Is the dream of home ownership dead?
March 7, 2012 1:57 PM   Subscribe

Despite low mortgage rates (and rising rental demand), home ownership levels among young people remain at their lowest levels in decades--a trend that began even before the housing market crash. Although unemployment and other debts may be precluding many young people from buying a house now, it may also be part of a societal shift where renting is considered just as good as, or superior to, owning. NPR's On Point discussed the question today, as well as linked to NYT and US News stories on the subject. Megan McArdle offers a dissenting view.
posted by Cash4Lead (136 comments total) 22 users marked this as a favorite
 
mr. desjardins and I are not that young but we've never owned a home. We rent a duplex, and we couldn't come close to affording the mortgage on the place we live, even with a tenant. So, unless we want to extremely downsize our living space, buying just doesn't make any sense for us right now.
posted by desjardins at 2:06 PM on March 7, 2012 [1 favorite]


It's because we all got mortgages on our brains first. Sorry, mortgage companies, higher ed lenders have got your milkshake.

I don't understand why that Atlantic article raises student loans and then just totally misses the point by talking about people not getting married.
posted by gauche at 2:08 PM on March 7, 2012 [30 favorites]


The only reasons I'd want to buy a home right now are in order to 1) make more noise and 2) make more holes in the walls.
posted by desjardins at 2:08 PM on March 7, 2012 [14 favorites]


I don't understand why that Atlantic article raises student loans and then just totally misses the point by talking about people not getting married.

Because it is holy writ in the Atlantic that everything bad is the result of young people being bad. Maybe you should buy something to get rid of that anxiety about how badly you are failing to live up to the Atlantic's standards.
posted by The Whelk at 2:10 PM on March 7, 2012 [23 favorites]


Yeah, the added immobility is a problem, too. My generation (early 30s) has been on the receiving end of a lot of broken social contract, and we're not in a huge hurry to assume we'll be able to spend 30 years in one spot.
posted by gauche at 2:10 PM on March 7, 2012 [50 favorites]


Time to buy some rental properties?
posted by caddis at 2:10 PM on March 7, 2012 [4 favorites]


oh, and historically, it's been a good way to build up some equity and wealth for your retirement and the next generation. House ownership is one of the big factors in wealth differentials between white and black Americans.
posted by jb at 2:11 PM on March 7, 2012


it may also be part of a societal shift where renting is considered just as good as, or superior to, owning.

It doesn't have to be "considered just as good," really. Just "Less bad than it used to be." Among the (mostly broke, mostly employed, mostly married/cohabitating) 20somethings I know, owning is definitely considered superior - but renting doesn't have a particular stigma and "We're not buying because we just don't feel like dealing with all the hassle" is considered a pretty reasonable response.
posted by Tomorrowful at 2:12 PM on March 7, 2012


Young people have piles of student loans. Young people aren't getting paid as well as they were in previous generations (inflation adjusted). Real estate market is still over-inflated, and until banks take the hit on their books by unloading the huge pile foreclosed homes it will stay that way.
posted by Mister Fabulous at 2:12 PM on March 7, 2012 [13 favorites]


We bought our home in order to 1) make more noise and 2) make more holes in the walls.
posted by rabbitrabbit at 2:12 PM on March 7, 2012 [11 favorites]


I can think of several reasons why renting can be preferable, but mainly it favors mobility. I have a rental property in addition to a primary home and these things anchor you down quite a bit. I'm okay staying put, but if someone wants or needs to relocate it is a lot easier with a lease.
posted by dgran at 2:13 PM on March 7, 2012 [1 favorite]


We rent a duplex, and we couldn't come close to affording the mortgage on the place we live, even with a tenant. So, unless we want to extremely downsize our living space, buying just doesn't make any sense for us right now.

This is exactly my situation. Rent in my section of Los Angeles is so much more affordable that buying is, it's insane. Almost none of my friends (mostly in their thirties, most of them making higher-than-average money) own the places they live.
posted by Bookhouse at 2:13 PM on March 7, 2012 [2 favorites]


There is a home across the street from me that has been empty for two years now. The previous family just disappeared one day. I'm guessing they walked-away from the mortgage. The bank finally sent crews in and fixed it up and it's officially been on the market for about 6 months. It gets tons of lookers but, so far, no buyers.

So, if any of you youngsters want a nice home, cheap...

• Approx. 2200 sq.ft.
• 4 br
• 2 baths
• 2-car garage
• In-ground pool
• 8-ft security fence around back yard
• Good county school system
• Price reduced to $79,000
(But...You have to move to Muncie. And across the street from me. Sorry.)
posted by Thorzdad at 2:14 PM on March 7, 2012 [2 favorites]


a trend that began even before the housing market crash

You mean young people weren't lapping up overpriced and unaffordable housing stocks as fast as developers can deliver.

I FOR ONE AM SHOCKED BY THIS REVELATION AND I'M ALSO SHOCKED UPON SEEING THAT THE SKY IS BLUE.
posted by Talez at 2:14 PM on March 7, 2012 [7 favorites]


I vaguely remember (correct me if I'm wrong, someone) that home ownership wasn't as prevelant a "thing" until after World War II. So maybe ownership was the exception rather than the rule to begin with.
posted by EmpressCallipygos at 2:14 PM on March 7, 2012


I literally cannot fathom how I would save up a down payment on a house by the age of 30. I don't know anyone else who could, either. I know people who make what I think are decent salaries but everyone has debt and even without it the cash flow just does not permit you to save enough money.

Granted, I'm accustomed to home prices in New York, which are not what they are elsewhere, and 20% down on a half-million dollar studio is not the same as 20% down on a $200,000 house, but still.
posted by dixiecupdrinking at 2:14 PM on March 7, 2012


[makes holes in lalochezia]
posted by seanmpuckett at 2:15 PM on March 7, 2012


And we bought in 2008, so we've seen our home decrease in value by about 20%. We turned it into a rental, and we get about 2/3 of the mortgage payment from that rent, and it will be forever before we can sell it. We bought another house out in the country where we can make a LOT of noise and we are making a LOT of holes in the walls. But that one doesn't have a mortgage on it, thank god.

Wish we didn't like noise and holes so damn much.
posted by rabbitrabbit at 2:15 PM on March 7, 2012 [1 favorite]


I like renting for a lot of reasons -- one is that I'm unmarried and don't need too much space, and another is that I'm all thumbs and I want to be able to call a landlord with real problems.

The main consideration, though, is mobility -- both geographical and financial. I can't honestly anticipate making a certain solid income in a certain city for the next ten years, let alone any longer. Granted, that's got a lot to do with my particular work, but even without that consideration I would be hesitant to commit. It's just not the way of the world I live in.
posted by Countess Elena at 2:16 PM on March 7, 2012 [4 favorites]


We live in one of those metropolitan areas where renting comes out on top of buying. We've looked at homes around here and the math just doesn't add up, even though we don't have student debt and have enough for a 20% down payment. A comparable condo to the apartment we have now would be several hundred more dollars per month that we just don't feel would be worth spending on housing expenses.

We could move out to the suburbs and afford something nice, I'm sure, but my girlfriend works downtown and would need to buy a car if we moved. So assuming we could find a home for roughly what we're paying in rent right now, then we need to add in a car loan to boot.

Plus, you know, all our friends are here and it's really, really nice to be able to walk home after a night of heavy drinking.
posted by backseatpilot at 2:17 PM on March 7, 2012 [4 favorites]


Up until four years ago I never lived anywhere more than three years, so the need to put down roots based on a residence didn't get instilled in me. That said, it'd be hard for me to consider leaving LA, so you could say my roots are in the city itself.

Renting provides mobility and free repairs to the unit. With friends constantly complaining about broken A/C, bad pipes and termites, I really don't see how renting is "throwing money away" (they're favorite expression when trying to talk me into buying a house).
posted by linux at 2:19 PM on March 7, 2012 [5 favorites]


Given the unemployment numbers for young adults and their high debt from college and credit cards, I wonder what this will do to the housing market over the next ten years or so? What will the longterm effects of lost county tax revenue do for infrastructure and services? There are already towns in the East Bay who have consolidated fire and police services due to lack of funds.

I'm from SF and not independently wealthy or a dot-commer, so buying was never in the cards for me. I used to feel bad knowing that I would probably not be able to afford a house despite making decent money, but my CPA made a pretty good case that simple living + sensible investing would likely see me just as financially stable in the long run. I'd love to buy, but being an independent contractor in a pricey city with student loans, it's just not going to happen. I'd rather live in the city of my choice and rent than buy in a city that I'm lukewarm about. For now, at least.
posted by smirkette at 2:20 PM on March 7, 2012 [3 favorites]


I highly recommend a history of American home ownership in the 20th Century, from Design Observer:

Housing and the 99 Percent
posted by charlie don't surf at 2:23 PM on March 7, 2012 [6 favorites]


I literally cannot fathom how I would save up a down payment on a house by the age of 30. I don't know anyone else who could, either. I know people who make what I think are decent salaries but everyone has debt and even without it the cash flow just does not permit you to save enough money.

The wake of the house bubble has made the lending market skittish. Normally if I was going to move up to a bigger house I'd use the equity in the current house as the down payment, rent out the old place and put that rental money towards the newer, bigger mortgage.

Instead people over here in the states look at me like I'm insane.

I really don't see how renting is "throwing money away"

Because you're pissing away the building of tens or even hundreds of thousands of dollars in equity because you don't want to spend a few hundred bucks on a plumber or HVAC guy every so often.

With home prices as low as they are and rents still extremely high this is probably the only time you'll get in this generation to buy positively geared rental properties.
posted by Talez at 2:23 PM on March 7, 2012


I literally cannot fathom how I would save up a down payment on a house by the age of 30.

This is one of those things that bootstrappy young middle- and upper-class folks tend to overlook. We have money for a down payment because it was bequeathed after a relative passed away. No way in hell we would have had enough for a down payment otherwise.

My brother bought a home a couple years ago, and he's two years younger than me. I think they put down the minimum required for one of those first-time homebuyer loans (FHA?) - maybe 3%, possibly 5%.

As far as building equity is concerned, that down payment is doing a lot better in the mutual fund it's in now than it would be in any condo we could buy with it.
posted by backseatpilot at 2:23 PM on March 7, 2012 [4 favorites]


I'd consider home ownership, but I live in Vancouver and it is therefore impossible.
posted by Hoopo at 2:26 PM on March 7, 2012 [11 favorites]


We returned to Canada in 2004, right when the housing market took off; housing prices doubled in my community during the decade and have not declined. A median price of $549k is just not doable for me. And so we rent. On the plus side, we live in a nice urban neighbourhood, close to a walkable downtown, a large and beautiful civic park, the ocean and the beach, and the shops. I would never be able to afford to buy in the neighbourhood, and I am sure as hell not going to move out to the burbs where someone's idea of high culture is a full chrome package on their 4X4.
posted by KokuRyu at 2:27 PM on March 7, 2012


Home prices are pretty low in the States compared to Canada. I'm envious at how cheap houses are there.
posted by KokuRyu at 2:29 PM on March 7, 2012


With home prices as low as they are

You're either not in the 'States or you bought in 2005.
posted by gauche at 2:29 PM on March 7, 2012


I'd consider home ownership, but I live in Vancouver and it is therefore impossible.

Not so great in Toronto, either, but these are the two worst real-estate bubbles on the continent at the moment, and so will eventually burst. Local housing prices cannot drift upward regardless of local average household income, and playing with the economic levers to cause them to do so will just turn the invisible hand into an invisible fist that punches you in the face.
posted by one more dead town's last parade at 2:30 PM on March 7, 2012 [2 favorites]


As low as they are? Where are you?

Here in Santa Clara the condo a few doors down went for $263K which can then be turned around and rented at $1750/mo.

If I had $50,000 I would plunk down the 20% to buy one of these since it should come out about even if not positively geared with a $1300/mo mortgage + property tax.
posted by Talez at 2:31 PM on March 7, 2012


My kid brother worked hard, lived frugally, saved up a lot of money, and bought a house when he was... um... 25, I think. Very responsible, but the market crashed and he's now completely screwed, underwater on a house he can't sell. He and his wife have moved in with her sister. The cost of rental doesn't cover the mortgage, but it helps.

I look into buying a house every few years, but it never works out. There simply are no houses for sale which would cost less than double what I pay in rent.
posted by Mars Saxman at 2:31 PM on March 7, 2012 [2 favorites]


There's a widespread belief that your house is an investment, but it really isn't true. By and large, housing prices track inflation. C.F. The Case-Shiller 100 year housing chart.

Plus, you have to maintain it.
posted by bonecrusher at 2:37 PM on March 7, 2012 [4 favorites]


...and to forestall those of you who live out in middle-of-nowhere-land, where you apparently all amuse yourselves by picking up 10-bedroom Victorians over the weekend for a couple kegs of beer and a jar of loose change, no I am not going to move out to the sticks just to get a cheap house. I live in the city because I want to live in the city, and a cheap house far away is absolutely not the same thing as an equivalently-sized house nearby. </rant>
posted by Mars Saxman at 2:38 PM on March 7, 2012 [6 favorites]


I literally cannot fathom how I would save up a down payment on a house by the age of 30

It's like the laughable "you should have six months of expenses in your savings account." I would also like a unicorn.
posted by desjardins at 2:39 PM on March 7, 2012 [43 favorites]


From the Megan Mcardle article:
1. You're not always going to be as mobile as you think. [...] Those jobs will not necessarily allow them to pick up and move across oceans or continents so that you can explore some exciting new opportunity, or see what it's like to live somewhere different. [...]

2. Moving eventually gets really old. I'm not saying I loved it when my possessions filled one or two trips of a minivan. But it started to become really hateful once my lifestyle expanded beyond 500 square feet--which, yes, you will eventually want to do. [...]
I like how she implies that moving is (primarily?) voluntary. What if it isn't? As I say to all my friends who're buying houses: "Congratulations on the new home. Hope the economy in your area doesn't turn to shit."
posted by mhum at 2:41 PM on March 7, 2012 [5 favorites]


There are currently two really bad pieces of news with regards to Vancouver. 1) The housing market is cooling, but its not cold. People still want to live here and immigrants will immigrate here to where their families are as a first choice. So in short, I don't think Vancouver is nearly as much of a bubble as people think.

The second piece of bad news is that affordable student rents are hard to come by. Landlords who aren't absentee or who can actually calmly handle your request to fix mold/leaks/flaky paint/etc. are getting harder and harder to find. Not impossible (as made doable by padmapper) but you ain't going to be living above ground if you aren't willing to commute from 40+ minutes away.
posted by Slackermagee at 2:42 PM on March 7, 2012 [1 favorite]


Mars, you don't have to live in the sticks to find affordable houses, just don't live in a big city. I live right downtown in a medium sized city and bought a four bedroom Victorian for $200K and you can find nice places for much cheaper than that.
posted by octothorpe at 2:43 PM on March 7, 2012


I bought a house in 2008 when I was 25 for around $150k. Now comparable homes in my neighborhood are on the market for $80k and not selling. In retrospect not one of the best financial decisions Ive ever made. On the other hand Im still on track to pay the damn mortgage off in the next few years (got it down to $60k) so even though Ive lost my ass on the deal overall Ill still have a place I can stay rent free at the end of it.
posted by Sexy, Sexy Anonymity at 2:43 PM on March 7, 2012 [2 favorites]


I live in a resort-ish area where many people have second homes or vacation homes...or, at least, they used to. There are at least a couple of for-sale or vacant/foreclosed-upon properties on each block.

I could buy a house. I have a down payment and my town qualifies for the USDA Rural Development loan. I could easily transition from paying what I do in rent to paying what I would pay for a mortgage within my price range. I live in a little basement apartment right now with no garage or yard. There are beautiful houses everywhere with garages, new kitchens, fenced yards, great views, and all within my price range...being sold by motivated sellers who would probably be willing to make a deal.

So, why am I so hesitant to buy a house and get in on these AWESOME DEALS? Because I'm scared shitless, that's why! Too many of my friends have had to struggle and some have lost their houses. Friends who bought during the boom wound up with tons of debt and properties that lost their value. People are losing their jobs. People are struggling with medical bills.

In my town, I am a Realtor's dream come true: steady job, good pay, looking to stick around for a while. I've had several actually stop me and ask if I'm interested in purchasing a home in town. But it's not going to happen, not right now. I'm too skittish. I don't want to go through what my friends have gone through. Right now, buying a house seems less like a dream and more like a ball and chain. And the ball is one of those cartoony Acme bombs.
posted by Elly Vortex at 2:43 PM on March 7, 2012 [7 favorites]


What Megan McArdle doesn't know would apparently fill an article every few months in the Atlantic and a daily blog.
posted by Aizkolari at 2:45 PM on March 7, 2012 [26 favorites]


Young people shouldn't be buying houses. Something like 70 percent of HS graduates go on to college in 2 years. That's essentially a 4 year commitment to poverty from which no down payment can be made. And when you graduate, you really need the mobility of a rental agreement to find good paying work in the national market.

My family didn't buy a home until I was in 1st grade, as my dad bounced from software contracts. Wasn't aware we were trend setters.
posted by pwnguin at 2:47 PM on March 7, 2012 [2 favorites]


my husband and i are looking to buy because i'm sick of someone else having the right to enter my home basically whenever they wish. of course, we live in middle america where you can find beautiful homes for 75-100k. i'd never buy in one of the big metro areas. of course, a lot of those places have renters rights, something lacking out this way.
posted by nadawi at 2:47 PM on March 7, 2012


The reasons I might be tempted to buy are a) nicer housing (rentals are older, often abused, and sometimes ugly) and...well that's it, really. I do get some snobbery from those who've bought, but they are also people who didn't marry a musician and needed to be able to move wherever worked to make a living.

I love watching home renovation shows, but mostly because I'm not the one doing the repairs. I find home repair very intimidating, and houses in general seem like nothing but a collection of catastrophic expensive repairs waiting to happen...even new ones. I like calling my (currently excellent) landlord and having him send out a guy to fix the plumbing. We live close to the bone as it is, and home repair cost just aren't something we'd easily afford.

If houses were not so fucking expensive to buy and maintain, sure, I'd consider one. But I just don't have the burning need to spend 1,000s on the upkeep, insurance, and taxes.
posted by emjaybee at 2:48 PM on March 7, 2012


oh, and we have zero debt. neither of us are college graduates. it would change the picture a lot if we had student loans we were paying down.
posted by nadawi at 2:48 PM on March 7, 2012 [3 favorites]


I ran a spreadsheet a while back comparing:
A) Mortgage Payment + Taxes + Insurance + Maintenance
vs
B) Rent Payment + Renter's Insurance
With the difference from scenario B invested to bring the total monthly amounts equal.
Obviously mortgage rates and expected investment returns are the biggest factor, but I was amazed at how having long-term compounding working in your favor (B) is so much better than having it working against you (A)
posted by rocket88 at 2:49 PM on March 7, 2012 [6 favorites]


I'm in the weird position as of December of having separated from my wife and am thus paying a mortgage and the rent on a studio apartment simultaneously. I'm lucky enough to be able to afford that, just barely.

With divorce impending, I am finding the sudden flexibility, mobility, and lack of storage space for All The Things! quite a lovely combination. Nearly twenty years since the last time I had this situation, I am relishing in it.

Plus I have control of the DVR. This is more important than I realized. ;)
posted by Celsius1414 at 2:51 PM on March 7, 2012 [3 favorites]


People still want to live here and immigrants will immigrate here to where their families are as a first choice. So in short, I don't think Vancouver is nearly as much of a bubble as people think.

Wanting to live in or move to Vancouver doesn't magically give you the cash and/or income to do so. Wages have to go up or housing prices have to go down.
posted by one more dead town's last parade at 2:51 PM on March 7, 2012 [2 favorites]


The Vancouver bubble began in the late eighties, early nineties when the average single family dwelling went over $500k, something like 5 to 10 times the annual household salaries of even the dual-income middle class. It hasn't fallen below that ratio since.
posted by bonehead at 2:56 PM on March 7, 2012


I almost bought a house with my ex-wife 2 years before our divorce. Turns out it was a very good thing we didn't.

Now I'm not in a stable enough situation to know where I want to live in a year or two, so buying isn't a good idea.

Even when you have the money, it can be a bad idea (not to mention that rent vs buy calculations generally come out in favor of renting here in LA).
posted by wildcrdj at 2:59 PM on March 7, 2012 [1 favorite]


With the difference from scenario B invested to bring the total monthly amounts equal.
Obviously mortgage rates and expected investment returns are the biggest factor, but I was amazed at how having long-term compounding working in your favor (B) is so much better than having it working against you (A)


But if you are in it for the long haul...your mortgage will stay the same while your rent will continually increase. That is assuming you stay in the same house of course.
posted by ian1977 at 2:59 PM on March 7, 2012 [1 favorite]


I have zero desire to own a home. Absolutely none whatsoever. I'll admit, some of that has to do with geography : where I live -- the Bay area -- has the worst rent/price ratio in the country. Perhaps if I lived someplace like Provo, UT or St. Louis, MO, where I could buy a house outright for $150K, my thinking might be different....

.... although then again, maybe not. I just don't see home ownership as that desirable. Don't get me wrong, I'm sure there are situations where you come out ahead in the long run. It's just not something I'm interested in. Lotsa people (especially my parents' generation) have all these warm fuzzy associations with buying a house, but when I see the word "mortgage", all I can think of is debt. Owing a whole bunch of money to a bank. No desire to do that.

It pays to have a life that's as portable as possible. A few years ago, I moved out here from NYC, and it was one of the best decisions I ever made. Could I have done that if I'd owned property in NYC? Maybe, but it would have been a big old pain in the ass. A house is totally not a fungible asset. It's not like a stock or mutual fund. You can't just log onto Vanguard and sell your house. There's all kinds of shit you gotta do that involves lawyers, paperwork, expenses, and the vagaries of the housing market. Don't want to deal with any of that.

And then of course there's all the expense of actually owning a home : taxes, maintenance, upkeep, etc. I have a friend who owns a place, and he had to randomly put in a sewer line in a house he wasn't even living in. A cool $20K down the drain. And that shit happens. All the time.

Basically, even if the economics DID work out in my favor -- and there's no guarantee they would -- I'm willing to pay extra for the privilege of NOT owning a home. I don't want to deal with any of that shit. I want nothing to do with it.

I have a solid cushion of savings, a fully-funded retirement account, and I live within my means. I don't owe any money to anybody for any reason. And I have a kickass apartment that's the envy of all my friends. To put it simply : I won.
posted by Afroblanco at 3:00 PM on March 7, 2012 [14 favorites]


I almost bought a house with my ex-wife 2 years before our divorce. Turns out it was a very good thing we didn't.

I bought one with my ex 8 friggin' months before our split! Boy howdy was that dumb!
posted by ian1977 at 3:00 PM on March 7, 2012 [1 favorite]


> Not so great in Toronto, either, but these are the two worst real-estate bubbles on the continent at the moment, and so will eventually burst.

My wife and I have given up on ever buying a house in Toronto or the idea that the bubble will ever burst. You win, real estate market bulls! Prices will rise forever, and I will rend my garments and bewail my fate as I scurry about my humble rental unit totally bereft of pot lights and granite countertops.
posted by The Card Cheat at 3:00 PM on March 7, 2012 [1 favorite]


rocket88: I keep coming back to the same thing. As a renter I can afford to max out my 401(k); as a homeowner, I'd be stuck using that money to pay off a loan at interest, with my only consolation being a single volatile, illiquid, maintenance-dependent asset subject to property tax. Somehow this just doesn't sound like a good trade.
posted by Mars Saxman at 3:01 PM on March 7, 2012 [2 favorites]


while your rent will continually increase.

Not at all guaranteed. Rental markets are like housing markets. My rent decreased dramatically after the dot-com crash in SF, for example.

Now, I agree that your mortgage is less subject to change, which can make planning better / easier. So for some people that peace of mind (my housing costs will be X for the next 30 years) could be worth something.
posted by wildcrdj at 3:05 PM on March 7, 2012


It's interesting the different takes people have on the same thing.

Me, I bought a house more or less as soon as it was feasible.

I hated renting - landlords, nosy neighbors (just look at all the AskMe questions about those two things).

I like having a yard I can putter around in, walls I can knock holes in, sure financially, it's probably about even in the end, but at the very least, as long I can come up with the property taxes, I can stay here forever.
Can't say that about renting.
posted by madajb at 3:07 PM on March 7, 2012 [8 favorites]


I live in the middle of Charlotte and I am a librarian. The only way I could afford to buy a decent house in a nice neighborhood would be to live outside the county and drive an hour to work. Fuck that. So I rent a house with my old lady and a good friend. The three of us get by just fine.
posted by zzazazz at 3:08 PM on March 7, 2012


Obviously mortgage rates and expected investment returns are the biggest factor, but I was amazed at how having long-term compounding working in your favor (B) is so much better than having it working against you (A)

Indeed. If I tried to sell you on a savings account where, instead of me paying you interest, you had to pay me 4+% annually for the privilege, and in addition you needed to invest a lump sum of $40,000 or more initially and commit to contributing 4 times that amount over the rest of your career, would you ever sign up?? It's sort of insane when you think about it.

And of course, as wldcrdj points out, your house is subject to what is essentially a wealth tax, applied against its FULL value (not just your equity amount), which obviously is not the case with any sort of savings or investment account.
posted by rkent at 3:10 PM on March 7, 2012 [2 favorites]


I rent because my parents didn't give me the down payment for a house like their parents did for them. Also because when I did save up my own money for a down payment on a house, I used it to spend two years living in the Caribbean without working.
posted by snofoam at 3:13 PM on March 7, 2012 [6 favorites]


your house is subject to what is essentially a wealth tax

If you think renting is a way to avoid paying property taxes, I have some bad news for you.
posted by one more dead town's last parade at 3:14 PM on March 7, 2012 [6 favorites]


So, if any of you youngsters want a nice home, cheap...

Bah. I can find you a five-bedroom house for under $25,000 Canadian. Bonavista, Newfoundland is beautiful but not exactly booming.

Property taxes: $556 per year.
posted by ricochet biscuit at 3:14 PM on March 7, 2012


your mortgage will stay the same while your rent will continually increase.

As will your property taxes, extra insurance, and maintenance costs if you own a home.
posted by rocket88 at 3:14 PM on March 7, 2012 [3 favorites]


snofoam, judging by my brother's example, I'd say you got the better end of that deal.
posted by Mars Saxman at 3:15 PM on March 7, 2012


these are the two worst real-estate bubbles on the continent at the moment, and so will eventually burst

I'm not so sure. People in Vancouver have grown old while chanting an "any day now" mantra about that.
posted by Hoopo at 3:30 PM on March 7, 2012


I bought a nice $179,000 home in late 2007. It was built in the 60's, but well-maintained and came on a half-acre lot that gave my kids lots of room to play. Then I lost my job, my wife lost her job, and we moved 2000 miles away to find work again. We sold the house for $155,000 in May 2010 and were lucky to get that much for it. Bye-bye downpayment. We had enough left over to move and pay deposits on a rental home. Really, compared to a lot of people we're fortunate--we at least could afford to take the hit and start over, and didn't get stuck in an underwater mortgage forever. But God knows when we'll be able to scrape up another downpayment. And I'd have to be damn sure that we were going to be able to stay in the town where we buy.

Sure, maybe for some people renting is "throwing money away." But buying a nice family home in a good neighborhood wound up costing us $24,000, plus closing costs.
posted by Pater Aletheias at 3:30 PM on March 7, 2012 [1 favorite]


Why I bought a home: nice place for kids and in good school district. Rentals usually outside of the better school districts. Increasingly salaries for younger folks not keeping up with rising costs of living and sol they can not afford to buy homes.
posted by Postroad at 3:32 PM on March 7, 2012


Ugh, Megan McArdle. I will never understand how she became a "respected" economics commentator. She's just so wrong all the time. Her ignorance is just embarrassing.
posted by longdaysjourney at 3:34 PM on March 7, 2012 [9 favorites]


But how will young people separate themselves from the lower classes??????

HA.. I think an unspoken rationale for home ownership is to separate you from the poor people down the street who 'rent'. I just don't think anyone likes to frame it that way.
posted by khappucino at 3:42 PM on March 7, 2012 [5 favorites]


why the young can no longer buy
posted by Postroad at 3:47 PM on March 7, 2012


I'm not so sure. People in Vancouver have grown old while chanting an "any day now" mantra about that.

Eventually, young families who would typically purchase their first home won't be able to afford to buy in, because they paid more for their education and are getting paid less at their jobs. In order for demand to rise to meet supply, prices will have to come down (not necessarily quickly, but down nonetheless).

Eventually, a number of retiring baby boomers will want to downsize or move out of Toronto/Vancouver, and given that a lot of them will be doing this at the same time, you're going to see a lot of houses sit on the market for a long time if they refuse to lower the price, especially because the young families buying in really won't have the cash to spare.

Eventually, the Bank of Canada is going to stop rewarding irresponsible borrowing and punishing savers, and house prices will have to correct themselves downward because you won't be able to get as large a mortgage.

The only way to make a particular asset class increase in value indefinitely is to distort the economy so much that it will come back to bite you in unpredictable ways.

Sorry, developers, but those $269,000 townhomes you're promising near Kingston and Lawrence will probably never materialize, or they'll be full of people underwater on their mortgages.
posted by one more dead town's last parade at 3:52 PM on March 7, 2012 [1 favorite]


This is why we just bought our first rental property. We paid cash for a house in good condition and under $100k, our closing costs were $760, and we hit the sweet spot of "hip" gentrifying neighborhood, strong rental market, and cheap property tax. Even factoring in taxes, upkeep, property management, and anticipating a couple of larger repairs down the road, we'll conservatively make an 8% return on our investment annually. And while we haven't factored it into our analysis, chances are good that our home value will rise over the next five years. On the flip side, because we live in Manhattan, we are rent our apartment. We couldn't begin to make the numbers work for buying our own home in NYC. The rental house we bought is in a booming city in South where I have family and friends.
posted by kimdog at 4:05 PM on March 7, 2012 [1 favorite]


WAKE UP SHEEPLE
GOOGLE RICHARD FLORIDA
posted by GuyZero at 4:07 PM on March 7, 2012


An unanticipated benefit of our home ownership has just been shown to me.

I'm planning on going back for a PhD soon. Right now, I can get a home equity line of credit at a really good rate -- hopefully around 4%. That's better than any student loan rate I'm ever likely to find, but of course it doesn't come with interest and repayment deferment.

Here's the neat idea our CPA had this morning: take out a student loan, defer everything as long as possible, and if I still can't pay it back by that time, use the HELOC to pay it off. Then start paying that 4%.

I don't know if I'll need to do that, but it's nice to know it's there if I need it.
posted by gurple at 4:09 PM on March 7, 2012


I may not be able to speak for my entire generation, but let me get this straight: You can buy houses?
posted by TwelveTwo at 4:18 PM on March 7, 2012 [10 favorites]


If the housing market is stagnant or declining (which it is where I live), I'd be pissing away money by "buying" a house that would put me in a monthly mortgage payment twice as big as my rent to live in a house that's smaller than the one I'm in, only to have equity not materialize for at least 10 years.

This is why it's all about where you live.

I've been house shopping with a friend the past few weeks (she's 30) and it's been very eye-opening.

Here in Las Vegas, housing prices are expected to decline another 10% or so. But a nice, 3-bedroom house with 20% down will run you about $400 per month with a 30-year mortgage. The same house would be $1100 to rent.

My friend, renting out 2 bedrooms, will be living for free and making a little on the side. Should she decide to live on her own, she'll still pay less than half what she would have if renting.

The rent/buy argument is always dumb, because both sides are always right.
posted by coolguymichael at 4:26 PM on March 7, 2012 [10 favorites]


From a purely emotional standpoint, I can't wait to be able to own my own home. I've lived in dorms and apartments my entire adult life and it has overall been an extremely unpleasant experience. However, want does not equal means.
posted by graxe at 4:34 PM on March 7, 2012 [2 favorites]


Right now, I can get a home equity line of credit at a really good rate -- hopefully around 4%. That's better than any student loan rate I'm ever likely to find, but of course it doesn't come with interest and repayment deferment.

Here's the neat idea our CPA had this morning: take out a student loan, defer everything as long as possible, and if I still can't pay it back by that time, use the HELOC to pay it off. Then start paying that 4%.


Don't do this please. You are just swapping a fixed rate student loan rate for a floating rate HELOC. The math looks great when rates are at 4%, but when/if rates climb a few percent you will lose out.

Not to mention you are swapping unsecured (though non-dischargeable debt) for secured debt.
posted by JPD at 4:54 PM on March 7, 2012 [2 favorites]


I did own for a time and should have sold sooner. At least I got out while the getting was good. I rent now and I'm fine with that.
If you are married and get divorced, a house is onemore thing to fight over.
posted by Katjusa Roquette at 4:57 PM on March 7, 2012 [1 favorite]


I would love to buy a house. Love love love. Like nadawi, I hate the whole landlord thing. Hate.

But we just don't have the money yet. My husband's got tons of savings but no income and I'm a freelancer so, yeah. However, if we bought a house I figure we'd be at least a step up from my peers who seemed to have bought prematurely, often on the bubble, and in New Jersey to boot. We've moved to New York State and we're as pleased as punch about the amount of space and house we'd be able to get for our money here, if we're ever in the position. No way I'm making a $400,000 one-bedroom mistake like some of our friends.
posted by PhoBWanKenobi at 4:57 PM on March 7, 2012


Time to buy some rental properties?

Not quite yet. The demand is receding, but there's still a ton of people who want to sell (or will want to sell) but irrationally cannot accept the fact that they will have to take a loss. There's also a lot of bank-owned REO property that banks are holding onto for fear of flooding the market and crashing land values. Further, as many state and local governments feel the pinch caused by their earlier fiscal irresponsibility, I suspect we'll see stiff hikes in real property taxes (because landowners, unlike corporations, cannot easily move to more favorable tax jurisdictions) or, alternatively, schools will start being underfunded, in which case home values may take a further hit because the ability to send children to a good school district (which was in many cases supporting the high land values) is no longer as relevant. Finally, the federal government's fiscal irresponsibility may force them to cut governmental subsidy to homeownership (Fannie and Freddie, FHA, maybe even the tax deduction for homeownership, though I doubt it because that's too obvious which would cause prices to collapse.

In other words(1) the demand is gone, but the supply won't accept the new reality for a while yet, and (2) housing prices are still at historic highs and may have further to fall.

oh, and historically, it's been a good way to build up some equity and wealth for your retirement and the next generation. House ownership is one of the big factors in wealth differentials between white and black Americans.

Past performance is no guaranty of future results.

I think my favorite summary of this debate is from Philip Greenspun:

"If you can rent anything decent, try to avoid buying property. Think about the most interesting people you know. Chances are, most of them are renters. People who rent talk about the books that they’ve read, the trips that they’ve taken, the skills that they are learning, the friends whose company they are enjoying. Property owners complain about the local politicians, the high rate of property tax, the difficulty of finding competent tradespeople, the high value of their own (very likely crummy) house or condo, and what kinds of furniture and kitchen appliances they are contemplating buying. Property owners are boring. The most boring parts of a property owner’s personality is that which relates to his or her ownership of real estate."
posted by gd779 at 4:58 PM on March 7, 2012 [18 favorites]


your mortgage will stay the same while your rent will continually increase.

As will your property taxes, extra insurance, and maintenance costs if you own a home.


I bet if you find someone who has lived in the same house for 20 years versus someone who has been living in apartments that entire time the housedweller's monthly housing expenses are waaaay less than the apartment dweller's.
posted by ian1977 at 4:58 PM on March 7, 2012 [2 favorites]


So on one hand, I have basically zero student loan debt. It'll be paid off entirely in two more years, at which point I'll have a magical 10% raise. On the other hand, I seem to have developed some kind of expensive-education fetish; all of my exes and a good proportion of the women I've just dated a couple of times have acquired, are/were acquiring, or were planning to very soon acquire $60-120K in student loan debt. Lawyers! Med students! MBA grads! So I've sort of started taking for granted, to be honest, that whenever I do pair off with someone and start planning A Life Together, we'll have $100K or so of student loan debt hanging overhead. Which makes saving for a down payment a sick joke, for one thing, and for another, it's not like that's going to help make paying off a mortgage easier or more appealing.
posted by Tomorrowful at 5:16 PM on March 7, 2012


The notion that rises in renting versus buying is just an abberation only makes sense if you totally ignore the rest of the world, especially Europe, where buying a home is not considered a requirement for adulthood. I recall Russia tried to get Russians buying, and they resisted. There's nothing in Russia like the housing market in the US.
posted by deathpanels at 5:18 PM on March 7, 2012 [2 favorites]


It's also an abberation given American history -- it's not until the federal government began to underwrite certain types of mortgages (thus underwriting much of the risk inherent in mortgage lending) that a majority of (white) Americans began buying homes rather than just renting. It was very, very difficult to get a mortgage before the 1930s and 1940s -- people often had to put 50% down on homes, and many available mortgages amortized over 3 to 5 years rather than 30 or 15. This made owning a home both risky and expensive -- lots of people ended up buying lots on the periphery of American cities and constructing homes piecemeal, when they could afford it.
posted by heurtebise at 5:36 PM on March 7, 2012 [1 favorite]


Man, I own my condo, but the only way that happened was a confluence of two things:

1. I have no student loan debt.
2. I bought in 2006, when the banks would have been delighted to give me a 5/1 ARM for five times my annual salary with zero down.

The only reason I still own my condo is that I took a staid 30 year mortgage for only twice my annual salary, on the advice of my mortgage broker (who was a friend of mine - we did all my paperwork over margaritas and popcorn shrimp at Joe's Crab Shack.) I got remarkably lucky, and I am far and away the outlier among my agemates. I don't regret buying, at all, but had those two things not worked out the way they did, I'd still be renting, and that would be fine too.
posted by restless_nomad at 5:45 PM on March 7, 2012


The only reasons I'd want to buy a home right now are in order to 1) make more noise and 2) make more holes in the walls.

Are there any other reasons to buy?

Well, that and never having to deal with a landlord. Everyone seems to have great landlord stories, but almost all the ones I dealt with were pure scum. Financially, though, it's probably a wash: my mortgage is cheaper than rent, but then there's maintenance and if I needed to move there'd be the hassle and expense of selling.

Housing and job markets are so local, though; I have trouble with a "young people are like THIS" argument. It's going to vary based on where you are, what your career track is like, if there's any intergenerational transfers of wealth in your family, etc.
posted by Forktine at 5:53 PM on March 7, 2012


the next home I buy will be diesel-powered and bus-shaped.
posted by ninjew at 5:59 PM on March 7, 2012 [2 favorites]


I have to say, the student loan thing matters more than just in the "I can't afford a house" way. When I graduate from law school, altogether I'll owe something like $150,000 in student loans. After paying those off, I don't see myself being in any rush to owe someone else another six-figure debt. Say what you will about renting, but at the end of my lease I am totally unencumbered, thankyouverymuch.
posted by dixiecupdrinking at 6:01 PM on March 7, 2012 [1 favorite]


Sad anecdote time:

I bought my house 5 years ago. It cost $85k and my dear dear mother put up 6k for the down payment while I put up 4k. I have a lovely house and a cheap monthly bill, and I literally fantasize about walking away every single day.

I love my home, but I hate owning it. It fills me with fear, dread, uncertainty, and regret. That's on the (rare) good days. I don't want to say how I feel on bad days. I never realized how important mobility was to me until I lost it. Some of these young folks today have the right idea.
posted by broadway bill at 6:02 PM on March 7, 2012 [1 favorite]


Local housing prices cannot drift upward regardless of local average household income, and playing with the economic levers to cause them to do so will just turn the invisible hand into an invisible fist that punches you in the face.

Perhaps. But the fact is that Vancouver has become a parking place for global capital, particularly from newly rich Chinese looking to invest; the buying and flipping of houses on the West Side is like an insane game of Monopoly at the moment. The other thing happening, of course, is the flow of drug money being laundered through condo developments, which is widely rumoured and which I find completely plausible.

I live in a housing co-operative. I bought a share in the building (1,200 bucks, using a loan guaranteed at the local credit union and payable at a rate I could afford) and pay a monthly housing charge. We run the building ourselves, with the help of a management company that specializes in housing coops. It's the absolute best of both worlds: the security of owning (including being able to do renovations) along with the benefits of renting: The Maintenance Committee takes care of any needed fixes, painting, new flooring, etc. There isn't a day that goes by that I'm not grateful to be living where I am.
posted by jokeefe at 6:02 PM on March 7, 2012 [3 favorites]


The rent/buy argument is always dumb

Yes, but there are clear reasons on both sides. Owning will always be more expensive in the short term, but the leverage from being an owner will improve your control of cost of living over the long term.

What's more important than this, though, is timing and location. Right now (and probably for the next generation) the key is to be in urban areas with decent economies. This will help with the income/housing cost ratio over time as well as diffusing local municipal costs due to more efficient utilities and more users.
posted by Reasonably Everything Happens at 6:03 PM on March 7, 2012


Where I work, the norm is to buy pretty big homes, five or so bedrooms, but have it shared by the two brothers (sometimes married to two sisters) as well as the parents (free childcare) using pooled resources. I assume the financial institutions are flexible about this arrangement since it has become so common. It would be nice if it was an option for more people, especially unrelated people.
posted by saucysault at 6:08 PM on March 7, 2012


> I bet if you find someone who has lived in the same house for 20 years versus someone who has been living in apartments that entire time the housedweller's monthly housing expenses are waaaay less than the apartment dweller's.

We've lived in the same condo for the last 13 years (excluding 16 months when I rented it to someone, while we lived overseas). A similar unit in our building is currently renting for three times what our mortgage + tax + insurance + dues cost. If we did not own this place, we definitely couldn't afford to live in this building, and might not be able to live in our neighborhood at all.

Of course, this is San Francisco, and our housing market does not seem to follow the same rules as everyone else's.
posted by toxic at 6:09 PM on March 7, 2012


ur housing market does not seem to follow the same rules as everyone else's.

Yeah, I mean the issue there is that the value of houses is still way, way higher than 13 years ago. If you bought now, the mortgage vs rent in 13 years may be a lot different. It seems very unlikely to expect that growth in the future. But rents are related to current housing prices, whereas your mortgage is only based on the price at the time you bought.

But this is why local economies and housing cycles matter so much in this "debate".
posted by wildcrdj at 6:16 PM on March 7, 2012


In order for demand to rise to meet supply, prices will have to come down (not necessarily quickly, but down nonetheless).

Eventually, a number of retiring baby boomers will want to downsize or move out of Toronto/Vancouver, and given that a lot of them will be doing this at the same time, you're going to see a lot of houses sit on the market for a long time if they refuse to lower the price, especially because the young families buying in really won't have the cash to spare.


Again, this would apply in a closed system, a market where supply and demand makes local sense. Properties in Vancouver are being bought by investors overseas, which takes supply/demand to a completely different place. A very ordinary bungalow on the West Side isn't worth 1.5 million because everybody wants to live in Vancouver, as I have heard from time to time; it's worth that because many, many properties in this area are investments on a spreadsheet, not homes. I don't see that changing any time soon, really.
posted by jokeefe at 6:18 PM on March 7, 2012


My mom had a shit fit the other week when I told her that I have never had any plan to buy a house in the future and most likely never will. But come on: it wouldn't fit my lifestyle, or finances, and it's putting yourself into a scary whopping amount of debt forever and getting rid of your mobility. And I'd rather live in nice areas with no house than in the middle of nowhere in the midwest where houses are huge and affordable anyway. The only people I know under 30 who own houses are people whose parents helped, and of course they're married. And now everybody's houses are underwater (I'm guessing that means the equity thing y'all keep talking about isn't going so well?) to boot. Yeah, sounds great. Sign me up for that.

I wouldn't get a house unless (and this is extremely unlikely, mind you) I got married to a millionaire who really insisted on one. I just don't see this ever being an option, or something I want to do to myself to screw myself over with in the future.
posted by jenfullmoon at 6:20 PM on March 7, 2012


Based on that quote from gd779 Philip Greenspun can go to hell.
posted by jepler at 6:26 PM on March 7, 2012 [1 favorite]


As a recent émigré from Ireland to Canada, I can assure you this place is looking bubblicious. A boom in housing in a place that's really empty doth not compute. You can just keep building at the edges forever.
posted by Damienmce at 6:44 PM on March 7, 2012 [2 favorites]


When I was single the flexibility of renting made sense. I didn't need much room, I could have two cats (with a monthly fee) and could move easily whenever my company wanted me to change offices (which I did three times, having to move each time).

Hoopo: "I'd consider home ownership, but I live in Vancouver and it is therefore impossible."

Unless you want a very long commute, that's right. The mister works in North Vancouver and we live (and own our home) in Abbotsford. If we wanted to live closer to the mister's job, we'd have to pay about $750K to a million dollars for a similar home in town. That's just not going to happen on a Sys Admin's salary. Luckily the mister telecommutes more days than not. And we can put all the holes in the walls we want, be as noisy as we want and have four cats and a dog.
posted by deborah at 6:48 PM on March 7, 2012


The rental house we bought is in a booming city in South where I have family and friends.

Shush! They will hear you!


But yeah, I dropped out of college, worked shit jobs, saved money, and bought a triplex in a smallish southern university town when I was 25 in 2005. There are libraries, parks, actual culture (thanks to the school, mainly, but also lots of local artists & musicians), historic architecture, restaurants (no chains), etc. just down the sidewalk. I live there when I want to and go live somewhere else when I want to. My tenants (students) pay the mortgage & upkeep. I could pay off the mortgage at any time but I prefer having the liquidity & getting a better return elsewhere. (Very low APR on the mortgage.)

But then I set out at 18 to put myself in position to own property debt-free by the time I was thirty so I could afford to do whatever kind of work I wanted (or fart around when I wanted) and still be okay financially. When school and the attendant debt (and spectre of more) began to lead me in the wrong direction, I recalibrated my professional aspirations, dropped out, and continued apace. People get what they prioritize.
posted by ferdinand.bardamu at 7:08 PM on March 7, 2012 [2 favorites]


What Megan McArdle doesn't know would apparently fill an article every few months in the Atlantic and a daily blog.

And usually does.
posted by scalefree at 7:47 PM on March 7, 2012 [1 favorite]


I'm 46. I just bought my first apartment, here in Korea. It cost something like 1/7th the average price for a similarly sized place in Vancouver. I paid cash. Paying cash for everything, always, was my plan all along. I must admit, though, that I had been hoping by this point to have a little more cash.

And the fucking renovators are a bunch of notalent assclowns, which is par for the course here.
posted by stavrosthewonderchicken at 8:06 PM on March 7, 2012


Megan McArdle is literally the dumbest person on the internet.
posted by bardic at 8:15 PM on March 7, 2012 [4 favorites]


I literally cannot fathom how I would save up a down payment on a house by the age of 30.

Down payment? Screw that noise. Come to Canada and get yourself a CASH BACK MORTGAGE. -5% down! Just take this money and sign here! Don't worry, it's not a bubble, it's a BALLOON! Prices can only go up, up up!!!!!
posted by mek at 8:56 PM on March 7, 2012 [1 favorite]


Megan McArdle is literally the dumbest person on the internet.

Flagged as "most hyperbolic statement ever made on the internet."
posted by pullayup at 8:56 PM on March 7, 2012 [2 favorites]


HA.. I think an unspoken rationale for home ownership is to separate you from the poor people down the street who 'rent'. I just don't think anyone likes to frame it that way.

I'd be quite happy to admit that I bought my house where I did so I wouldn't be next to rental houses with unmowed lawns, a dozen cars parked on the street, and, shall we say, less concern for social proprieties.

I don't need a gated community or HOA or architectural review board, but being around people that have at least a little vested interest in where they live is nice.

Now, naturally, not all renters are bad, but this being a college town, if you're in one of the areas with a heavy renter percentage, odds are you're living next to 6 people in a 3 bedroom house.

So, not separated from "the poor" per se, but definitely separated from the shabbier part of town.
posted by madajb at 10:15 PM on March 7, 2012 [2 favorites]


madajb: "a dozen cars parked on the street"

The horror!
posted by schmod at 10:39 PM on March 7, 2012 [3 favorites]


Again, this would apply in a closed system, a market where supply and demand makes local sense. Properties in Vancouver are being bought by investors overseas, which takes supply/demand to a completely different place. A very ordinary bungalow on the West Side isn't worth 1.5 million because everybody wants to live in Vancouver, as I have heard from time to time; it's worth that because many, many properties in this area are investments on a spreadsheet, not homes. I don't see that changing any time soon, really.

The problem for these investors are that they're all eventually going to have to sell to someone local. The median housing price in Vancouver is already unsustainably high relative to the median household income, and someone's going to end up taking a haircut on that $900,000 condo that's really worth $400,000 or so, unless incomes rise dramatically.

You start to run into problems when housing acts like gold and isn't worth anything but for its resale value.

Incomes must rise, or housing prices must fall. And incomes aren't rising all that quickly.
posted by one more dead town's last parade at 10:59 PM on March 7, 2012 [1 favorite]


I've linked to him before, and there are plenty of people who think he's a bit of a crank, but if you're in Canada and interested in real estate, you really should be reading ex-MP Garth Turner's blog, Greater Fool.
posted by stavrosthewonderchicken at 11:59 PM on March 7, 2012 [1 favorite]


I would gladly have rented forever in many of the countries and cities I have lived in. Unfortunately in this one, landlords/real estate agents inspect your apartment every six months, which is annoying in itself, but even more so when they leave nasty notes about things like your shower doors not being clean enough, or your ceiling having too many spiders on it. The rental market is tight enough that not having a perfect reference can screw you totally, so you are always worried about the inspections not being perfect. And the real estate market moves so quickly that every single landlord we had sold the property within a year or two of us moving in, so that we were always having to find new places to live. And finally, almost no rental properties allow pets (and given the six-monthly inspections and tightness of the market, keeping one anyway in is dangerous and difficult.)

Every time the landlord sold and we had to move, it took months to find a new place, and it was usually only through a fluke that we got one at all. At each "showing" of an apartment, twenty to thirty potential renters would show up, and to have a chance at all, you had to be willing to put in an application on the spot. And even then your chances depended pretty much on your income - the landlords gave the apt to the highest earner, and as university employees we were never going to be up there.

The last place we rented, the rent gradually got increased over the two years we were there from $1600 a month to $1800, while the place itself got shabbier, with no chance of any repairs or maintenance occurring. The landlord refused our request to be allowed to hang pictures on the walls. (And the six-monthly inspections mean you can't just do it anyway.) Then the landlord put it on the market, and we said "Fuck this" and bought our own place.

I'm not sorry we did, but it wouldn't have been my first choice, if only renting had come with some basic privacy, the chance of staying in one place longer than two years, and an ability to keep pets.
posted by lollusc at 12:33 AM on March 8, 2012 [2 favorites]


Mars, you don't have to live in the sticks to find affordable houses, just don't live in a big city.

The problem with moving from a big city to a medium-sized one is that the salary rate also tends to decrease along with it. (I know. I checked.)

So if I were to move from NYC to, say, Topeka, sure I'd find cheaper housing prices -- but I'd also be getting a smaller paycheck, so I'd have less money to spend on this house that I"ve bought, so I'm still stuck with a house I can't afford, except now I'm in this house in Topeka rather than in New York which is where I really wanted to be in the first place.
posted by EmpressCallipygos at 5:51 AM on March 8, 2012 [1 favorite]


And the real unfairness of geographic salary inequity is that cost-of-living these days is only partly tied to where one lives. If my home and food and personal transport (which are geography based expenses) cost 50% of my income in both Toronto with a $100k salary and in Guelph with a $50k salary, if I live in Toronto I have $50k leftover but in Guelph just $25k. And if I live in Shenzen, I probably have $5k leftover. This wouldn't matter so much if one couldn't just go online and Buy Stuff from the Internet with that money, but since one can there's huge pressure to look for the high salary even when high geographic cost-of-living comes with it, because one can do so much more with the leftovers.

This isn't a revelation or anything, just one of the major influences that get people to move to places where everything is more expensive, which might be counter-intuitive until you do the maff.
posted by seanmpuckett at 6:12 AM on March 8, 2012 [2 favorites]


Young Adults See Their Pay Decline, viz. cf. The Eurozone youth of today & The trailer park indicator

one of the major influences that get people to move to places where everything is more expensive

Why Don't People Move To Opportunity?
Matt’s new book: The Rent Is Too Damn High Available Today
posted by kliuless at 6:30 AM on March 8, 2012


The problem with moving from a big city to a medium-sized one is that the salary rate also tends to decrease along with it.

The other issue is that costs go up when you lose access to the cheap goods sold in urban working-class communities. Immigrant neighborhoods in big cities can afford to sell sundries and fresh food at prices that usually only be matched by Wal-Mart, elsewhere in the country. And, having lived in a suburb where food could be bought at either Wal-Mart, a discount supermarket of roughly Wal-Mart (that is: abysmal) quality, and a bunch of premium supermarkets I couldn't afford to shop at, I find it difficult to figure how to stay healthy in that sort of environment if you're not solidly middle-class.

I'm also not sure how much it costs to own a car, but it's bound to be over the ~$150 a month I spend on a monthly train/bus pass and occasional cab fare. Although I am aware things become Very Different once kids enter the picture.
posted by griphus at 6:50 AM on March 8, 2012


I just refi-ed 30 year morgage at 3.875% which is freaking awesome considering my parents were paying over 10% in the 1970s when they bought their house. I pay about $750 a month for my morgage.

Reasons I bought:
- I didn't want to follow any HOA dues or be subject to any condo/apartment rules
- I wanted a yard (for dog) and the ability to improve my place of living
- I could get a lot more room for a monthly morgage than I could from just renting
- First time home buyer credit of $8,000 (we bought in 2009)
- Housing market was going down = good time to buy low
- Morgage interest rates were low which made our monthly payment low
- Theres a sense of community when buying, your nieghbors don't move out every year, you see the same faces, same cars around the neighborhood etc.
- I enjoy doing home improvements so it works out
posted by amazingstill at 6:56 AM on March 8, 2012


The problem for these investors are that they're all eventually going to have to sell to someone local.

They're selling them to each other, thus driving the market to further extremes (again, this is rumour, but it seems plausible given the flip rate). In my mother's neighbourhood (16th and Macdonald) it feels like her whole street is being torn down around her ears and rebuilt into mini-mansions with 3 million dollar price tags. 4 perfectly livable, beautifully built houses have been torn down or are about to be torn down within a block and a half of her house and within the last month. Something is pushing this forward, and it most certainly isn't local buyers. Again, I want to be careful with my wording; I have nothing against immigrants or immigration-- welcome it, in fact. I have a problem with the global rich playing dice with real estate investment or building summer houses which sit vacant large parts of the year in what were once thriving neighbourhoods.
posted by jokeefe at 7:10 AM on March 8, 2012 [3 favorites]


So much of the argument is location specific, in Toronto renting is an absolute nightmare, especially if you aren't a young, single person. To rent a place big enough for my family of five I would be paying double my mortgage and praying the landlord doesn't end the lease and force me to look elsewhere every year. I know very few people that have managed to rent anywhere for too long; market rates reset between tenants so the landlord has a financial incentive to create churn. The apartments around the corner from my detached bungalow rent two bedroom apts in a poorly maintained building for several hundred more than my (high, advanced amortization) mortgage - plus they still have to pay utilities. I can't fathom the economics that says two bedroom starter homes are five times the local average household income; but at the same time there is no where near enough rental units. As mentioned up thread, there is still plenty of empty land, both as infill and on the edges of the GTA.
posted by saucysault at 7:35 AM on March 8, 2012


Ugh, Megan McArdle. I will never understand how she became a "respected" economics commentator. She's just so wrong all the time. Her ignorance is just embarrassing.

You're right. With those credentials she should be an economist!
posted by srboisvert at 7:50 AM on March 8, 2012 [1 favorite]


Circular logic filter - Debt-ridden, flat-waged, transient, single young workers don't want to and/or can't afford homes because they are debt-ridden, flat-waged, transient, and/or single income.
posted by seppyk at 8:01 AM on March 8, 2012


I'm surprised no one has posted the NY Times interactive calculator "Is it Better to Buy or Rent?" In my situation, it says buying is better than renting after 9 years, assuming I have a 20% down payment. I'll be 46 years old.
posted by desjardins at 8:25 AM on March 8, 2012 [1 favorite]


I did some research and put some actual numbers in rather than the defaults*, and buying is NEVER better than renting over 30 years for a comparable house to where we live now ($200,000).

*Milwaukee home prices have declined 1.68% in the last year, property taxes are 2.6%, 30 year mortgage rate of 4.46%
posted by desjardins at 8:43 AM on March 8, 2012


That's interesting, because when I put in fairly realistic numbers for my situation (I don't know the exact rate of rent increases, for example, nor does it seem to have an option other than a 30 year mortgage) it tells me that I am ahead buying after 3 years. It has been interesting watching friends' rents rise while my mortgage does not; in a place where rents are falling that shoe would be on the other foot for sure.
posted by Forktine at 9:13 AM on March 8, 2012


Ah, you can change mortgage length in the advanced settings tab.
posted by Forktine at 9:18 AM on March 8, 2012


I get similar results, desjardins - it claims I'll save about $15k/year by renting. Prices would have to rise by at least 3% every year before it would ever make sense to buy, and even then it would take 20 years.
posted by Mars Saxman at 9:21 AM on March 8, 2012


Bought our house in the late 90's and even with the real estate pull-back it is worth more than double what we paid for it. Mortgage rates are incredibly low and the government subsidizes a nice portion of that. This is just about the best financial investment I have made. Only my investments in education and Apple stock have done better. YMMV
posted by caddis at 10:54 AM on March 8, 2012


The horror!

I know it.
Don't even get me started about the garbage bins out in the street all week!
posted by madajb at 11:16 AM on March 8, 2012


and the government subsidizes a nice portion of that.

Which is built-into the price you pay.
posted by Space Coyote at 11:45 AM on March 8, 2012


I highly recommend a history of American home ownership in the 20th Century, from Design Observer:

Housing and the 99 Percent


I wish I owned a home.

It's not that I don't make a decent living. I'm privileged enough to work in a field I love that pays a decent salary (software engineering) along with a wonderful long-term partner who also has a decent job (UX designer).

But I also live in Seattle, and I've made a life-decision to always live in a major tech-center urban area. Whether it's Seattle, San Francisco, or Berlin, it has to be vibrant and cultured, and provide opportunities for my career.

But that also means I'm looking at an average home price of ABSURDO_VALUE (~500k) to stay in the city and near transit centers.

And a 20%, ABSURDO_VALUE/5 down-payment is something I just don't have. I was raised to put down at least 20%, and that's not going to happen for a while yet.

Meanwhile I know about a dozen old friends in Michigan who bought houses they couldn't afford in the bubble. Literally about half of them have just walked away. And of those, most have already bought new houses.

I realize the sub-prime mortgage crisis was institutional banking corruption on an epic scale, and that the entire country was robbed. But it's also incredibly frustrating seeing consumer irresponsibility rewarded. They'll have a blemish on their financial record for, what, 7 years? Meanwhile their new house is accruing value.

I've started seeing Seattle friends buy in the city now, and I'm starting to re-think my position on 20% down. It's starting to seem old-fashioned.
posted by formless at 12:48 PM on March 8, 2012 [1 favorite]


Bought our house in the late 90's and even with the real estate pull-back it is worth more than double what we paid for it.

When you say "what we paid for it" are you talking about the original price of sale, or the sum total of every mortgage payment, tax bill, and maintenance expense you've incurred over all those years?
posted by rocket88 at 1:20 PM on March 8, 2012 [3 favorites]


IT DEPENDS ON WHERE YOU LIVE PEOPLE! IT DEPENDS ON WHERE YOU LIVE PEOPLE!

I'm so very, very sorry.

really, I'm really very, very... very sorry.

posted by porpoise at 7:57 PM on March 8, 2012 [2 favorites]


that NYtimes calculator is wonderful. I've worried that maybe my family should buy, but definitely NOT with our local rents/prices ratio. Renting is cheaper by a long shot.
posted by jb at 8:36 PM on March 8, 2012


I said this somewhere else, but depending on your known input values, it may be the case that very small variations in the assumed price fall/increase on your house VASTLY affects the rent/buy calculation. When we bought ours, it was basically, if you assume the house will appreciate by more than 2% per year, you'll save money by buying. Less than that (even a very small amount less), you'll save money by renting. Nobody can predict whether the housing market here will carry on increasing by >2% or not, so it's all just a gamble.

And if you aren't entirely sure whether your income will remain steady, and you don't know what interest rates are going to do in the long term, there are just too many variable factors that could vastly change the outcome even staying within quite plausible values.

For me, the main thing was to feel comfortable about our decision for reasons beyond the purely financial. If we lose money on the house in the long run, it will still have been worth it to me.
posted by lollusc at 9:33 PM on March 8, 2012 [1 favorite]


When you say "what we paid for it" are you talking about the original price of sale, or the sum total of every mortgage payment, tax bill, and maintenance expense you've incurred over all those years?

By that method it is an even better deal. The sum of the mortgage payments, taxes and maintenance is less than the sum of rental payments we would have owed for an equivalent dwelling, if you could have even found one for rent most years. By that measure our cost is zero and we have a several hundred thousand dollar capital appreciation, which currently is taxed at 15%. Sweet.
posted by caddis at 6:54 AM on March 9, 2012




Buying is never flat-out better than renting, nor is the reverse always true. Buying can, depending on the state of the market and a whole host of other factors, be a better place to invest a maximum of 90-[your current age] percent of your net worth, though.

In America, in many places, buying is an excellent bet right now, depending on the state of your finances, and being aware that interest rates are historically low. Buying in most places in Canada right now would be the stupidest thing you could possibly do with your money.
posted by stavrosthewonderchicken at 3:53 PM on March 21, 2012 [1 favorite]


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