Not really an option for me. The kind of house I’d want to live in (and more importantly my wife) is not something that is easily available for rent in my location. May not even be available at all.
For me, I can at least compare my mortgage now to rent in the Bay (a fair bit higher), and in the latter option I’d still be sweating where to send my girls to school in a couple years. Had I not bought this and stayed, there, would I move again and pay even more rent to get a better school system? Go private? Move up here and pay 30% more or more in mortgage for a similar place, or end up in a much smaller one? It’s been a pretty big windfall for sure, even if many of the housing gains from here going forward aren’t worth much.
Some hedgefund bro may be working on fixing that!
If you’re comparing with moving to a lower cost of living area that’s a different story, imo. If I was willing to sell and move to Nebraska, I’d make out like a fucking bandit. So anyone who is willing to do that is exempt from initial claim. If you’re willing to move to a different (i.e., less expensive) city, then you can actually realize your gains in a meaningful way (or in your case, make them).
I think that the flip side of your argument also holds. What I am hearing you say is:
At time t = 0 I bought a house for $1
At time t = 1 the house can be sold for $2, yay!
But oh no, at time t = 1 any replacement house is also $2, so I wouldn’t actually be ahead.
The thing is, you get to carry that $1 of equity gain on the first house to the second house. The alternative is that you didn’t buy the first house at time t = 0, in which case you would have saved $1 but you’d just have $1 available to buy the $2 house at time t = 1. But buying the first house and realizing the gain, you are effectively buying the second $2 house for $1.
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Nah, I’d have more. That $1 would have been in STONKS, ldo.
Edit: I’m only kind of joking. STONKS have outperformed my ridiculous housing gains over the same holding period.
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It is a recent development, even in the US. It comes with the creation of the 30 year mortgage note. That’s not a thing that really existed 150 years ago.
Did you lose more than 7 years of rent?
I think for Boomers who lived in one house for decades home ownership was probably a fantastic wealth generation tool. Many people don’t have the discipline to save on their own but a mortgage is basically forced savings.
This is still obviously true for some people, but much less so now that people move much more frequently for work, therefore incurring transaction costs, and financial institutions have gotten far more aggressive at marketing aimed at inducing people to tap home equity.
Two things that might meaningfully help are widespread changes in land use restrictions and people actually leaving expensive markets to work remotely in less expensive places. The second seems far more likely than the first - what possible incentive do people in Santa Monica or Marin or wherever have to negatively impact their own home values?
If you’re going to look at that, you’ll need to subtract the 7 years of mortgage interest he paid. And other ownership costs that renters don’t have.
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Of course. And Taxes and maintenance. But rent is expensive. You have to take a real bath to be far behind after 7 years. But the main reason to buy a home is you need a place to live, not as an investment. If you had a wealthy relative who wanted you to live in his house for free most people should obviously take it.
Yeah, I agree with all that. However, as a practical matter many people tend to rent places that are not as nice as places that they ultimately buy. I think in large part it’s because they see renting as more temporary and so they’re willing to settle. People far more commonly buy too much house than they rent too much house.
So for most people (but not all) the decision is not between renting and buying an equivalent house. Instead it is between renting a worse place and buying a better place. This factor probably narrows the gap a bit.
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Yeah, you almost never hear about someone renting a place that puts a strain on them financially where as it happens all the time with buying. Of course that’s partly because taxes and maintenance are less front and center than any costs associated with renting.
You do in gentrifying neighborhoods.
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That might be true. But I see being priced out of your neighborhood as a different problem from somebody making a decision to get 4 bedrooms for 2 people then struggling with the payments.
Costa Rica real estate still looking mighty fine to me.
I’ve been telling my wife for the last 4 years that we should sell, pocket the equity while we rent for a year or two, and then buy when the market tanks. Now I think I’d we did that we’d be renting for the next decade+.
We had friends that stuff exactly that. They just bought the rental they were in after waiting 3 years for the market to drop.
That would stupid when you could just cash out you 401k and buy Gamestop options instead.
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I remember telling my friend in the late 90s that $500k was a crazy amount to pay for a decent-sized house in Mill Valley (heart of Marin County). My thesis was he should wait for the dotcom bubble to burst, which would cause the Bay Area housing market to crater. Good thing for him he didn’t listen to me!
Also I learned to never attempt to give anyone financial advice beyond the generic, “well according to the experts, this is what you should be doing…”
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Just roll it over to an IRA and put the whole thing in GME and AMC. Tax free (ish) profit!
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