Maybe in Indiana it’s good. It doesn’t make sense in cities with high price-to-rent ratio such as San Francisco (51.79), NYC (38.26), Los Angeles (37.39) or Seattle (36.65).
Yes
No. It’s good for a lot of people. Not all though. Some people really can’t manage money well enough to be home owners. They need the predictable monthly payment from rent. Even with an escrow account to ensure they pay property taxes and homeowners insurance, there’s still other lumpy expenses with home ownership. (And why do you think banks started requiring escrow in the first place? Because home owners weren’t paying those expenses.)
When anything unexpected comes up, some people just can’t deal with it financially. Or they simply won’t maintain their home.
When my father converted an apartment building he owned to condominiums he tried to sell them to his tenants. It did not go well. If they needed a $400 plumbing repair they couldn’t manage. Within a year they’d all sold back to my Dad asking to go back to renting. And he was really holding their hands to a much greater extent than any normal lender would… such as supplying the names of the vendors he’d used and setting up payment plans if they got even a few months behind.
It’s just more responsibility than some people want or can handle.
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That rings true. I think fear of the unknown plays into it. When they first get that unexpected $400 plumbing bill, they may wonder what other unexpected bills might come their way. Renting gives them peace of mind that they will not have to worry about any more unexpected housing bills. Of course, longer term the rent may become unsustainable, but few people nowadays are good at long-term thinking.
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I bought into the “home ownership is best for everyone” line the first time around. Home ownership is good for a lot of people, but definitely not everyone. If you move often, if you view a home as an actual investment, if you don’t have the flexibility to pay for unexpected costs, if you don’t want to be responsible for upkeep, home ownership ain’t it. I hate home upkeep. If I could do it all over again, I might not choose this route.
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Vancouver is even worse than SF or NYC on price-to-rent ratio so the “bank of mom and dad” had to be accessed for our kids (only condos: detached homes are impossible). (I know this article is 5 years old but relative comparison has worsened since then.)
Not convinced it will be a good investment (interest costs are not tax deductible) but they wanted to have an asset.
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Me too. My next home will be another condo. You still have some upkeep with the condo, but not nearly as much as with a house.
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Hard agree. I wanted something in the range of $200-250k, ended up at 272.5k because we liked how nice it was and the location.
Lender, and realtor until I put my foot down kept wanting to push me as high as $750k. Realistically we could just barely afford that today, but we’d need to drop our 401ks to minimums and basically not increase any other savings, ever. And goodbye to 90% of our fun money, and nevermind on having a child.
But then you’ll miss out on cutting the grass and shoveling the snow!!
yeah, but you’d be living in a much more glamorous house, which is basically like taking a vacation
Some notes the Economist Article–
Boomers were way more able to purchase houses in their 30’s than Millenials. The article wonders if maybe that’s why Millenials are all friggin socialists.
Ever increasing house-prices means ever increasing rents and debts to finance the purchases.
Taxes & Regulations protect entrenched homeowners at the cost of non-owners and later owners. For example with capped property taxes.
NIMBYism prevents adequate construction to meet supply, resulting in rents being too high where the jobs are.
Home ownership is really only a good investment because of debt-financing. Take that out and you’re better in stonks.
Also-- it takes a long time for folks to die. If I die at 80, that means my kid inherits at 60. Hardly a boon for young people.
Or, more simply put, it doesn’t make sense for so many old people to be living near the city in 4 bedroom houses by themselves.
Agree but, as pointed out before, a parent doesn’t have to wait until death to pass on assets to a child. Maybe that is less common in the US than Canada?
And yet, there are. So, I’m guessing there is some sense to it. (Mostly inertia.)
Lots of talk about work-from-home. Do we have any numbers on how many more people can really do that now? I’ve got anecdotes but not statistics. Do the millennials have to live in particular cities because that’s where the jobs are, or do they want to live in those cities because they are “more exciting”?
My wife has every intention of dying in the house where she raised her kids, just like her mother did.
No, it doesn’t “make sense” to me, either. But, other people’s emotions never make sense if I don’t share them.
That’s completely irrelevant. I’m talking about upcoming generations that need to buy a house. That’s how the wealth increase is realized. You generate the wealth by extracting it from future buyers. This disproportionately affects the younger generations. You are essentially taking money from younger people and giving it to older people.
The CAGR on my home purchase is around 14%.
I did this and rented my basement to help pay for my mortgage. Now I have a bigger house than I want. :\
You completely misunderstand what I’m saying on a fundamental level. I’m saying the fact that homes act as a wealth building tool is a terrible thing for society/economy. It shouldn’t be something we aim for the housing market/homeownership to do.
So I completely disagree with your claim that my comments are drivel.
This is a consequence of using homes as wealth generators.
This. 100%.
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So they have to go buy a new house themselves after they’ve retired and have less income? Sounds like a bad plan.
Why? I don’t think you can justify this position.
You can access the equity in your home without selling it and give funds to your children. Or, if you have other savings, give some of that to your children to help them purchase a home.
For the reasons I laid out and the issues SredniVashtar listed.
Mainly, it leads to housing costs growing faster than wages. This results in a transfer of wealth from the younger generation to the older generation. You can only do this activity for so long before the youngest generation is saddled with crushing housing costs.
People under this system also view their home values as needing to grow. As a result, they engage in constant NIMBYism that prevents sufficient housing from being built because that would harm the value of their home. I don’t think we should look to policies that cause housing shortages.
Maybe you don’t care about future generations, but I do.
This is an interesting read by an economist on the topic: Housing and wealth-building - by Noah Smith - Noahpinion
You’d think in such a wealth country, children wouldn’t need constant handouts from their parents just to obtain housing. That isn’t an efficient system. It’s also a regressive system that harms people born to poorer parents and advantages people born to rich parents.
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