Is renting neccessarily inferior to home ownership?

[ProgressiveModerate]

https://www.economist.com/graphic-detail/2023/11/28/is-it-cheaper-to-rent-or-buy-property

Read this article and it's somewhat interesting; tdlr is that basically in more parts of the Country it's become cheaper to rent. There's a pretty striking visual showing how in 2020 it was cheaper to buy in most parts of the Country including many urban areas. However, in 2023 there has been a dramatic shift towards rent being cheaper in basically 90% of the Country except a few depressed rural communities.



This got me thinking

Home ownership is often seen as a somewhat essential part of any sort of "successful" life in America. Many will say it guarantees stability, and allows one to sell their home later for such as retirement. With renting on the other hand, your rent is at the mercy of the landlord and the market and no matter how long you rent for, you will never own the apartment. Furthermore, renting is generally associated with lower classes while buying is associated with the wealthy.

But renting has benefits as well. For instance, renting generally allows more flexibility for moving around. When someone takes out a 30 year mortgage on a home, it binds them to that home. I wonder if there are any studies about the potential jobs opportunities and earnings homeowners may miss out on by being forced to stay sedentary. Renting just allows people more flexibility with life circumstances.

Additionally, here in NYC there are quite a few people I know who probably could save to buy a place if they wanted to, but instead choose to rent fairly nice apartments, because they prefer just not having to take care of their own place; many nicer rental buildings will have on-site people to fix things in the apartments as needed. They also maintain communal amenity spaces like gyms and lounges.

It’s also important to remember even once you own a place, you still must pay taxes, maintenance, and potentially HoA fees on a regular basis

Would more middle class people choosing renting over buying necessarily make people less financially stable and worse off?

[LostFellow]

As the article states in the details, the 2020 to 2023 chart is just reflective of a higher federal funds rate. There isn't some large inherent structural change in real estate or other economic sectors.

Being still a younger adult, I have only rented for flexibility in moving around as I decide where to settle and start a long term career. I wish I knew the answer to whether I prefer renting or homeownership, but I haven't had enough direct experience with owning a place in a denser urban environment that I prefer. I can definitely rule out owning a large plot suburban home in an unwalkable environment for the next decade+ of baked in preferences though.

[Damocles]

In macroeconomic terms, a healthy rental market with a wide variety of options for many people is a good thing. A housing market where you can only own a home imposes high costs on those who are just starting out, or who may have just immigrated, and who don’t already have high savings account balances. It’s irrational to exclude these people from living in your city just because you deem SFH ownership to be the be-all, end-all of housing.

[lfromnj]

Reminder, rent usually goes up and your mortgage doesn't unless you have a variable interest rate loan and depending on the time of when you get the variable mortgage the expected value of paying shouldn't be going up.

[Sprouts Farmers Market ✘]

Home ownership is a half baked savings and stability plan for the undisciplined middle class that would not otherwise have a high enough savings rate to last them for their whole life - and they pay the penalty for it with smaller rates of return on investment.

Reminder, rent usually goes up and your mortgage doesn't unless you have a variable interest rate loan and depending on the time of when you get the variable mortgage the expected value of paying shouldn't be going up.

But also important to remember that your maintenance costs and property taxes do and should go up (California hopefully soon no longer an exception). Those costs alone could exceed my annual rental costs in a better location before accounting for commuting costs, opportunity costs, and liquidity costs.

[Clarko95 📚💰📈]

Personally, what I love about living in Germany is that renting for life is a perfectly acceptable option; in fact, a majority of Germany live in rented apartments or houses.

I don't want to take out a $400k+ loan and have it control me for the majority of my adult life. I don't want to shovel snow, rake leaves, clean gutters, cut grass, etc. I don't want to file a property tax return. I don't want to have to keep a large lump of cash on hand just in case the boiler fails or the roof needs replacing. I don't want to have to spend so much time and effort cleaning anything that is greater than 1400 sq feet/130 sq meters. I grew up in a suburban house and it was just an enormous waste of time, effort, and money from my perspective, and a major source of stress and tension in the family. That is something that the pro-ownership crowd underestimate, is how much of your life will get sucked up simply maintaining the property, getting around in a low-density area, and how much tension it can cause in your family.

The only reason homeownership in countries like the U.S. is so lucrative is because homeowners receive huge subsidies in terms of interest tax deductions, government sponsorship of mortgages, car-based infrastructure, and the political consensus that housing prices must always rise, so that the next family can do the same thing again.

I love living in an apartment where, while rents do increase, they are subject to a rent index and a rent brake. My rent increased with the new year from 653 Euros per month to just 656 Euros per month, an increase of just 0.4% for operating costs. It shouldn't be acceptable to just raise rent to whatever you feel like, and that's a good thing that helps bring about stability. I prefer to keep 10k in cash in the bank as my six month emergency fund, and then the rest of my savings gets shoveled into mutual funds and bonds. I have the flexibility to up and move to another city if necessary, while a mortgage would chain me to one area, especially if I try to sell during an economic downturn.

It's very good for the economy as a whole that businesses that actually create value and real wealth don't have to compete for capital with worthless property speculation, and that the tax system incentivizes building more homes and apartments instead of restricting supply to boost prices artificially. You should buy a house because you actually need the space and want to live there, not merely to make a profit off the price appreciation (which should be incidental to ownership).

[Antonio the Sixth]

There's nothing wrong with renting per se, but the colossal market failures inherent in it means that a reasonable rental market could only exist if the state controlled a plurality or even a majority of the housing stock, and operated it at cost (or even at a deficit it necessary) in order to counteract rampant profiteering.

[Electric Circus]

The biggest advantage to owning your home in the US is that you're buying your way into a political constituency.

There are only a few parts of the country where renters are organized enough to have anything close to that level of clout as a local interest group, and even then they rarely get the same consideration in state politics.

That's changing, but only slowly. How many renters are in your state legislature? How many landlords?

[Damocles]

Snip

To add onto this, one could credibly argue that this would be more microeconomically efficient, due to the benefits of comparative advantage. Instead of everyone taking up home maintenance as a burden that competes for and reduces time and attention and resources available for your actual job, it’s convenient to leave this to professionals who specialize in this stuff (property managers, groundskeepers, plumbers, electricians, etc.).

Instead of it being a drag, then, it actually *boosts* local employment opportunities and turns a liability into another asset. Not only are you more efficient in your job, but they can have theirs. Both then become wealthier and benefit from this exchange, but neither party had to give up anything.

[Progressive Pessimist]

It depends on the area.

In my situation, I am fortunate to live in a house that's paid off. All we pay are property taxes, and among the lowest in the county. So, it's more financially sound for me to stay here than to rent an apartment for probably $2,000 a month at a minimum in my area.

In other circumstances, I would rather rent an apartment than own a house and take out a mortgage. I don't think I'll ever do that myself.

[Hollywood]

It depends when you buy the home, what you want in life, and whether you can earn enough to afford to live like a King.  I mean there's nothing like the personal freedom to renovate your home or backyard as opposed to having limited space and leasing rules.  I've got two miniature golf holes b###ches.  The second one was merely to build a windmill.  My brother and his kids spend hours playing.  I got a jacuzzi, cornhole, soccer nets, and a basketball hoop.  I'm wanting to build a pickleball court to play with the family, but that's going to run me 25k.  Worth it.  My dogs have a little area to s##t so I don't have to walk them every day.  I got a garage to store a golf kart that I use to take my dog to park.  I don't have to worry about neighbors intruding on my life, but I can also hang-out with them, and rely on them to take care of my s##t when I'm away.  I have five avocado trees, and a lake to go fishing.  There's room in the house to store everything, and enough room for a home office and game room, as well as space for my GF.  It's quiet all the time unless I throw a party.  I'm close to the city without having to live around third world communities or homeless encampments.  I have privacy and control.  Options.  I can have sex with a prostitute without anyone knowing. Or I can murder a prostitute and hide her under the concrete of my basement. I like having that option. lol. 

If I were young, I'd have buy a trailer home with two bedrooms to split with my friend.  You can finance one for 120k with 10k down over a 15-year period, and your monthly payments will be around $1,100 split two-ways ($550).  And when you decide to sell it in a few years, you'll at least have enough equity to walk away with 10-15k.  You can work and go to an inexpensive community college, and then get good enough grades to back your way into a four-year school without any debt. Even if one or two of you moves out, the other roommate can assume the payments, or sublease the property $1,500, and now you have passive income that's building equity.   Basically, if you're a smart people to guide you, ownership is F-ing awesome. Most people are educated by public school teachers that funnel you into the expensive college experience, and then you come out of college without credit, savings, or work ethic.  Every single teacher I know constantly b###ch about their finances, because they're stuck renting an apartment with roommate, racking up credit card and auto debt that continues to punish them after their loan is discharged under the 10-year public employment benefit.  That's a college-educated renter's life.