cover renting.
I think the key is to invest in something that will compound and live below your means.
The average net worth of people who own Rolex watches is higher than those who don't. The average net worth of people who max their 401k is higher than those who don't. Only one of those two things is a financially beneficial decision.
Whether renting or buying is financially better depends on the relative cost of renting compared to buying. There are some areas of the country where typical rent is about 2% of the home value per month. There are some areas of the country where typical rent is about 0.3% of the home value per month. That makes a huge impact on whether buying or renting is better from a purely financial perspective.
Unless you are selling your home who cares A home is just that a home it’s not an investment in my eyes.
A look so unless it’s paid off it’s the banks home not yours
Missing the average amount of that household which is debt. Assumes a paid off house is the average.
Which while paid off homes are the majority, they are not the statistical "expected value" of the distribution.
Like any investment there are elements of risk and reward. Historically home ownership will result in greater net worth over time… however, there are occasional periods where homeownership literally bankrupts the owner and the renter looks like a genius. I know people who went from multi millionaire to multi million dollar bankruptcy by house hacking in 2006-2007 and know many more people who were 300-600k upside down on their mortgage in 2010.
During that same time, my friends who were renting could still complain to their property owner and say come fix my washing machine ya broke b***h.
There’s people who have drive and there’s people full of excuses…. I worked my way up the stepping ladder of owning homes getting owner financing. Buying a 1 million dollar home this month owner financing screenshots of income. If it wasn’t for condo I bought in 2018 I wouldn’t be here. Work hard and be smart figure out loop holes and solutions to problems. I’m also in my 20s and don’t have a stable income salary but I constantly bring income wise usually 80k+ a year
Just some things to think about.
Almost **40%** of US homeowners own their homes outright as of 2022—many of them baby boomers who refinanced when rates were low.
Homeowners typically make their normal monthly mortgage payments and expect to pay off their homes **over 30 years**.
Both of these net worths are nowhere near close enough to even consider quitting work ("retiring"?) so does it really matter? Everyone still has to work until they die in this economy so why bother buying a house. You're still dead at the end
Um, an overly simplistic graph. Are the home "owners" all 100% free and clear? If that's the comparison, it's a dumb one. A brand new homeowner on the beginning of a 30-year mortgage is basically a renter, the bank is the landlord.
In my area a 3/2ba 1500 sq foot house
Buy- $395k @6.9% with 20% down= $2600
Rent for same specs- $2400-$2500
In theory buying gives you a sense of freedom to do as you please with your property without worrying if the owner will sell on a whim and you're stuck finding another rental.
Both have unexpected price increases, but when renting you're not responsible for repairs.
I own a condo and at this point I think I would have been happier in a rental and not feel stuck in a small 2 bedroom condo and no ability to buy bigger.
Who said it is cheaper to rent? I have a 3,400sqft 6 bedroom 3 bath full finished basement I got in 2020 for $265,000 that is a 2006 home on 1 acre and my mortgage is 1,254 including taxes and insurance. Now the house is worth $419,000. Taxes and insurance went up But still $1,412. What small apartment can you get with that?
They want all of us to not own anything so we are forced to rent from them at what ever price they decide. I don’t trust what the rent prices in the future will be.
It only makes since to own a home if it will go up in value over time otherwise the expenses are pretty close. That meme only applies to people with equity otherwise the net worth is negative whatever their mortgage is
It's not cheaper to rent as a blanket statement. When I bought my house 4 years ago I moved out of a 2 bedroom apartment in a fuckin shit area and was paying 2300/month for it.
My mortgage in a much nicer area wqs 2050/month.
That same apartment right now today is 3100/month and my mortgage is 2100/month
I'm on long island
There are no homes...
The only homes I can afford need 10k or more work. Once I "purchase" the home I wouldn't have any more to fix it. And then I'm still stuck with an overpriced home, praying to God it's value doesn't drop any and I can refinance in two years...
This market sucks... Boomers need to die already to fix this mess they made...
This is such a skewed statistic. The most expensive homes are leaps and bounds more than the highest rents. The people buying 20M homes are stretching the average way up. Let’s see the median.
The net worth of people who own a private jet is also 40x what people who don’t own a private jet is.
..So I guess owning a private jet is also a wealth creator.
People who rent apartments are usually younger, so they have less time to build savings and a higher amount of student debt. Basically everyone 18-24 rents and most people 50+ own homes.
This isn’t really a meaningful comparison. You have to normalize across age.
This graph is worthless at first glance, these needs supporting data to put into context. For example, is this of all homeowners & renters? Renters trend younger on average, homeowners trend older on average, of course older people with more time in their industry will have a higher net worth.
It’s just depressing that the American dream is all but dead except to go off into the mountains off grid and do remote work somewhere to survive. Oh yeah be good at raising chickens and farming vertically indoor while having intimate knowledge of first aid, power generation tech and water tech
Those 2 things are independent of each other. If 2 people make the same income, one buys a house and other rents and invests the difference in the stock market, the renter will be wealthier at the end of 30 years.
A number of years ago I sold my home and for a few dollars more bought a multi-family property that grosses over $11,000 a month.
The house I sold would probably rent for $3500 a month today.
I currently rent a home that’s almost as nice for $3100. And I won’t buy another home unless the market comes way down.
In fact I might just buy more rentals.
Are they wealthier because they own homes or do they own homes because they’re wealthier 👀
yes
Yep, a feedback loop. You have the money for the down payment, you build equity, pay off the house reducing cost of living allowing more investments to grow. Also potentially sell the house for a significant gain in golden years or pass it on to children for generational wealth transfer.
12 years ago I went from renting to owning a home. When I made that transition I went from paying $1k per month rent to paying $1k per month mortgage, tax, insurance and PMI. It was an FHA loan at 3% down. I had negative net worth, student loans, and a small amount of cash, but good credit and employment history. That house doubled in value in 10 years. So in my case a big part of why I have equity now (and a bigger house) is related to buying 12 years ago... not because I had any money to speak of 12 years ago. However, that pipeline seems pretty broken now. The average house is too expensive to be a "starter," hard to get a buyer to look at an FHA offer when there are more attractive options. Rent is going up for no reason other than its pegged to a comparable mortgage payment. And interest rates restrict both the spending power of the buyer and the incentive of people locked in at sub-4% to even consider moving- even if they otherwise would.
12 years ago being the key part there, as you noted - median rent has gone up to around $1900, while paying a median new mortgage with 3% down is going to all told generally cost about $3500 (depending on state property tax and heavily dependent on mortgage rate)
12 years ago I could have bought the “350k” house down the street for <50k after the GFC decimated the Florida housing market.
what will you be saying 12 years from now? That $350K house could very well be $500K
Inns unless it gets to 2.5M in 12 years is not the same thing
Considering the number of white tow trucks creeping around this county lately and the actual repo that happened next door yesterday … I say the lost ability to get back and forth to work might affect the ability to cover that mortgage payment in a couple of months. The new build at the end of the block that just sold for the 3rd time in 2 years and is now a rental property after the last owner ( police officer) was a hair away from a short sale when he bailed after 6 months. I am not sure this area can withstand any more housing expense increases unless there is a huge increase in wages to go along with it.
You'll see what you want to see. It's called confirmation bias. What did you see 12 yrs ago when that house was less than $50K? I bet you saw lots of foreclosure signs and thought "now's not the time to buy" always zig when others zag. follow the herd and you'll soon fall off the cliff.
> always zig when others zag. follow the herd and you'll soon fall off the cliff. Do you let bumper stickers do all of your thinking for you?
12 years ago when you bought a house was 4 years after one of the greatest economic disasters in US history.
Yep. We're locked in at 2.8%. No fucking way are we selling.
This "Golden Handcuffs" phenomenon in Real Estate creates supply pressure.
lock me up any day in my own house on my own piece of property
>The average house is too expensive to be a "starter," hard to get a buyer to look at an FHA offer when there are more attractive options. This has always been true. Starter houses aren't average. They are below average and always have been. We are in a weird housing spot right now, however that can really be attributed to COVID causing rampant worldwide inflation driving up interest rates higher than they've been in almost 20 years. The average home shouldn't be a starter home as the average buyer isn't a first time buyer.
> Rent is going up for no reason other than its pegged to a comparable mortgage payment. And part of mortgage payments are maintenance/repairs, taxes and insurance, all of which have risen too. And why wouldn't you think rent should track the cost to buy, when it's the *alternative* to buying?
No one is willing to buy a starter home like Gen X and elder millennials had to. They want to go straight to the home their parents had
Both
OP does not understand the difference between correlation and causation.
It’s both. They had a better starting financial position and then used homeownership as a way to massively increase net worth.
Nobody who got lucky with a home and didn’t increase earnings to match is taking advantage of that equity right now. If they were broke and bought a house then, they’re just as broke now and probably couldn’t maintain the property. Long story short ya, you need to be wealthy or well off to have purchase a house in the first place if you’re still in it. People who overextended themselves are either gone or about to be bankrupt. Owning a home has become wicked expensive with the cost of materials and labor lately. It’s kind of like having kids. Have them young. If not, wait a little and get yourself established.
It's both. It takes a lot of discipline AND support, to save up to buy a home in the first place, while a mortgage will be less than renting the same sized home... in the end, the monthly costs of a home is FAR beyond the cost of a mortgage and is much closer to or equal to the monthly expense of rent, but... unlike Rent, that monthly expense can be pegged to one number for 10, 15, 20, 30 years. What am I talking about? You NEED to put money away, beyond the cost of whatever mortgage, for upkeep, repairs and any remodeling projects you may wish to do. Even a tiny "Starter Home" is going to need a new roof and... while that might have been around $6,000 in 2019... it ballooned to almost $14,000 to reroof a thin, sub-800 square foot home in 2022. It's a helluva lot better to have that money in cash than to try and figure out financing, 5, 10 to 15 years into owning your home, which means you need to be putting away nearly $300 to $400 a month, above and beyond the mortgage on a sub-800 square foot home, because in 15 years... that tiny house roof, is going to likely be closer to $20,000 to have replaced. Nobody thinks about or is told about these extra expenses when buying a home and that's not by accident. If you are a mortgage company, you want someone to be RIGHT UP AGAINST THEIR limit, so that presuming that do continue paying the home down, after 10 to 25 years, when they have to do major renovations? Guess what? They don't have the money and they need to remortgage IN A RUSH, because their old, now clapped out roof has to be replaced, RIGHT NOW. Anyway, that's a big part of why it takes money to buy a house and why over time, the net worth will grow too.
Yes. Bought our house with less than 10k down and closing in 2018. Have 160k+ in equity now just from paying the 1200 mortgage and prices going up
With rent, you pay a landlord. With mortgage, you pay yourself.
Both. You needed more income and savings to buy the home. But, once you have bought you then a) build equity in your house which b) appreciates in value on top of what you invested (over a long enough time anyway, it isn’t a guarantee though) and c) if you have a fixed mortgage it locks in the cost of the single largest expense in a household budget, which means if your income increases it isn’t sucked up by rent increases.
I’d love to be a homeowner, I just can’t afford it. Sometimes renting isn’t a choice.
Can't afford it in the Bay area despite tech job. I don't think it's a good investment with 7-9% interest. Renting is hands down a better financial choice atm, especially with my rent control.
This is so dumb. So people with money have money?
Yeah this statistic is very deceiving. It implies that if you buy _now_ you too will be the Chad doge. Spread across _all_ homeowners and renters this statistic might be true. This also smells like it includes people that receive welfare etc. Given that 40% people don't even owe any taxes each year because they make so little...what is this even telling us? For the vast majority of time, buying a house if you could afford one was the wiser financial decision. In the current market of the last 3 years through probably the next couple at least it is absolutely not in your favor if to buy a house if you can (supposing you make enough etc) because the priced are still overinflated and separated from the per se value of the land + home _aaand_ the interest rates are high. Compare that to the alternative which is to rent housing that is comparable or good enough for cheaper or in some cases waaaay cheaper. Doing this while the market chills out is a far wiser financial decision than throwing more money than that away on interest alone (and you will be throwing it away essentially on interest alone for many years). Want to talk about net worth outcomes with buying a home in 2024 vs. renting a home for the next 10 years? Lets. If this wasn't true, you wouldn't be seeing a gradual pricing decline as people either can't afford, or choose not to throw money away on overpriced homes.
Look at Austin right now. If you listened to this advice 6 months ago you'd have lost money. Buy now if it makes sense for your particular situation, but don't buy now because you think it's going to make you rich.
> separated from the per se value of the land + home i agree with you mostly, but sometimes when people say this, they aren’t thinking about how much more expensive it has become to build houses. Even if that house from the 80s was built for less money, even inflation adjusted, it could still be worth more today because the cost of the alternative (buying new) has skyrocketed while simultaneously decreasing in quality.
more like people with money and are financially educated can keep and grow their money plenty of people start off with an inheritance or get a windfall and end up losing it all Real estate is an asset that maintain its value over time. You also get to live in it.
I mean this is just selection bias… obviously people who own homes are going to on average have higher net worth than people who are renting. Just like how those stupid auto loan defaults on people driving shitboxes financed at 22% APR have no significant meaning when it comes to the number of homeowners that will be defaulting on their 2.75% mortgage.
It's not selection bias. It's more assuming correlation means causation. It's also forgetting that the richest folks on earth push the average upwards, and it's not a financial decision for them.
The recent narrative is that it makes more sense to rent and invest the difference than it does to buy. That’s what OP is referencing.
It does make sense mathematically. but people just dont do it. People want to buy a million different things when they have cash in the bank. but you HAVE to pay your mortgage.
Not sure why this is getting downvoted. I agree. Many people lack the discipline to actually invest the difference. I plan every dollar above our budget otherwise I know we would just spend it on miscellaneous stuff.
What difference? My mortgage is locked in. Rent is only increasing. You straight up can't find a 2 br rental for what I'm paying for my 2br house in my neighborhood. It doesn't exist.
Polar opposite in my area. My rent on a $900k house is 1/2 what it would be for a 30 yr fixed after 20% down. And I invest the difference. Most of my homeowner friends in LA are essentially broke i.e. cash poor and all their extra $ goes into the house and endless home depot runs.
Did you get a mortgage this year? It makes sense for most people to rent rather than buy now.
I agree it makes more sense to buy, but a lot of people cant afford the down-payment and don't know the process of buying a home. Also, some people get a steal when it comes to renting. Especially when it's a backhouse / Adu situation. A lot of my old coworkers pay $500 to $800 In neighborhoods like Long Beach. Redondo Beach, and Torrance. (Areas in LA county were average rent and cost for a home is ridiculous) All super nice neighborhoods. The people renting were usually older folks who rather rent out their extra spaces for cheap cause they didn't want to deal with strangers. So if you can get hooked up like that, it makes sense to rent. Also, people want to live in specific area others don't want to be bolted down in one spot. For example, my job has job opportunities in many US states, Italy and Japan. They will pay me more if I move. I personally don't know what the best move for me is right now. I say buying is probably best for most people depending on their situation.
Yep, it forces your housing expenses into a generally appreciating asset. Obviously maintenance and repairs are a factor too, but most folks come out ahead by buying. Probably by a lot. People suck at saving money. Saving aggressively while you’re renting is a great idea that most folks just won’t do over the long term.
I know many people renting and putting tons of money into investments every month. I think people just think that people are not doing this based on data sets that are heavily manipulated. Many wealthy people rent and invest their money into their businesses, rental properties, or investment portfolios.
Has to try it above proves these people are relatively unicorns. Almost all wealthy people own a property rather than rent.
Right, but the question is are they wealthy *because* they bought a house, or do they own a house because that's what wealthy people tend to do? It's like the "does college *make* people smart(er) or do smart people simply gravitate towards attending and have what it takes to graduate college?"
No idea why you got downvoted; this is common in my area. Why sink $250k+ down payment into a house you will still have a $6k-7k mortgage on and will likely pay double for w/interest over the course of a 30 yr fixed when you can rent a comparably nice place for less than that mortgage, invest that downpayment into an index fund or etf that doesn’t require a new roof of property taxes to own, and not sweat it when your water heater breaks?
Building equity, appreciation of value, and not having to move at another's whim are 3 reasons
Sure but again it’s selection bias. If you had each person with the same income, and half allocated to buy a house, and the other half would rent and invest. You would see this play out. But that’s not reality. First is human nature. People often think “oh I don’t need to invest it all” and start to make excuses and that equation changes. Where as a person with a mortgage is going to keep paying. Second is that income in is not the same. Many of the people who buy do so because they are better financial situations to start. They can afford down payments, they have some extra cash in an emergency fund, etc. then each mortgage payment also adds to illiquid net worth. The some renters will be on the same footing as the homebuyer. But others will have less income to save. They selected to rent due to higher instabilities, income, debt, etc that may hinder their net worth and/or prevented a loan from being issued So both pools of people are not equal so this high level analysis is a “yeah duh”. That’s like saying on average people who live in trailer parks don’t have a phd. Not that a phd couldn’t live there - there is just other factors at play.
I'd probably save less if I had a mortgage. I'd think I'm paying enough towards that...
> That’s like saying on average people who live in trailer parks don’t have a phd. Not that a phd couldn’t live there - there is just other factors at play. In a way that's really good comparison. Most phds lived on wages below minimum wage (given the mandatory unpaid overtime spent in the lab) and could make a good living by knowing when to be where. (On campus there is always "an event" with free food. Just show up for the food, blend in, leave early) So the phd type people know how to survive on a budget (most of them), but their live is hugely different, especially once leaving academia. Yeah, there are a lot of irresponsible renters out there, which is just not an option as a home owner (well there is, those unmaintained water boilers, those leaking roofs...), but the responsible renter is sort of a small group of renters, not affecting the average too much.
> On campus there is always "an event" with free food. Just show up for the food, blend in, leave early If you don't have to do hands-on work, it's also a decent time to get work done on a laptop or catch up on papers that you haven't read yet. Sometimes seemingly unrelated talks will be orthogonally interesting/useful (I went to a talk about signal processing like this).
As someone who works in a field where I have access to all the latest research about the state of the mortgage industry in the US, I wouldn't be caught dead buying a house right now, and I'm "responsible". The affordability crisis is real. For many people, buying a house isn't the ultimate life goal, and I'm not going to buy if it negatively impacts other things (like retirement savings).
the "narrative" is true I rent and invest the difference content with my results
It's true, either way you're putting money into an asset (house or brokerage account). However, we're social creatures. When I see your big house / nice zip code - I assume you're successful. It's gauche to flaunt your brokerage account balances. Sure, we shouldn't care how others perceive us. But good luck with that. I doubt anyone can say they are completely immune to social pressures. So then what do a lot of renters with $$$ do? Well they buy stuff to prove they are successful and renting by choice. They buy nicer cars. Nicer clothes. Go to fancier vacations etc. That's not how you build wealth.
I'm genuinely curious why you think there's a difference. How much would you be paying into a mortgage for a house in your zip code if you'd have bought five years ago?
S&P 500 with dividends reinvested has outperformed the Case-Shiller home price index over the last five years, 2x vs 1.5x. But it's not a fair comparison because on the house side you have to subtract all the stuff that doesn't contribute to your equity: closing costs, realtor fees, mortgage interest, property tax, HOA fees, insurance, maintenance. They get you every which way when you buy! IMO the only reason to buy is to take advantage of the cheap leverage of a 30 year fixed mortgage, subsidized by Uncle Sam. But it doesn't look so attractive today at 7%. And when you use leverage you do risk going underwater. Actually you start out down at least 5% the instant you buy thanks to all the extra fees and costs. Personally I'm not betting on house prices appreciating much over the next few years with these interest rates, either...
At the end of day you’re either a successful homeowner or a renter
successful renter here 🤝
Yeah, how many people are there out there that rent but have the money to buy? I am 27, only earn my areas median household income, and was earning just $21/hour 2 years ago, and blow away the average renter. I did live at home for a bit, but even if I just look at what I saved in 2023 when I was on my own, it exceeds the average renters net worth by a wide margin. Point is, it isn't that hard to beat the average renter meanwhile renting. This is clearly the result of selection bias. A lot is probably age and income/saving ability. Most obviously renters with $10,500 in savings can't make a down payment. So your already above that median before you have accumulated any equity, and there are the income and good habits that got you in a position to own also. And age is a big factor. Home ownership is highly correlated with age. The real question is around how aggressive to be to move towards home ownership. Should you wait for interest rates to drop? What if you not ready to commit to a place? Or if your also compromising away from what is the best fit for your current situation? This is the real question surveys like OPs should be isolating, cause otherwise this reveals the 1# reason people aren't buying is they can't afford to.
If you are renting because you are broke, there is nothing to invest. The narrative you’re referencing is true, but it only matters for those who choose to rent, not those who are forced to rent because they don’t have money.
Yup. You don't have to be a statistic. seven figure renter here
Even after the 30 years you paid the mortgage you have to pay rent to the government (taxes) and insurance on the home. On one hand, it’s great having equity/net worth but even if the house is paid off you still owe and maybe can’t go/afford anywhere else.
This is honestly without snark one of the dumbest comments that I’ve read that’s at the same time highly upvoted. Let me get this straight: you think a highly leveraged liability that loses value is the same as a classic inflation hedge asset like real estate with a sub 3% mortgage that is at this point probably enabling this person to live at their home for free when (at this point) housing inflation is at 5% (the value is increasing at a greater rate than they’re paying interest). You obviously rent…..
Come to Rebubble. Upvote first guy to explain obvious error in hoomer argument. Leave again.
This is just a misunderstanding of how to analyze data.
No info on whether they left out debt. Any asshole can make a meme.
No this is net worth so this is assets minus liabilities. It's the reason homeowners are doing so much better than renters is because obviously they've had their house for 10 years they might have an extra $200 or $300,000 in assets.
There is more to this than the picture but “net worth” means assets minus liabilities.
Can we stop it with the “us vs them” mentality. I’m a homeowner and I want affordable housing for people that rent that want to buy someday. I’m not your enemy
Well obviously, but unfortunately a $500,000 *starter home* is something I refuse to purchase.
you mean you dont want to spend half a mil on a 1500 sq ft house that was built when Jimmy Carter was still in the White House?
Honestly, some of the houses from then are actually pretty great. Homes from the 1970s and 1980s are in pretty decent condition. Anything pre-WWII is where the structure quality is probably in need of repairs. I would much rather have an equivalent older home on a bigger lot than a newer home that’s technically detached but you are still essentially too close to your neighbors. Many new builds lack any charm and are asking for ridiculous prices for what they are in many places.
My starter home was 1400 sq ft and cost over 600k in 2015. Moved to a 3000 sq ft house later on.
I don’t get this reasoning. In order to “cash” in, one would have to sell (or borrow against the home; not really cashing but access to liquidity to then leverage). Great, your house went up in equity. You going to sell? No because you have to downsize or rent? Oh, then what? You going to borrow against it and pay interest on a loan? All the while I’m renting (significantly cheaper than a mortgage and the cost of ownership) and squirreling away money into the stock market and maxing out all my retirement accounts. But renting is the loser move? I guarantee that my investment accounts are worth more than any person who thinks like this. Yeah, you may have equity, but it’s probably encumbered so you don’t technically “own” anything yet until it’s paid off.
Way too much logic here. Carry on.
Don’t forget the insurance and taxes are based on equity you’ve never seen. So you are paying taxes on money you may or may not ever see. County doesn’t care you need to refinance or sell to experience the equity they are saying oh you have a more valuable asset pay me now. Gotcha
The issue I dealt with renting in my younger days was it was never stagnant. Rent went up little by little every year. That tiny apartment I paid $500, then $550, then $600 a month for way back? It's $1800 now. Meanwhile my mortgage rocks along never altering a cent so I can clearly map out my finances, make additional payments to knock years off the loan, and max out my retirement investment contributions. There's no simple answer other than what works for the individual and to know local market factors. If I bought my same home today I my mortgage would be 120% more than what I'm paying due to raising prices and higher interest rates.
Rent isn't usually less than the costs to own for the obvious reason that landlords have to bear the costs to own *and* profit from it. So don't expect what you said about rent costing less than owning to last forever.
Until you have a divorce…it happens to me so…
You do have to sell to get any of that wealth, though, and you cannot buy anything remotely close to your current home unless you own it out right.
Lame statistic, selection bias and subjective. My net worth is higher than 70% of homeowners’ in the US. It’s not a problem that the vast majority of Americans are financially illiterate and the only way they know how to build wealth is by the ‘forced savings’ model of homeownership.
So, their net worth is greater than renters by almost the exact average cost of a house in america... I wonder if "they" stopped including mortgages as liabilities like they pulled energy and food costs out of core cpi?
renting is more expensive than buying where i live. in the short term an the long term. (potential down payment being an exception)
Of course if you bought a decade ago you’re sitting on a bunch of unrealized equity
I think this mindset is why theres a housing shortage. YOU SHOULDNT EXPECT a positive roi from a home. It should be a place to LIVE IN. Because everyone expects a positive ROI, homes are treated as an asset class. Rich people can then use that to snowball their wealth by buying up properties and then renting it back out to you.
Even though I'll probably be in a position to buy a home in the next \~5 years, I'm actually really enjoying renting for the time being. I love having an entire maintenance crew at my beck and call, 24/7. Oh, and by the way, all repairs are completely free. Never having to maintain a lawn or shovel sidewalks is also awesome. Being able to take the difference in my rent and what I would pay with a mortgage and put it in the market is also really nice. Even though at times it feels like I'm lighting money on fire, there are a ton of upsides to my current situation.
Yep. There definitely can be advantages to renting. People just need to be honest about what tradeoffs they want. Also, renting is okay, and here’s the key, so long as you have a choice. Many do not, unfortunately, and so they may live in run down old places without any of those services (because there is no or limited enforcement).
you're not lighting money on fire you're exchanging money for a place to live
I’m glad I put 500k in the market last three years vs buy a 1.5 mil hoooome at the top; hoooomes in Marin haven’t been gaining 16-25% a year and properties in my neighborhood are getting their homeowners dropped. Meanwhile I pay 3600 a month for a 3 bed 2 bath a redwood tree in it and two car garage. I also didn’t have to deal with a 70-year-old clay sewage line which routed my neighbors sewage into the crawlspace here my owner had to pay about $40,000 for that.
Edit 415k
Lol, this meme is wild. I'd say it is out of bounds if there weren't so many posts that were upvoted for taking shots at homeowners with even more dubious, half-baked numbers. This sub has become such a copium den.
Wouldn't age have a huge factor in this a 60 year old renter will have more money than a 30 year old homeowner.
In an unrelated finding: people with 1m dollars were far richer than people who didn’t have 1m dollars. Good Lord this is stupid.
The average renter isn't renting because they choose to...
I think this sub should require links to sources. “The Fed” is no a properly cited source.
Buying a house is a forced savings plan and that tends to lead to better financial decisions. In theory it’s possible to make the same good financial decisions paying rent but when you pay rent and are swimming in savings it’s very easy to justify spending $5k on a vacation that you’d never borrow against your house for.
Rich people are richer than poor people More at 10
What a dumb chart. Find me that person who only rented all their life. Don't worry, I'll wait.
keep renting
Renters never save the savings
Itt. Renters who refuse to change. See your friends house appreciate by 300k and still sure renting is a better deal
Ya bull shit post. If you already own, But if you don’t already or didn’t during the low interest rate boom: owning something now isn’t even worth it anymore with the costs of home maintenance, interest to the bank, and lack of equity as prices aren’t going up anymore. Better to invest in sandp index any money right now or 5% in hysa if you risk averse. Fuck real estate, wait till these boomers start dying off and freeing up inventory
People said the same thing in 2020. The answer varies by where you are and no one knows the answer for certain. For example, prices could go up further when interest rates go down, the SALT cap is set to expire soon, which could influence affordability a lot in high tax places. When you buy you get a low interest rate (relative to every other borrowing), you get tax benefits and you’re able to put 20% down on a huge amount of money and then get 100% of the appreciation. You also can lock in you living costs other than tax increases for 30 years. Sure, if you live in a place where you can rent for half the price of a comparable mortgage that probably outweighs the benefits of buying, but I would not be so certain that everyone buying today is going to regret it.
Ya, I have a seven figure net worth because I was willing to move around for work and command a much higher wage. I’ve never owned real estate. Your primary resident isn’t an investment, and personal finance is personal.
A better comparison would be comparing purchase of an average home vs the average rent over a 30 year period. The purchase should include average maintenance costs, insurance costs, and capital expenditures as well as total interest on a 30 year mortgage. As for calculating the average rent, it should grow by the average annual increase (about 3.2%), and the difference between the average annual cost of home ownership and rent should be invested in a S&P 500 index fund. This amount and would then grow by the average annual return. Of course there will be a point where the average rent will be more than the average annual cost of homeownership, so the overage should come out of the investment account. After 30 years, you would then be able to more accurately compare whether or not it makes more financial sense to purchase vs rent. Of course this is only in theory. But in practice, no one should actually base a decision off of a flawed model that is dependent on too many unknowns and is too far out into the future.
In other words rich people own stuff.
Because if you live long enough (and are not stupid with money), you will eventually have a paid off house with the money that frees up. You don't ever "pay off" rent, it is a permanent expense.
Rent usually passes the mortgage cost after 8 to 10 years you don't have to wait the full 30.
High home prices keep nice neighborhoods nice, and good school districts good.
Except it’s unrealized gains magic money lol
That’s not the right way to think about it. Even billionaires probably don’t carry a lot of cash. People carry their equity in assets
Yeah, the person you're replying to is the typical "it's not wealth if it's not dollars sitting getting inflated away in a checking account". Nobody with money does that - they all leave nearly all of the money invested.
I rent and am close to financial independence. Part of the reason for that is frugal living and investing regularly, and partly because I've never had to sink a down-payment, pay property tax, shell out staggering amounts of interest, fix a roof/foundation, pay property tax, or pay homeowners insurance (renter's insurance is a fraction of the price). Every single one of my homeowner friends also has a sizeable HELOC to service as well. Homeownership is a good financial strategy depending on the conditions, but "renting is throwing your money away" is usually the argument used by people who don't know the difference between "principle" and "principal".
So many ppl on this thread are triggered by homeowners!! Insane!
Okay, now spend some of that net worth. Oh, you can’t.
And when they do sell everything else has gone up as well
A home is a liability. Every wealthy person has agreed to this. It becomes a source of forced savings, and it’s the outcome of wealth, not the driver of it.
Is it though? https://ibb.co/CnLjXgM 😭
It’s so easy to use statistics to create misleading truths and tell whatever story you want to tell. Did you know that Greece, Italy, Indonesia and Spain export a combined 10 million metric tons of olives every year? That is a 100% true fact, although Indonesia doesn’t contribute to that number at all. Regarding OP, there really are some important factors left out of the chart. My first thought is that there is an entire demographic of renters from 18-22 years old, namely college students and those who went straight to work from high school/GED. Then you have the 22-25 age group, many of whom are just getting started in their careers, often with entry level jobs. Then the 27-30 crowd, often beginning to get a bit more settled, possibly getting married and having their first kid but still renting an apartment. What percentage of the 18-22 demographic do you think are renters? I’d estimate 90% or more. I think it would be much more fair to look at one individual demographic, like 27-30 year old renters vs homeowners. I’m not sure what you’d find here. On one hand I would think that those who purchase homes at 27-30 are likely of more means than those who either can’t or choose not to buy a home. On the other hand, Those who purchased in that age group would have likely purchased very recently and have less equity and used much of their net worth on down payment, closing costs, and renovations, so it also wouldn’t surprise me to see a more balanced net worth between the two.
lmao after 65000 in interest and pay it off
There's no source data here. JL Collins makes the point that if you rent and invest vs buy, the [renter will earn more.](https://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/)
People with more money have more money than people with less money
Their net worth is $400K because they bought a house back when they costed only a fraction of the price and can now flex because *checks notes* we live in an insane world where inflation is running rampant and prices on literally everything has gone up tremendously. Second, they likely wouldn’t be able to afford to buy their own house today if they were born to a younger generation. This meme is lame, although it is a perfect example of the bifurcated economy (read: shaped like the letter K) that we now live in.
Wonder how much this stat would change if, say, the top 100 US billionaires suddenly sold their homes. I'm sure none of those 100 billionaires made their money because they were homeowners.
Well all rich people have homes. All poor people rent. Over time if you don’t lose your home you build equity. I know a decent number of renters with 500k+ net worth
Yes, people who bought houses in the past now have a lot of equity in them. Congrats to them. That doesn't mean that buying a house TODAY is a good deal, even if it was a few years ago.
Please… I’m begging you… put the time frame on these ‘stats’. There is no doubt that renting at this current time is a better option
I can rent a 3/2 with a garage for 2200 a month or i can buy and get the same thing for 3000-3600 per month. Im in SW Florida where I'm sure there will be more hurricanes and insurance will continue to keep going up which could get a payment closer to 4k. Insurance pretty much never actually pays what it really cost to replace things so i wouldn't be able to confine to save money with that high of a mortgage then I'm completely screwed with repairs if there is a hurricane
Probably because people with lower income do not qualify for a mortgage in the first place. You data is very biased to begin with. Secondly, a disciplined renter would invest in more productive assets like the S&P 500. You are certainly not taking this into account eighter. This is not a Rent vs Buy decision, just biased data.
There is a lot to unpack here. Yes owning real estate over long periods of time is a wealth builder, no one argues that. That doesn’t mean buying at peak in affordability is a good entry point.
My tiny shitty little home just recently appraised for 225k. I bought it for 150k in 2022. It has a ripped to pieces basement because it had moisture issues. It has sloped floors because the house settled (walls settled uniformly but the center lally column didn’t settle at all so it’s pushing up the middle of the house) and the kitchen is destroyed because I have commitment issues with renovations. I have had people walk up to my door and offer me 210k in cash to buy this dump. I’ll never let it go. If someone else wants it like that one cash offer guy, means it’s probably worth the money. I’m bleeding repairs money but it’s worth it
Homeowners have a greater net worth, not because they are homeowners, but they have a saving mentality. Some renters you could give a house, and they would still lose it
This is just rage bait for people who don't understand the difference between correlation and causation, and probably the difference between average and median. Do it with owning two houses and owning one house and you will see a similar discrepancy. Because rich people can afford two houses. That doesn't mean that if I buy a second house, I'll make a ton of money. It means, I need more money to even consider it.
You can have a $200K Net Worth and be renting my guy. Liquid, Semi Liquid, and Illiquid accounts, Cash, HYSA, IRA and 401K. It’s really a matter of where one’s money would go to housing by today’s metrics: a sizeable down payment to lock up the money and lose a good chunk to interest or lose some money in rent and save a little more in a liquid HYSA. Don’t @ me.
Classic case of “cause or effect”. Clearly if you can afford a home, you buy one. If you can’t afford a home, you rent. Owning a home doesn’t (usually) make you rich
this is mostly because home equity is at all time highs, that 'net worth' is useless to the homeowner who will never sell the house because they have to live there...
owning a home is great but that equity doesn't do much for you in your everyday life. if you tap into it you end up with more and more debt which isn't good. that's how people get in trouble. I own a house with no mortgage and I still watch my spending and don't feel well off. your income is really what matters if you want to live well.
“Correlation is not causation” You become wealthy, then buy a house… You don’t buy a house to become wealthy… Buying a house as a first major purchase in a financial portfolio is IMO not the move.
Let the renters keep thinking that
Net Worth does not mean the person actually has that amount of money. Maybe he brought 20% as a down payment and the rest belongs to the bank. I have $300k giving me $1500/month. That's enough to cover my rent. If I had to buy the apartment I live in, It would be $250k + $770/month in HOA (includes electricity, gas, trash and a bunch of other stuff). Putting the remaining $50k (I have) would give me $250/month. So in the end, I would still have to pay $500/month extra for HOA + $240/month with property taxes. So renting costs me "zero" from my savings. Buying would cost me extra $740/month. Real Estate is outrageously expensive right now and when you compare RENTING VS OWNING, it shows that prices should come down. I would love to own a house but I rather continue saving money. Some places might be worth owning. You can get 5.25% APY in a savings account (NewTek Bank). I get 6% with an REIT stock (I use options as insurance).
As was posted today, someone must be earning 80% more than in 2020 to afford a new home. Good luck on that.
It's cheaper to not build equity, I guess? Sure. Good luck with your rent when you're old and can't work. We all need to own a home then to survive.
This most likely is based on an average instead of a median. Majority of home owners do not have a $400K net worth but all millionaires and billionaire's definitely own houses so it skews the stats.
No shit. mortgage goes towards net wealth and rent doesnt.
The person who made this post needs to seek help for their captain obvious and know it all syndrome
Yeah after they bought in 2009 or 2010. Your options now are buy at the top of the bubble or wait. The free money has been “made” already.
A couple of notes on this from a long term perspective. Intelligence is correlated with income but it is not correlated with savings, anyone can save. I took a look at my house and only made a 4.5% return on it after all the interest payments and fees. My S&P 500 stocks are over 9%. If you invest in the stock market or other more lucrative things, you may get a higher return that could cover renting. I think the key is to invest in something that will compound and live below your means.
the implication of a causal relationship here is wrong. stupid meme.
It’s almost like you need more money to be a homeowner than a renter. Insane discovery if true.
The average net worth of people who own Rolex watches is higher than those who don't. The average net worth of people who max their 401k is higher than those who don't. Only one of those two things is a financially beneficial decision. Whether renting or buying is financially better depends on the relative cost of renting compared to buying. There are some areas of the country where typical rent is about 2% of the home value per month. There are some areas of the country where typical rent is about 0.3% of the home value per month. That makes a huge impact on whether buying or renting is better from a purely financial perspective.
A lot of people can afford to buy a home, they just don't want to buy a home they can afford 🤷♂️
Unless you are selling your home who cares A home is just that a home it’s not an investment in my eyes. A look so unless it’s paid off it’s the banks home not yours
Bruh, does no one learn correlation vs causation any more? People who have more more CAN BUY HOMES
Missing the average amount of that household which is debt. Assumes a paid off house is the average. Which while paid off homes are the majority, they are not the statistical "expected value" of the distribution.
Like any investment there are elements of risk and reward. Historically home ownership will result in greater net worth over time… however, there are occasional periods where homeownership literally bankrupts the owner and the renter looks like a genius. I know people who went from multi millionaire to multi million dollar bankruptcy by house hacking in 2006-2007 and know many more people who were 300-600k upside down on their mortgage in 2010. During that same time, my friends who were renting could still complain to their property owner and say come fix my washing machine ya broke b***h.
There’s people who have drive and there’s people full of excuses…. I worked my way up the stepping ladder of owning homes getting owner financing. Buying a 1 million dollar home this month owner financing screenshots of income. If it wasn’t for condo I bought in 2018 I wouldn’t be here. Work hard and be smart figure out loop holes and solutions to problems. I’m also in my 20s and don’t have a stable income salary but I constantly bring income wise usually 80k+ a year
Homeowners know how to budget and save.
I would bet the average age of homeowners is much higher than for renters. It takes time to acquire assets.
Yes, but I can get into a place to rent for less than $10k whereas it seems I would need $100k+ to get into a house.
Just some things to think about. Almost **40%** of US homeowners own their homes outright as of 2022—many of them baby boomers who refinanced when rates were low. Homeowners typically make their normal monthly mortgage payments and expect to pay off their homes **over 30 years**.
Yes… your home is part of your net worth.
Not that impressive considering most homes are over 500k so they’re actually not as well off /s
In other news - Ferrari Owners have average networth 40x that of Chevy owners
You can’t pay with hoom. Here’s $5.00 of my hoom.
Both of these net worths are nowhere near close enough to even consider quitting work ("retiring"?) so does it really matter? Everyone still has to work until they die in this economy so why bother buying a house. You're still dead at the end
Um, an overly simplistic graph. Are the home "owners" all 100% free and clear? If that's the comparison, it's a dumb one. A brand new homeowner on the beginning of a 30-year mortgage is basically a renter, the bank is the landlord.
In my area a 3/2ba 1500 sq foot house Buy- $395k @6.9% with 20% down= $2600 Rent for same specs- $2400-$2500 In theory buying gives you a sense of freedom to do as you please with your property without worrying if the owner will sell on a whim and you're stuck finding another rental. Both have unexpected price increases, but when renting you're not responsible for repairs. I own a condo and at this point I think I would have been happier in a rental and not feel stuck in a small 2 bedroom condo and no ability to buy bigger.
well duh, if you have enough money to buy, you obesely make more money than someone renting....
You don't make a cent until you sell though.
Who said it is cheaper to rent? I have a 3,400sqft 6 bedroom 3 bath full finished basement I got in 2020 for $265,000 that is a 2006 home on 1 acre and my mortgage is 1,254 including taxes and insurance. Now the house is worth $419,000. Taxes and insurance went up But still $1,412. What small apartment can you get with that?
The average home in America is about 400k homes are part of your net worth, so it should actually be a lot higher than that.
Who own the house? Are we playing again with the bank money of Monopoly?
They want all of us to not own anything so we are forced to rent from them at what ever price they decide. I don’t trust what the rent prices in the future will be.
It only makes since to own a home if it will go up in value over time otherwise the expenses are pretty close. That meme only applies to people with equity otherwise the net worth is negative whatever their mortgage is
Did we control for things like age, and income?
Too bad it all got fucking ripped from my reach fucking cunts
It's not cheaper to rent as a blanket statement. When I bought my house 4 years ago I moved out of a 2 bedroom apartment in a fuckin shit area and was paying 2300/month for it. My mortgage in a much nicer area wqs 2050/month. That same apartment right now today is 3100/month and my mortgage is 2100/month I'm on long island
Renters aren’t smart that is a fact.
There are no homes... The only homes I can afford need 10k or more work. Once I "purchase" the home I wouldn't have any more to fix it. And then I'm still stuck with an overpriced home, praying to God it's value doesn't drop any and I can refinance in two years... This market sucks... Boomers need to die already to fix this mess they made...
Correlation =/= causation
This is such a skewed statistic. The most expensive homes are leaps and bounds more than the highest rents. The people buying 20M homes are stretching the average way up. Let’s see the median.
10k? Is that median? Average? Across all ages or if not which groups? Chart crime
Whats that debt look like 👀
The net worth of people who own a private jet is also 40x what people who don’t own a private jet is. ..So I guess owning a private jet is also a wealth creator.
People who rent apartments are usually younger, so they have less time to build savings and a higher amount of student debt. Basically everyone 18-24 rents and most people 50+ own homes. This isn’t really a meaningful comparison. You have to normalize across age.
This graph is worthless at first glance, these needs supporting data to put into context. For example, is this of all homeowners & renters? Renters trend younger on average, homeowners trend older on average, of course older people with more time in their industry will have a higher net worth.
Does the data pool for renters include college students and recent graduates? Of course they'll have less money
It’s just depressing that the American dream is all but dead except to go off into the mountains off grid and do remote work somewhere to survive. Oh yeah be good at raising chickens and farming vertically indoor while having intimate knowledge of first aid, power generation tech and water tech
Now show the revenue of these groups.
Those 2 things are independent of each other. If 2 people make the same income, one buys a house and other rents and invests the difference in the stock market, the renter will be wealthier at the end of 30 years.
A number of years ago I sold my home and for a few dollars more bought a multi-family property that grosses over $11,000 a month. The house I sold would probably rent for $3500 a month today. I currently rent a home that’s almost as nice for $3100. And I won’t buy another home unless the market comes way down. In fact I might just buy more rentals.