The Absolute Insanity of Not Buying a Home When You’re Young
The Absolute Insanity of Not Buying a Home When You’re Young
If you’re young—under 40 or so—and have been heeding the personal finance advice spewing forth from some of the most popular columnists and bloggers over the last few years about how owning a home doesn’t make financial sense anymore, I’m afraid you’ve been duped. Buying a house—especially when you’...
While buying a house is not a luxury everyone can afford, buying one instead of renting provides several key benefits that pay off in the long term.
What does everyone else think about buying when compared to renting?
The absolute inanity of posting something like this as if it is a new revelation.
If young people could buy a home. They would.
What;s your next post?
It's better to have children in your 30s than in your 50s!
If you spend more than you earn you in for a bad time!
Stop being poor by having more money!!
Yeah, the issue is saving up for a deposit. I finally managed to buy recently, and despite rate rises the mortgage is already pretty much the same as what rent would cost for a similar house (and long term will only be trending down in real terms with inflation). People would buy if they could, it's not like people love having to deal with landlords.
Getting sick? Just don't let viruses in your body!
What the author used as their title is not the most ideal however the main point is the benefits buying has over renting.
However I understand that people can't afford a down payment on a house in major cities.
Out where I live houses can go for 100-200k so it is more achievable for those of more modest income.
Obviously I never intended to put people down because they don't make 200k+ a year.
Lol yes, everyone here is just going off because of the title without actually reading the article.
They never said millennials and zoomers are stupid for not buying houses, in fact the article makes no remark on people's ability to buy home, just all the benefits of doing so.
The article even talks about the house price drop after the bubble burst in 08 and hints about the dropping prices now. It's in no way advocating that you need to buy right now.
I'm in the 40% that can't afford it and am not going to be able to in my lifetime.
The absolute insanity of me!
Have you tried not being poor? Just let your financial advisor invest the $500k your parents left you in your trust fund so that you can make money on it. It's so easy.
Silly me, I see now what I'm doing wrong. I should have picked richer parents to be born to!
Instead I tried to stop being poor through hard work, only I picked the wrong body to be born into.
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Thanks for your advice, but unfortunately none of it applies to me.
I live in a country with a housing shortage and low housing affordability (40k would not even get you an insulated caravan here) and as a seriously chronically ill person unable to earn a living, my income is just under 50% of what my income would be if I were on minimum wage.
I don't buy it. Imagine writing an article about how a 250k house will cost you a million dollars by the time you die and shilling that as a good thing. Insane!
Value goes up, taxes go up. Value goes down, you're upside down on "your investment". It's a lose lose. A house isn't an asset! It's not an investment! An investment in what? Who's doing the work to raise the value? You are! So it's an investment in yourself? It's an asset that you have to continue to pour capital into to keep it's value? That's not an asset, that's a liability!
I've got a friend that lives in a medium sized city in a large metro area. He pays the total value of his house every 10 years in taxes. That's every 10 years, he's re-paying off his house. Every year they raise the taxes by the maximum legal amount, every year he disputes it, every year he is denied.
Water leaks. Mowing a yard. A new roof. Another pain in the ass every weekend.
The idea that you're not tied to a house after buying it is ridiculous. As if it's a liquid asset you can just slap on Facebook marketplace and sell in a weekend.
HOAs. You must select one of the approved paint colors. You can't cut down that tree. You can't plant that tree. You can't park on the street in front of your house. You can't work on your car in your driveway.
What if you don't want to buy a house as an investment? What if you want to you know, just own a place to live? Too bad. You'd better have a line of credit for emergency expenses on the house, you'd better have home equity, you'd better have a valuation higher than your liability in perpetuity or youret fucked. You can't just have a home anymore, you have to manage an asset, or a liability.
So that 200k savings you get by the time you croak according to the author's math, is it worth the hassle? The neighbors telling you what to do, the municipality fleecing you for every dime they can get, the constant maintenance because a house is a liability, not an asset, that will crumble if you don't pour money and time into it, the commute, the traffic, is it worth it?
I would never, ever buy a house in a residential area, ever. The whole market is a god damn mess. Now, buying land somewhere rural and slapping up an A frame...
I'm basically with you on all of that, except it still sounds better than renting.
Also, I don't have kids, but I see a lot of folks buying houses in suburbs "for the schools". In affluent towns where the math you're describing is the worst, renting often isn't even an option. Also a lot of those parents will sell and move the second their kids graduate high school. All of that is way cheaper than private school, especially for multiple kids.
This must have been written before interest rates hit a 20-year high.
Most of what he says is true, but it’s pretty tone deaf to write in this market.
Where’s that post-peak finance blog post telling people interest rates don’t matter because surely they’ll be able to refi.
In the U.S., buying is a mistake if you don't think you're going to stay for more than 5 years. The up-front transaction costs of a purchase, and then a sale when you move, needs to be amortized over a long enough time period to be worth it.
A typical $500,000 home is going to see something like $520,000 paid by the buyer for $480,000 in the seller's pocket. That $40,000 is an expense that can only be justified if you're staying there for more than 5 years ($8,000 per year). Maintenance, taxes, and insurance on that $500k home will also be continuous, and will vary heavily based on age/condition of the property and the jurisdiction/location. On the upside, maybe the property will appreciate, but historically that has basically only happened about as fast as inflation for specific properties.
Renting is generally better if you want the flexibility. If you're single and childless, but anticipate maybe getting married and having children later, do you buy the place that works for a single person today, or do you buy the place that might work for raising kids 10 years in the future? Contrary to this piece's argument, it's precisely the young people who are least equipped to predict the medium term future, and renting can buy time so that when they do buy, they buy the right place for them at that future stage of life, with full knowledge of their household income, expenses, and household size. Plus city, neighborhood, etc. Nobody wants to commute an hour per day because of a decision they made 10 years ago.
Renting is almost always better for people under the age of 30, and the financial calculators basically prove it.
In the U.S., buying is a mistake if you don't think you're going to stay for more than 5 years.
Rather than selling the house, you can consider renting it out if you move. Depending on the terms of your mortgage, you may be only roughly breaking even when you first start renting it out, but after a couple years rent will likely increase so that you're cash flow positive and you're also building up equity in the house.
If you're single and childless, but anticipate maybe getting married and having children later, do you buy the place that works for a single person today, or do you buy the place that might work for raising kids 10 years in the future?
If you've bought a small starter house 10 years ago then you have lots of options when you want to upgrade. Your starter house should have appreciated and a good chunk of your mortgage payments have gone to increasing your own equity.
So you could sell the starter house and reinvest the profits into a larger house. If you do a 1031 exchange then you avoid paying capital gains taxes, so the starter house essentially functions as an appreciating savings account.
Or you could do a cash out refinance and keep the starter house as a rental property and use the excess equity to invest in the new house.
These are all good options to have. It's going to be rare where you're upset that you bought a starter house 10 years ago and are now looking to upgrade. That's pretty much an ideal position to be in.
If you’ve bought a small starter house 10 years ago then you have lots of options when you want to upgrade. Your starter house should have appreciated and a good chunk of your mortgage payments have gone to increasing your own equity.
Do the math. The S&P 500 would've outperformed the equity in the starter house over most 10-year periods of time. The renter is in a superior position when bidding on homes, compared to the owner who wants to put in a contingency on the sale of their current home.
Plus look at what people are actually experiencing today: they're ready to upgrade in their home, but are finding that the equity they've built (from high housing prices) isn't actually enough to significantly upgrade (because of high housing prices). So they feel stuck in their old house that no longer suits their needs.
After all, if the starter home appreciates from $250k to $500k, that means other $500k homes out on the market are generally similar, and your equity can't actually buy as much as you imagined 10 years earlier.
And more to my point, is living in the same house for 10 years a mistake? For most 20 somethings, yes. That "starter home" is a compromise in lifestyle: extra bedrooms they don't need yet, commuting distance to work or to family, shitty neighborhood for dating, school district they don't need, etc. Actively planning to live somewhere for less than 5 years makes buying a mistake, but actively planning to live somewhere for more than 10 years requires a lot of contingency planning and anticipating changing needs (and sometimes living with those incorrect choices).
I think his math is questionable and his logic even more so. My house costs about 10% of the value of the house. About half is capital opportunity cost and the other half is maintenance, taxes, and utilities. This is a cash purchase and never goes away.
Sure if you rented the same house it should be cheaper to buy. Generally one does not do that. I rented a much smaller place then I purchased. Then there is the a risk. If you buy in an up market and you have to move in a down market especially a one company town there that business went bad you are skewed.
Not saying no to home but there are many considerations. In the end it is a total numbers game. What are your exact alternatives. Then places to live including a house you own is a cost center not an investment. So cheapest apartment and smallest house is generally better.
From what I understand, at least in the US, you can write off home improvement costs in your taxes if you're willing to itemize. It's not for everyone of course, but for people who spend a lot of money improving their home, it could help reduce the financial burden.
This is effectively not true.
Any capital improvements to your home add to the homes “basis”. When you sell, your gain is the sales prices of the home less the cost of the home less capital improvements less cost of the sales. The US already allows for a significant exclusion on the gain on the sale of a primary residence from income taxes so overwhelmingly nobody will get a tax benefit from a new roof or bathroom or whatever.
No. Only adjusts basis when you sell. There are tax benefits and a lot of them. Some general but a lot very specific. Lot depends if you make money on the property. My house I have had 20 years. Maybe made 1% a year return while the cost is 5%. Typical house returns are about inflation though mine is less. Typical investment return in the market though are 5 to 10% above inflation.
Wow. Someone got paid for writing that garbage.
Lol tell me you didn't read the article without telling me you didn't read the article. All the points they made are objectively true. You're just going off on the journalistic title, but that still doesn't make it not true.
I tried to read it and it was bad and rambling and didn't get to the point of the headline. Instead writer decided to tell their life story and talk about kids cleaning out a house.
Well thanks, guess I'm insane for not having $25k Canadian to my name, parking spots cost C$250k and only a handful of listings for condos within a 90 minute car commute from Vancouver costs under C$300k, which come with their own mini-rent anyway in the form of condo fees.
Where I am, I pay about the same as the example scenario except in Canadian dollars, and it gives me easy access to public transit so I don't need a car to commute around. I think this is a better deal.
Uhhh… I managed to save up a hefty down payment and bought my house in 2009.
It has since then over doubled in value.
So yeah, “sane choice = buying a home while you are young” is my vote.… buuuuut, today you’d have to be nuts to buy a home.
Not sure where that leaves the young people today, but there is no way (in my area at least) that home values will keep on climbing.
They plateaued and I don’t see any further appreciation.Not sure where that leaves the young people today
On the street.
In a house with a ton of roommates or with their parents is the other answer.
Since when could young people afford to buy a house?
As an investment, a home is risky. For one, you're only going to have one most likely, so you're not diversified. While property values do trend up, there's a myriad of things that could potentially happen to reduce your property value as well. Not to mention, while the land underneath the home increases in value, the value of the home itself (on top of the land) decreases as the house ages.
On top of that, you're paying maintenance, insurance, and property tax. While yes, it's better than renting, it's not necessarily a good investment compared to other investments you can make. On average, you're going to have a better return on the stock market than a home. True, that's also risky, but it's easier to diversify and there's more money to be made.
Finally, you're usually leveraged pretty deep on a home. If you default for whatever reason, you'll be left with nothing. If the bank somehow fails to recover its investment after selling the home (say, because you owed more than it was worth), they can sue you for the difference.
That said, it's not a bad idea to buy a home. You can always live in it, if nothing else. You might want to buy one just because you want it, which is valid. Lots of people do well on homes. You just need to realize that it's not as safe or good of an investment as it might seem.
Median house prices are around $400k. The low end of down payments are 10% of the total price, meaning to buy a home I'd need to save an entire year's worth of income when I can barely manage $3k in savings, and I'm the most frugal person in my family. "While buying a house is not a luxury everyone can afford" is one of the most laughably privileged things I've read in a while. Please go outside and touch grass sometime this century.
You can go as low as 3.5% down with an FHA loan if you have a 580 FICO.
That's still $14k though and too much for a lot of people. I do know some people who were able to buy homes with FHA loans though.
Huh neat, I'll have to squirrel that knowledge nugget away just in case that ever becomes viable. Another snag in my situation which I expect a lot of people my age experience though, the longest I've ever been employed at any company is my current job for 4 years (often not by choice - the current job just fired 1/4 of the staff for "budget reasons" on what should be a high-margin contract), and I've lived in almost as many locations as I have years. Buying a home would tie me down to one location, and my life has thus far been too volatile to trust that I could stay in one place without needing to move 5 years later. Plus, I was a kid during the 2008 financial crisis so I saw first hand my parents buy a big house past their means only to lose it within a couple years. That one is more irrational/emotional but worth mentioning.
Then there's the hopium that the proletariat will be pressed by late-stage capitalism into ☭Glorius Revolution☭(TM) and/or AI removes labor from the labor-consumer-owner equation and causes economic collapse (can't be a consumer if you don't have money from labor, can't be an owner if no one consumes, can't be labor if no one can hire you), and buying a house will mean a big expense that gets nationalized by the end of the decade. Probably not. But I also have no idea what the next 20 years looks like.
Governments should set a standard house price for new buyers and cover the difference. Each generation pays the same relative amount as previous generations, and capital gains / land value tax claws back money from people that take the piss and over-value their houses to take advantage of this scheme.
It's only insane because, at least here in America, housing scarcity has been manufactured in order to drive up prices and rents and our political leaders aren't going to do a damn thing to stop it.
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