It's still a roof over my head regardless of how much it's worth. And more importantly, how much it's worth is completely irrelevant unless/until you want to sell. And if you do want to sell, and home values have crashed, then the next house you buy will also be cheap!
Yes, it often seems the rental cost will be less than your monthly payments, but do realize that you lose all the rental cost, but not all your monthly payment.
There are online rent vs buy calculators that you can use to generate these scenarios.
https://www.calculator.net/rent-vs-buy-calculator.html
Plug in negative appreciation for property values and watch how the comparison tilts.
* It gives you a fixed monthly houseing cost. No "10k new roof" or "1k new stove" suprises hit you.
* If you are say, saving 50% vs buying, you can put this difference in an index fund. This would over 10 or 20 years potentially give you a LOT of money over buying.
Look, buying is mostly great. It's one of the biggest builders of wealth for most Americans. But from a purely numbers game, it's not so clear "rent is just losing money".
2. So does a fixed-rate mortgage. Even better, refinancing a mortgage during a low-rate period (e.g. 2012, 2020) actually lets you reduce your payment, while contributing more to equity. How often do you have an opportunity to reduce your rent?
3. Saving 50% of what exactly? You can put the down payment into an index fund, yes, but remember than the house is an asset that gives you 5x leverage initially, assuming 20% down. You can't get 5x leverage at your broker, and even if you could, playing with 5x leverage on the stock market is insanely risky compared to real estate.
> But from a purely numbers game, it's not so clear "rent is just losing money"
It's pretty clear actually. They've compared retirees who rented all their life vs home-buyers. The difference in wealth was striking, a factor of 6x-7x if not more.
What's not clear is whether that trend will continue in perpetuity under the conditions of declining population.
Home values rising historically is good, but I don't think a clear win through all time. There is no instrinsic reason a house value should rise faster than inflation. You can always build a new house for cost X. Buying existing means that new house supply is too low or too costly.
But for what I've paid in rent over the years, I could have paid for entire dwellings. And had the freedom to fix and alter things per my desire.
Renting is the opposite of a fixed monthly cost, since rents go up all the time. If you rent, you can't tell me what your rent will be in ten years. I can tell you what my mortgage will be, exactly the same as today.
> No "10k new roof" or "1k new stove" suprises hit you.
If these bother you, you can sign up for house maintenance insurance programs to give you a fixed monthly cost. I'd recommend against that since they make a profit off you, you're better off putting that money into an investment account and withdraw from there when you neeed it.
New roof costs are pretty much never a surprise. You should know when you buy the house how much life is left in the roof and plan accordingly. If a natural disaster occurs that destroys your roof, insurance will cover it.
Appliance costs? Yeah, they are often surprises. Hard to find reliable appliances any more.
Oh, and it's hard to get a $10K roof these day :-)
> If you are say, saving 50% vs buying, you can put this difference in an index fund. This would over 10 or 20 years potentially give you a LOT of money over buying.
Yeah, I always wondered if I should do this analysis for my house, and I'd be curious on studies on how this would play out in most cases. For me, right from the get go the rent on a comparable house exceeded the monthly interest + tax + insurance (excluding principle). The tax benefits more than paid for all the maintenance costs. So the main questions would be:
1. How much would the down payment be worth in an index fund?
2. How much would the principle payments monthly in an index fund be worth?
I suspect that I'm ahead of the market significantly, what with all the crazy house appreciation (that alone is about 8x my down payment), and rents are quite high - easily increased by over 70% since I bought the house.
But once it's paid for, it's paid for. Now you just need maintenance and taxes, easier on a fixed income. And it's easier to build intergenerational wealth if one of your children doesn't need to blow money at all on rent or home purchase.
When the new roof goes in, what happens to you as a renter? I'm pretty sure you still have to pull together 4k for moving/security deposit/first several months
Only a fool treats their dwelling as an appreciating asset anyway. It's subject to market forces.