Owning a home has rarely been this much more expensive than renting
Owning a home has rarely been this much more expensive than renting
The premium for homeownership has grown in recent years as home insurance, upkeep, and high mortgage rates skew the buying vs. renting math.
I might still not understand but... Landlords have to pay insurance as well. Why would they be the exception. They have all the same costs and also want to make a profit. How can rent be cheaper then?
Because if you buy a house, it's just you and the bank, so you need to cover the banks risk for you as an individual, meaning higher interest rates. Larger purchases, or a group of houses are covered by different loan types, flexible rates at for example international rated plus half a point.. and that is mich cheaper. The rate might fluctuate.. but if the government strongarms the fed to keep the loans practically free, companies borrow for free plus half a point. And that is a lot of difference.
Because on average, I imagine very few rental homes are brand new constructions/purchases so their mortgage is a couple years old and lower than if someone bought that same home today.
Highly dependent on where one lives I guess. My friend just rented a new apartment and his rent is over double what my mortage payments are. That's also money he is never getting back where as in my case my house is paid in about 15 years after which I own the damn thing and the monthly mortage payment drops off entirely. Excluding mortage, the montly cost of owning my house is 275€ which includes water and electricity.
Excluding mortage, the montly cost of owning my house is 275€ which includes water and electricity.
That's also excluding regular maintenance or emergency repairs that a landlord would be (often reluctantly) responsible for. It is also possible to do big, expensive, necessary renovations on a house and have it hardly affect the value at all.
It is also possible to do big, expensive, necessary renovations on a house and have it hardly affect the value at all.
Isn't this kind of irrelevant unless you're a house flipper? If you own a house and make renovations to it, it is because you find some practical value in it.
My mortage payments for one year would cover all maintenance I've done to the house during the 8 years I've lived here including an entire bathroom remodel. Obviously someone less handy would need to hire someone to do the jobs I've done myself so that helps a little with the costs, but still. The maintenance costs for my house aren't even in the top 5 expenses I have.
It's not about what your mortgage payment is. Interest rates are significantly higher now. See how much the same house costs at the current price and interest rates. Most likely it's significantly higher now as both rates and prices have increased.
My mortage payment is 520€/month including interests which are tied to Euribor12 and change once a year. My interests now are less than they were a year ago.
I am confused, my thought process went like this:
So it's more expensive to own then rent?
Unless you own it and rent it out to others?
Nobody would be a landlord if a dwelling cost more to maintain then to rent out.
So something doesn't add up.
I agree, and came in here to say the same thing. I think the data is being skewed by the fact that many (not all, of course) rental properties are subdivided into multiple units (or built that way in the first place). People commenting about how it's considering modern costs, well, they must not have read the first two sentences of the article:
On paper, owning a home is almost always more expensive than renting — about 14% more, on average, after factoring in expenses like insurance, taxes, and upkeep.
But the difference has grown much more extreme in recent years as just about all homeownership costs have ballooned.
The only way you can arrive at that 14% number is if you're averaging in multi-unit apartment buildings. Very few, if any, landlords are out there subsidizing their non-family tenants by charging less than the normal costs of ownership. If most landlords are losing money year over year, well... at that point just sell the property.
I believe they are taking into account the cost to purchase these days since interest rates are higher, ergo high mortgage payments.
As someone else mentioned most landlords have locked in rates at this point. Not many new landlords.
Most landlords bought the place earlier when home prices and mortgage rates were lower, or they just own the place outright and don't make any mortgage payments.
This article is about choosing whether to buy at current rates or rent at current rates. If you bought a place 10 years ago for half the price it's worth now and a 2% interest rate then you're probably going to be paying less then renting
As a homeowner what weighs me down most is insurance, by a large margin. It keeps increasing while the coverage decreases. It's a huge racket in my opinion
Racket.
A racquet is what you hit your insurance adjuster with when you're tired of his racket.
Do you live in Florida?
Oklahoma 🙃rates go up each year due to tornados, at least that's what they say. Even though i live in a heavily populated area that'll never get hit.
I had to put a new roof on cause of softball sized hail caused by the infamous may 2013 storm that damn near leveled Moore Oklahoma. But other than that, no storm damage ever
On paper, owning a home is almost always more expensive than renting — about 14% more, on average, after factoring in expenses like insurance, taxes, and upkeep.
I'd be interested in seeing how they arrived at the 14% number.
When I bought my first home a couple of decades ago I moved out of my 1 bedroom apartment which I was paying a monthly rent of $700/month into a small starter home with a mortgage of $1000/month. 20 years later that exact same apartment rents for $1350/month. All of the years I lived there my house payment never rose higher than the $1000/month mortgage payment while the rent on the apartment apparently continued to increase year over year. Meanwhile I ended up selling the starter home for $110,000 than my purchase prices nearly 20 years ago.
So is their 14% number just calculated on the first month of each (renting vs buying)?
For me, I'm in a condo that we bought with a 15-year mortgage during the pandemic. My mortgage (including escrow/taxes and insurance) plus HOA fees is about $2100/month. My old apartment (including monthly pet fee) was more than that when I lived there. It's currently listed for $2500/month (big complex, not necessarily my unit).
I promise all y'all I'm not spending $400/month on homeowner-specific costs. And, I could reduce my monthly cost by moving to a 30-year mortgage instead of a 15-year mortgage.
Once you factor in things it mentions like insurance, taxes, upkeep along with others like a down payment then it's very easy to see where the 14% numbers comes from. Frankly, I'm surprised it's only 14%. There's a lot of additional and hidden costs with home ownership.
The difference is those "costs" are going towards buying equity that you then get to keep. Maintaining a house is expensive but it is an asset that maintains value. This article really doesn't seem to understand that which shows a very basic misunderstanding of the wealth math that goes into home ownership.
Renting may be cheaper month to month but you're literally pouring that money down a black hole never to be seen in your hands again.
Granted, building equity doesn't matter when you're already have no cash paycheck-to-paycheck for either.
insurance
I was shocked as a homeowner to find that home insurance is not that much more expensive than renters insurance, especially for a condo where the HOA is sharing a large amount of the cost
taxes
I mean, especially if you’re already a homeowner and your assessment is years old, this amounts to less than $1k/yr.
Using the above poster’s example both of those costs annualize out to still be cheaper than rent
It’s actually horrifying how fast rent has gone up. Our mortgage in Boston went from being $1000mo more than average rent to $500mo under average rent in only two years. Even with the tax hike we just passed in my town, my total cost of ownership is far below renting even accounting for the savings we set aside for upkeep and emergencies
Plus this whole time we’ve been improving the property. We now have solar on a 0% apr loan and don’t have electricity bills anymore and the mo billing for the panels is less than our old electric bills. We also used a state program to replace all the insulation and windows at cost with another 0 apr loan. So our gas bill is now only ~$80-100 compared to the $400-500 gas bill in the shithole apartments around here with 200 year old paper insulation. And if we want we can use another state program to replace our furnace with a heat pump and lower that further.
So our relative cost went down even more as utilities keep going up and renters have zero control over their homes energy usage
Once you factor in things it mentions like insurance, taxes, upkeep along with others like a down payment then it’s very easy to see where the 14% numbers comes from.
So you're agreeing with me that they're only comparing the first month of ownership of the house with the last month of renting? There's no factoring in the long term rise in rents to their math?
There’s a lot of additional and hidden costs with home ownership.
There certainly are, but its very situational. A 100 year old home will have very different upkeep costs than a 10 year old home. A home in a hurricane zone will have different upkeep than one that isn't.
It's just talking about the first month / year. Assuming that only inflation is effecting prices to keep things simple the price of renting goes up over time with inflation, while a mortgage stays constant dollar wise, and since a dollar is worth less over time the payment is less.
Combine this with building equity the net cost of owning a home goes down over time while renting goes up. The question is when do those two lines meet, eg. If you bought a home now how long would it take to be paying the same as renting. Maybe it's 5 years, maybe 10 or 15 depends on the market, judging by the article it seems that period is getting longer as the starting point for a mortgage is really high and will take a while to recover.
Replace central air: $8k Deadwood 40+ year old trees: $6k Remove & replace concrete driveway without killing the 80 year old pine who's roots are buckling it: $8k Remove particle board siding and replace with vinyl: $12k New water heater (+ new requirements for not having a pressure bomb in the house): $3k
Owning a home for three years has been more expensive than renting for a couple decades. Sure the mortgage is $500 a month less then rent, but the loans/credit card + interest for all the above is killing us.
Seriously considering one of the brand new apartments in the up and coming district for only $2k a month if we can sell the money pit with outdated everything!!
This ignores the difference after 5-10 years. Rent keeps going up.
Maintenance cost and property taxes too though.
Still cheaper to own, if you have the initial funds or loan to buy and know you won't be leaving the area for awhile. If you rent a property those maintenance and tax and insurance and interest costs associated with owning it are just passed on to you in to your rent, plus a profit margin so the owner can make money off renting it out to you. Owning the same property would cost less, over time, and not just that, but you would have something to show for it.
My rent went down year over year.
What is your mortgage on the tent?
Cost of materials and demand for contractors. Even if you DIY it, everything is 3x as expensive as it was before covid. The price of lumber never really went back to where it was before covid. Its clearly price gouging.
Yeah, it sucks and really fucks with the "building equity in your home" narrative that updating/remodeling has. Now every fucking thing costs so much, that is very unlikely I get back out what I pay for updates in a home sale price later on. It seems like even maintaining your home is for the ultra-rich, now.
Building equity through improvements has pretty much always been a lie, the win was enjoying that improvement. The vast majority of improvements don't actually net a higher sell value than their cost.
The price of lumber never really went back to where it was before covid.
https://tradingeconomics.com/commodity/lumber
The price in at the start of 2020 was ~$377.55 per thousand board feet.
https://www.bls.gov/data/inflation_calculator.htm
$377.55 in January 2020 is $460.34 in July 2024 dollars.
The price of lumber in July 2024 was $423.27.
So it's gotten back down to and fallen below pre-COVID-19 prices in real terms.
It does look like the price has risen from July 2024 to November 2024, so it's presently higher, but it has not stayed above pre-COVID prices since the end of COVID-19.
See my response to the reply above this one.
Lumber prices are actually currently where they were for much of 2018.
Yeah thats an interesting statement right?
Because when I look up a chart I see the same thing.
But when I go to buy lumber, and especially sheet materials, its all still 2.5x - 3x what I was paying in 2019. So as an individual which should I believe? The lived experience I have is the one that took the money out of my account when I bought the lumber.
Some examples: This was $15 in 2019/20: https://www.homedepot.com/p/15-32-in-x-4-ft-x-8-ft-Sheathing-Plywood-Actual-0-438-in-x-48-in-x-96-in-20159/206827282
(You might get a different price. For me, its $26)
And this was $25 in 2019/20: https://www.homedepot.com/p/3-4-in-x-4-ft-x-8-ft-Hi-Bor-APA-Rated-Sheathing-Pressure-Treated-Plywood-95360/202087831 (You might get a different price. For me, its $60)
Non-treated 2x4 were $2, and treated were $3.5 in 2019/20: https://www.homedepot.com/p/2-in-x-4-in-x-96-in-2-Premium-Grade-KD-HT-Stud-058449/312528776 https://www.homedepot.com/p/2-in-x-4-in-x-8-ft-Standard-Better-Hi-Bor-Pressure-Treated-Lumber-95344/202087781
(You might get a different price. For me, its $4, and $6)
Its a reflection of the same presentation that the Democrats tried to make about the economy: "Look at these abstract metrics disconnected from your lived experience, they say that the economy is great!"
But thats irrelevant if the most reliable form of data I have, my lived experience, disagrees with it. The reality is I live in an old house and it needs some serious repairs. I have to put some of them off because the cost of materials is just ridiculous, let alone trying to find contractors to do work at anything less than robber baron prices.
We livin in a new gilded age, bruh.
By February, I will have put $100k into a house in stuff that's nearly invisible - replace fence, repair leaking pool equipment, stabilize foundation, repair plumbing, and replace exterior 'wood' that was really watelogged mdf. My mom paid $220k 11 years ago. I've inherited it - and the $130k mortgage balance. My son is helping me by living there and covering the mortgage payment and I'm pulling money out of retirement to make repairs. It would likely take another $100k to update the 1980s kitchen, bathrooms, electrical, and 20 yr old hvac. Oh yeah, plus $10k/yr in taxes and insurance! Anyone want to buy a house?
repair leaking pool equipment
You have a pool. You are already head and shoulders above most people, including people who are also mortgaging a property.
It's green and has been unusable for most of this year. It's essentially a pond.
But you're building equity! /s
Yeah, but, after X years you own your house.
After X years of renting, you got nothing.
Depending on where you live, much or all of that value goes away if it's 35-50 percent more expensive to own. Especially if you choose to invest the savings.
That’s some rich dad poor dad BS. Means nothing if you can’t afford the additional y cost over renting, plus with interest rates where they’re at…..so much of that monthly payment is still going nowhere.
My house is paid for so I’m gonna say nope - even with maintenance and taxes, etc
I don't think your case is what the article describes.
Yeah, if you bought recently, you’re a fucking moron lol
Wanting somewhere to live, amirite? 😂😂😂😂