James Altucher has a lengthy column on why you should rent rather than buy. Shorter version: there are a lot of hidden costs, and outside of the bubble, housing has not historically been a great investment. The phenomena that made it a great investment for some people (the emptying out and then filling up of cities, the introduction of self-amortizing mortgages, rising and then plummeting interest rates, and the special status of mortgage debt after 1986) will not indefinitely continue to push prices up; most of them have played out. Over the long run, housing prices cannot grow much faster than incomes.
I agree with all of this. You should not buy a house because
“renting is throwing your money away” or because you expect the house
to become a cash cow. As an investment, housing is a good form of
forced savings, but do not expect price appreciation to make you
rich–nay, not even if it made your parents and all your neighbors rich.
But
these articles, and the homeownership-skeptics (of which I am sort of
one) often give short shrift to the benefits of owning. Renting has
hidden costs, too. Outside of New York, with its massive stock of
professional landlords hamstrung by restrictive rent rules, renting
means you usually have to move every few years, because the landlord
wants to live in the house again, or is selling it, or wants to raise
the rent too much in the hope that you’ll be too lazy to move. Moving
costs a ton of money, between the movers (now that I’m getting old and
creaky), the new furniture that is inevitably required, and the old
furniture that cannot be fit into the new house and must be thrown
away. Moving also soaks up a month or so of your time on each side of
the move, which needs to be factored in for both lost income and sheer
misery.
Then there is the inability to have your house the way
you want it. Sure, it’s not like we could afford high-end appliances.
But if we owned our house, I might be able to hope that someday we
would acquire a water heater bigger than a thimble, rather than
hopelessly resigning myself to shallow, lukewarm baths. I might also
be able to sink screws into the ceiling for a hanging potrack, install
blackout curtains so that I could sleep later than 6 am in the summer,
and otherwise make the house over more to my specifications. But the
owners are fond of their home the way it is, so it stays.
For a
long time, I didn’t care so much about this. I liked the freedom
renting gave me. But once you’re committed to a city, and another
person, that freedom starts looking overrated.
