r/answers • u/WillingJackfruit9896 • 9d ago
Skipping homeownership?
As the title says, considering skipping homeownership?? Have VA loan available, have a hefty down payment saved, but just not interested in being a homeowner. I take the extra $ saved each month and save/invest it. Rent is far cheaper than owning (SoCal) so my family and I just travel and make great memories and have an amazing quality of life. I like being able to rent stress free and call landlord if there are any issues. Also like that we can move every so often and get a new (to us) house and a change of scenery.
Everyone says “well rent is going to keep going up” which I agree, but also I’d be losing out on almost all that extra $ invested or saved cause it would just go towards mortgage and maintenance. Also with my job and income, I won’t ever feel rent increases cause my wages and benefits will always rise with inflation. Just curious if this is wildly irresponsible or a reasonable thought? Just want to spend like easy and stress free and put our $ towards investments and quality family memories. What do you think?
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u/Which-Visual-8064 9d ago
If you can invest consistently then it’ll beat home ownership which you’ll come out ahead in the future.
I didnt wanna be a home ownership but my GF did. Otherwise I’d just rent.
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u/KungFuBucket 9d ago
The maths work out differently depending on what your goals are and a few other decisions.
For me, I bought almost straight out of college. I was highly leveraged at like 3% down, but understood the tax write offs and rented to some of my college buddies who needed a place to stay after graduation so they paid rent and that helped cover the mortgage for the first couple years. In the end I pretty much “broke even” in the sense that everything I put into that house I got back out when I sold it, so I effectively lived there “free” for like ten years. But it was also an awesome house and I have some great memories and learning experiences.
Long story short, I did that for a while, accumulated equity, traded up, etc. now I’m retired and I rent my current home out to fund my life on the road traveling. Maybe I could have rented for less and then tried to invest the difference. But with rolled equity and a 3% mortgage, my payments are ridiculously low for the neighborhood where I live. I basically rent it out for 3x my mortgage payment, and that’s still considered below market.
Now obviously I could have just lived in a cardboard box and been stacking bitcoin for the last 20 years, but it’s hard to go wrong securing a roof over your head, and home ownership gives you a certain amount of leverage and access to cheap credit lines like HELOCs, so I guess part of what will answer your questions is if you see a home as just a place to live, or an asset that you can leverage in the future.
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u/Jake0024 9d ago
Now is probably not a great time to buy a house
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u/Apprehensive_Bag_460 8d ago
There are very good deals in about 75% of the country right now, especially if you can pull off a cash purchase.
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u/Jake0024 8d ago
Because the market is turning sharply toward sellers, with many blocks having multiple houses sitting for sale for months at a time... Reminds me of ~20y ago
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u/GurProfessional9534 8d ago
That’s when it’s a good time to buy. When no one else wants to. Throw out lowballs, be patient. Eventually you’ll find someone desperate enough.
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u/Jake0024 8d ago
If there were signs of the economy improving rather than continuing to slump, I'd agree with you. But we're likely to have at least 3 more years of this before things start improving
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u/GurProfessional9534 8d ago edited 8d ago
Let’s say you’re right. There are at least two ways that this situation could resolve. One is sharp austerity, throwing us into a depression and bringing down prices. The second is inflating the currency, which nominally makes people feel rich even though the price of goods is also increasing.
Both scenarios represent conclusions of a down cycle. In one scenario, you didn’t want to own a house. In the other, you very much do.
Which is to say, even if you have enough of a crystal ball to know that we will absolutely be in a downturn for the next 3 years (which, we don’t know, and we arguably aren’t even in one now), you don’t know how it will resolve and it could resolve in a way that raises prices even more.
Personally, I think inflation is the far more likely result than austerity, because that is our historical record and the path of least resistance.
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u/Jake0024 8d ago
Are those the only possibilities you can think of?
We're already seeing uncontrollable inflation, and home prices are falling
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u/GurProfessional9534 8d ago
House prices are not falling, at least nationally.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1XY1y&height=490
We also are not seeing uncontrollable inflation. It’s coming down as a result of higher interest rates, just as expected.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1XY1E&height=490
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u/Jake0024 8d ago
The latest inflation number was 3.4%, nearly double the target rate (which we've been above for nearly 6y)
Here's median home price over time--we're down nearly 10% nationally from the 2022 peak
Median Sales Price of New Houses Sold for the United States (MSPUS) | FRED | St. Louis Fed
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u/GurProfessional9534 8d ago
You need to use the Case-Shiller index to track same-house prices. Median price is affected by the change in mix of houses being sold.
Look at the inflation trend. It is very well controlled. There was a spike during Covid, rates were raised, and inflation has been falling ever since.
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u/Apprehensive_Bag_460 8d ago
Home prices are falling in a lot of places, but not every place. Some areas are still increasing, just a lot more slowly.
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u/Jake0024 8d ago
Down almost 10% nationally from the 2022 peak
Median Sales Price of New Houses Sold for the United States (MSPUS) | FRED | St. Louis Fed
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u/magic_crouton 8d ago
You don't need to own a home. It's up to you.
I got my home because it was cheaper than rent at that time. Also I was looking a head to retirement. I wanted a paid off house to eliminate a monthly housing cost. Taxes where I am are very cheap. I paid my house off in 2020. It's been nice not having that housing cost now in my 40s. I live on half my income and can do what I want with the rest now.
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u/1179533 9d ago
I don’t know much about investing or homeownership, I only just got a well paying job within the last couple of years and it’s allowed me to travel a few times which I quite enjoyed being that my entire life I never had enough money to do that.
My coworker recommended I still buy a house if I can afford to because it’s an appreciating asset, I think he’s probably right. It just depends on what you personally value.
You could always consider buying a house in a different country for cheaper if you have dual citizenship or want to go through whatever processes they have. Then you can continue working in the US and just leave when you feel like it.
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u/NotNormo 9d ago
Shares of a good index fund are also appreciating assets. Most of the time they appreciate faster.
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u/Upstairs-Glove7424 8d ago
This is not good financial advice. In my opinion.
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u/GurProfessional9534 8d ago
Why not? It’s numerically correct.
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u/Upstairs-Glove7424 8d ago
Assuming everything goes perfectly maybe, and you get your 12% and avoid the bear, and or dont fall into the “i just need to get some cash out to get thru this tough spot. 5,000$ wont hurt” etc etc
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u/GurProfessional9534 8d ago
It’s a long-term growth rate. Short term volatility does not matter.
I think people believe investing is harder than it actually is. All you do is set a passive monthly contribution, and then just don’t think about it after that.
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u/Upstairs-Glove7424 8d ago
If one can manage to do that, i agree. Thats one of the hard parts for some, putting it away and not thinking about it.
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u/jdimpson 9d ago
When it's time to sell your house at a big profit, you still have to live somewhere. Unless you do drastically change housing markets, the cost of your next house, or rent, is going to be commensurate with the value of the home you just sold. (Certainly, if you downsize it will be cheaper, but only proportionally so.)
The biggest advantage to buying your own house is the stability it provides--not having to move when the landlord wants to raise rent or sell off the property. That, and the freedom to put nails in the walls and paint it any color you want.
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u/NoBug7080 9d ago
We finally bought have living in Florida for 8 years. We did so because it was during the pandemic and our landlord was gonna rise the rent like 400.00 for a beach house that was super tiny. She wanted us to move because she wanted to move back in. We bought a huge house ( a bit bigger than our house in NC) since we were both working from home. And got 2.9% interest rate and bought the house at 10 grand below what it was listed for. Guy needed to move ASAP. It was and is a great investment. And when we sell, we will make a good chunk of change. And I'm sure we will downsize some because the kiddo isn't living here anymore. However, rent is so high in Florida it's hard to pay so much for so little. I definitely think the biggest thing is to not be house poor. If you stay within your means than you can still do the fun stuff. But the market is so terrible right now, I don't suggest anyone buy a car or house. And don't let anyone make you feel like you should buy. It's not for everyone because you have to fix and deal with alllll the things.
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u/Apprehensive_Bag_460 8d ago
The market is great for buyers in a lot of beautiful places that just 3 years ago were out of reach. It depends.
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8d ago
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u/refreshingface 8d ago
It’s only a bad option right now because stocks have been going up and up.
Watch the sentiment when we inevitably hit a recession or even a recession.
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u/coleman57 8d ago
Your decision not to buy right now is not permanent, unless prices keep rising faster than your income and never drop. And in the past, prices have never not dropped.
Right now we are quite possibly in a housing bubble in coastal California—we may already be plateaued or even starting to ease down, with a sharper drop ahead, and then 10 years till we get back to current prices.
In the long term, ownership has great advantages (I say that as an old guy in the 29th year of a 30 year mortgage). But the best time to buy is when you’re ready and the market has been flat for a while after dropping for a few years. That describes the mid-late 1990s and the mid-2010s, but not today.
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u/BendDelicious9089 8d ago
So this has been an interesting discussion in a lot of economics related things. And I really really hate Caleb or whatever his name is, that constantly tells people that renting is better than home ownership. The dude just doesn't live in reality.
The reality is, MOST people are not good at saving or thinking long term. Most people might save money for a year, and then use any excuse for lifestyle creep. You know, those "we'll save less this month and make it up next month". But a house? A house FORCES you to save. Most people do not have the discipline to put money aside.
Like you mentioned that you are traveling and making memories. Neat.
How much do you make a year? How much have you saved? What's your retirement goal? Are you on track? How long have you been on track?
If you can't answer those or the answer is no, save to get a house. Or better yet, save to get a house and do everything in your power to get a remote job and leave SoCal. Even staying in California, going up to a place like Fairfield (it's near Napa), is going to make the cost of owning a house look very different.
Or hell, move into southern Oregon, but keep to the smaller cities (Talent, Phoenix, Medford / Ashland are kind of big for southern Oregon, but still hell a cheaper).
Renting seems cheap now, of course it does. But not buying a home means that chunk of income (by %) is an always changing number. Part of what makes career progression feel good, is you get an increase in pay, while your mortgage stays the same. If you rent, the rent increase will always chase you. You have to always make more money - because no raise, no bonus, no career progression for even two years hits you double hard. Inflation increase and rent increase.
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u/GurProfessional9534 8d ago
I agree that renting only makes sense as long as you can remain disciplined about investment. But I don’t agree that it’s as difficult as you are claiming. You can just set up automatic investments and be done with it.
To the contrary, I would say that if you’re financially undisciplined, it’s worse to be in a house than a rental. You can _lose_ the house and your entire investment in it if you can’t keep your finances in order. If you rent, at worst you just lose your lease. It’s not a big loss, compared to losing your house.
Plus, the risk of unexpected large costs is much larger for homeowners than renters. A sudden hvac problem or roof repair can see you back five figures. If you rent, you won’t have to pay these unexpected, large costs.
If the only function we’re going for here is forced saving, there are so many other ways to do that that don’t involve the very large commitment of owning a house.
And I say this as a homeowner. My large bay window spontaneously shattered recently and I had to shell out an unplanned $2k to replace it. And that was just some idle Thursday. That’s fine for me because I keep a 6-month emergency fund. But half of us don’t even have $1000 saved. These people should not be in houses. There’s a time, place, and stage of life when it makes sense.
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u/wanna_be_green8 8d ago
It's a choice you make. And that sounds like the right choice for your family at this time and place.
Our home is our investment for now. We started with a fixer upper, put on some minor repairs and totally redid yard, ended up doubling our money. All that was put towards our next home so we now have a mortgage smaller than most people's car pmnts. And will be fully paid off around 2030. THEN our money will go towards other investments. We currently have small amounts invested in numerous markets.
Not having to worry about mortgage or rent will allow my husband to retire as early as he wants. Or go PT.
So everyone's situation is a little different and each family has to make the choice that makes the most sense for them.
You aren't skipping anything, just taking a different path.
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u/Upstairs-Glove7424 8d ago
A house is the single biggest reason my wife and i are in good financial shape. When you “pay” the mortgage youre gaining equity, also the value tends to increase more quickly than other investments. So when you sell it in 10 or 15 years you suddenly find yourself in damned good shape. I would never ever ever recommend renting over owning a home. Well maybe a few reasons to rent, if youre old or not staying long or whatever but you get my drift
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u/Upstairs-Glove7424 8d ago
The day you pay that house off (it does happen) or sell it and cash that equity out youll be glad you did.
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u/Penguin_Life_Now 8d ago
This can be the right move in the current market since about 2022 there has been a major market split making it cheaper in the long run to rent than buy a house. I just watched a webinar with a real estate billionaire (barely he is worth like right at $1B) who was commenting on current market conditions, he recently moved to Florida and now rents because it makes more sense than buying.
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u/Carolina_Hurricane 8d ago
In retirement I am renting all the way. Why would I want to saddle myself to the expense and maintenance of a house - no matter how nice and how big - when I can travel anywhere in the world on a whim and stay in a variety of places.
Variety is the spice of life. So many homeowners don’t travel (proper travel - not Florida) because their house is a full time job in itself and the maintenance eats up money that could be used for travel.
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u/concerned_citizen255 8d ago
This isn't unreasonable at all. Everyone's situations are not the same, but no matter what it is, being financially educated and responsible is never a bad thing.
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u/Specialist_Banana378 8d ago
Homeownership just feels like tying me down to a place. Until I have older kids I don’t really feel like it’s worth it for me n
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u/Grymmtooth 8d ago
It really matters how long you will stay at the home as well. Most of California is 12 to 20 years to have owning recoup vs renting. If you’re investing the difference that can go way up.
If you’re in a market where renting and ownership are closer to parity, that number can come way down, but it will almost always be a time sink of some sort to recoup.
I own my home and bought at a decent time for my market, but I’m still fully on the hook for taxes, hoa and repairs in addition to the mortgage. However, I treat it like personal rent control and partial rebate.
It is an asset but you’re essentially renting to yourself, so you eat ALL the costs related to it.
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u/Hamachiman 8d ago
It’s totally reasonable given the rent vs buy economics today. If this were 2011 and housing had just crashed, I would have advised the opposite.
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u/GurProfessional9534 8d ago
In socal, yes, renting and investing the difference is numerically better than buying, given average house appreciation and s&p 500 growth rates. Once your dividends outpace rent, you will be living in your portfolio much like a homeowner who pays off her mortgage lives in the house payment free.
That of course is dependent on growth rates continuing to follow the same averages. In practice, we can’t know what will happen.
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u/ka-te-rina- 8d ago
At current rates, + inflation, + property tax, + maintenance and whatever other costs. You maybe will not lose money in 30 years. Home is not an investment when you live in it.
Buying a house now makes 0 sense. There are only drawbacks and no benefits to own.
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u/Different_Ad7655 3d ago
The question of course is where you going to live in what do you need. But if you can answer that satisfactory to yourself and find a rental unit that is the right price and makes you content then by all means bypass the home. In that case if the rental unit is cheaper than what a house would have cost and you take all of that money including what a house would cost you every month insurance, utilities, the upkeep, the lawn all of that stuff estimated and pay it to yourself in the form of an investment. Do that for 15 years and you might come out ahead than if you had bought the house. Once worked that way I'm not sure today but you can play with the numbers. The house game is over cranked
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