I spend a lot of time at work thinking about the value proposition of housing, and wrote this bad boy up when I was bored... Interested in any thoughts/criticisms.
The mortgage banking industry is the largest consumer lending industry on the planet, responsible for $6 trillion in loans in the U.S. alone. As a result, it has a tremendous ability to convince the public to make sub-optimal decisions with their money. The following example describes two individuals with identical financial characteristics, including earnings power, initial savings, and housing needs. One chooses to purchase a home, making use of the traditional mechanism; the 30 year mortgage. The other opts to rent. Which path leads to greater wealth?
John Snow was a typical man in his early-30s. Married, with a child, a good stable job, and about $50,000 in the bank. John decides to buy his first home. After all, he had spent his entire 20s “throwing money away” in the form of monthly rent. After scouring the market, he found a nice three bedroom home for $500,000. He decided to use his $50,000 savings as a down payment on the house, and take out a 30 year fixed rate mortgage for the remaining $450,000. Mortgage rates were still close to record lows, and with his good credit he was able to secure a rate of 4.5%. John’s monthly payment would be $2,280. He would also have to pay $6,000 a year in property tax. In addition, there would be other monthly fees including homeowner’s association dues, homeowner’s insurance, water & trash, gardening, and repairs that John was previously unaccustomed to as a renter. However, these seemed like a small price to pay for John to have his own place.
The beauty of homeownership to John was that he would be building equity in his home over time. Sure, it would start slowly, but over time John would continue to pay down the principal in his mortgage until after 30 years he would own the home outright. Even after factoring in the real estate agent’s costs upon closing (approx. 5% when John realized he pays both the buyer and seller’s agent’s costs), John would still be making money. The housing market had historically appreciated in value by 2-3% per year, so John felt good that equity would be building in his home. John did the math, and realized that:
- After 5 years, John would have $127k equity in his home
- After 10 years, John would have $248k equity in his home
- After 20 years, John would have $558k equity in his home
- After 30 years, John would own his home outright, and would have equity worth $996k.
John felt pleased that he would be worth a million dollars after just 30 short years.
Across town, Marcella Lannister was also trying to decide whether to purchase a home or to continue renting. Marcella was a mother of two, with the same income as John, and the same $50,000 in savings. If she were to take a mortgage, she would qualify for the same 4.5% interest rate that John received. However, Marcella was much more familiar with economics than John, and she understood that returns in the stock market had averaged around 10%. Although stocks were volatile, she knew in particular that this 10% return was quite certain over a longer time horizon, such as 30 years. Marcella looked carefully at the housing market, and identified some costs associated with homeownership that she currently didn’t face as a renter. First, property taxes in CA of 1.2% meant that she would be paying $6,000 a year to the government. She was also aware of the mortgage interest deduction, which could shelter her from some federal income taxes. However, over the full term of a mortgage, Marcella calculated that she would spend $371k in interest, and that this would yield an average tax savings of $3,100 a year. This meant that on balance, she would be paying $2,900 more in taxes each year as a homeowner than she did as a renter (=$6,000 - $3,100).
Marcella also knew she would need to pay HOA dues ($200/month), homeowners insurance ($1,000/yr), gardening/water/trash ($500/yr), and some basic repair expenses ($1,000/yr). Together these fees would add another $4,900 a year. This meant that owning a $500,000 home would cost Marcella about $7,800 a year more than renting a home with the same monthly payment. On the other hand, while a mortgage would remain fixed, Marcella’s rent was likely to keep going up. However, Marcella realized that repair and remodeling expenses (such as those for new appliances, new roofing, carpets, furnace, paint and insulation) would likely offset the cost of those rent increases, so this seemed like a push.
This got Marcella thinking. What if instead of buying the house, she took her $50,000 down payment and whatever amount she would save each year on taxes and housing fees ($7,800), and invested it in the stock market? So Marcella did the math; what would she have if she invested $50,000 today, plus carefully added $7,800 each year, which she would certainly have left over given she wasn’t paying all the homeownership costs?
- After 5 years, Marcella would have $128k, which was $1k more than John.
- After 10 years, Marcella would have $254k, which was $7k more than John.
- After 20 years, Marcella would have $783k, which was $225k more than John.
- After 30 years, Marcella would have $2.157mm, which was $1.16mm more than John.
Marcella Lannister of course opted to make the smart move and be a renter. She would be a multi-millionaire in just 30 years.
So why does Marcella’s path result in so much more wealth formation than John’s? The main difference was that instead of paying interest on a large amount of debt (mortgage), she would be generating dividends and capital gains from her savings which was invested in the stock market. Over time, the returns on the stock market would be much greater than the 2.5% a year that could be expected from the housing market. Even though John would be using leverage, the amount of the gain that interest would eat away would significantly reduce John’s total net worth at the end of the 30 year period. Over short time horizons, Marcella’s investment strategy is riskier. However, over longer time periods (like 10+ years), Marcella would fare much better.
Some might argue, “but at the end of 30 years John would not have to pay anything for his house, and Marcella would still be paying rent”. That is true, but Marcella would also have $2.2 million in the bank (John would have nothing, all else equal), and she could easily go and pay all-cash for a house that is more than twice the value of John’s. She would avoid paying a dime of the $371,000 in interest to the bank, which John so happily paid over 30 years.
If it is true that renting leads to faster wealth accumulation than owning a home, then why does the vast majority of the public (including investors) argue the opposite? The simple answer is because the banks have been extremely effective at convincing the public of “the dream of homeownership”. In reality, homeownership is quite a bad investment (assuming it is done using a traditional 30 year mortgage). However the mortgage is an extremely profitable product for the banks – it offers steady coupons over long time horizons with very little downside risk, since it is secured by the home itself (which very rarely declines in value, 2008 notwithstanding). The more people the banking industry can convince to “lever up” to purchase a home, the more money flows into their pockets in the form of interest payments. Did you know that your bank stands to make $370,830 in your $450k mortgage?! A Lannister always pays their debts…
People who buy homes for end use are buying a luxury instead of an investment. They want the ability to live in their house, do whatever they want to it, etc. Rentals don't give you the same "luxury". I'm personally fine with renting for the rest of my life, so long as I get the proper discounts compared to a similar "end user" property. I will use those savings to invest in properties that will give me a return.
If people are disciplined there are a lot of things they can do with their money that is a better financial return than buying a house. The problem is, the typical American can't put $50,000 into a non-retirement plan and simply not touch it for 30 years. With the exception of a few insane years, equity in a house is pretty illiquid. Few people are able to access their equity to make bad financial decisions (e.g. buying excessively priced new cars) or to make impulse purchases. A monthly mortgage payment with principal is forced savings. In a consumer-driven economy, forced savings is greater than theoretical paper savings on any day of the week.
Of course, you can manipulate the inputs to get the answer that suits your conclusion. You can make housing appreciation 5% and stock appreciation 8%. Historically, stocks have risen 10% on average. Who's to say that historical returns is a predictor of future returns, especially in a mature economy with GDP growth decelerating to a normalized 2-3%? Are 10% stock gains realistic long-term?
At the end of the day, the quality of life of a buyer is far superior, on average, than a renter. More space, more freedom, usually better communities than renters can access. Refusing to buy may lead to you serving your money rather than your money serving you.
Of course, market timing is everything. Don't tell people who bought real estate in 1998 and sold in 2005 that real estate is a bad investment compared to those who bought stocks in 1998 and sold in 2005. But don't tell people who bought in 2005 that real estate is a good investment and that stocks are bad.
Well said sir, if iHad any SB, would definitely throw one your way
Buying a home Getting married Having children Being Republican or Democrat Endless consumerism
These are all constructs meant to enslave people. Plain fact is buying a home is a liability in this economy. I will caveat this if you buy a condo/town home in a good sized city. You can easily rent in that case. Other than that it limits your mobility which is a killer in this economy.
People do shit "because they are supposed to" without questioning ever. Once you start questioning the bullshit social mores that you are indoctrinated into you will soon realize how limiting they truly are.
I will never own a home. I might buy a place as an investment property, rent it, milk the tax deduction, but "owning" a home as in white picket fence? Fuck no.
+1
Preaaaaaach
∞+
Sound like a hippie ;)
I think you're only looking at this from one angle. Sure, there are people who won't become financially independent because they decided to "settle in" to the usual American way of living life. They'll give up half way through the race (or before it even begins) and drown in mortgage payments/ monthly expenses/ college payments until the day they die. There will always be a lot people to run that course.
But then there are some people who understand that train of thought, learn from it, but do it anyways. They may work a little harder than the other folks, or work a little longer, or use their expertise more wisely to take home a little more $ than the first group of people. And while they can continue the progress of making even more money, they don't really care. There comes a time when they'd just rather spend their nights with someone they deeply care about instead of reading 10k's or watching movies by themselves. So while they may only be a little more financially padded, they'll still be willing to occur the "regular" debts of life because it's worth it to them. They know we'll all die one day and they just value the satisfaction of a family and home over the worry of having to continually pay bills until death.
Also, I wouldn't group endless consumerism with marriage and children in that list. Yes, they both cost significant sums of money over the long term and the cash can be used now to generate substantial dividends all throughout retirement, but you can't assume one because of the other. If you take the time to educate yourself, you can still have a frugal life with a wife and kids. Is it common? No, because you have a bunch of kids in the first paragraph clogging all the stats ;)
This reminds me of Ray Liotta in witness protection at the end of Good Fellas haha.
Great post SB, you left one institution of enslavement and mind control off your list ---> Religion
Meh, religion hasn't worked that well for a while. You really want to enslave people? TV, strip malls, sugar subsidies and alcohol for the poor, MBA Rankings and IB prestige for the smarter kids.
You're right bro. Get married, buy a home, start a family? That is so lame. You go be that childless 40 year old guy who rents a studio apartment downtown and lives by himself. Eveyone else has it wrong. Keep chasing the dream!
It IS lame if you are doing it because you are SUPPOSED to.
Good luck with the debt, divorce and kids.
FYI: @"TNA" is not a bro.
Also, everybody feels like they need a McMansion. If you watch an episode of one of those "house hunter" shows, you'll witness some lower-middle class, 40-hours-a-week corporate warrior couple who feel absolutely entitled to a 4/5 bedroom, brand New House in the burbs. Are these people insane?
Isn't this a question of risk aversion and being paid the risk premium? If you added Sansa Stark, who rented just like Marcella Lannister but invested in bonds instead of stocks, thirty years later she would be in the same position as John Snow. Marcella is better off because she's in equities. Her risk is that if historical returns do not materialize, she'll fare worse than John Snow in both inflationary and deflationary scenarios.
would you guys say this applies the same to countries which are much more space constricted like the UK? particularly which have 1 specific prime location (London)?
Interested in this as well, i've actually been flat-hunting for a while for a place in zone 2 central London.
It all depends on where you live...
http://www.forbes.com/pictures/edjf45hmil/10-big-cities-where-buying-a-…
I am currently paying a mortgage on a house, but I'd be paying 2x that mortgage in rent, if I wanted to rent a similar place in my city (not on this list, but there is a massive gap in mortgage costs vs rent, if you have an ok downpayment).
I like the thought from the OP. But...
To many unknowns to make a decision based on whether you'll be better off in 30 yrs IMO.
@DCDepository nails it. I'm out of SBs so I owe you.
Owning a home can absolutely be a more profitable venture than playing financial markets. It can also be seen as a diversification strategy. I'm looking at OP's operating assumptions and the conclusion drawn off of only one scenario. Ownership is not for everyone but it's a different mentality, just like the difference between running a company and being only an employee.
My experience was the Irish standard: my parents bought the worst house in the best part of town, and then fixed it up. THEN, they got involved in their community, helped better it, and the house+property became worth over 1000% of the mortgage. This is obviously an outlier, but I think you see what I'm getting at: buying a house can absolutely be a good investment.
The blanket statement of how people "come out ahead in all cases by renting" is not the case.
The other thing is this: the industry's size is largely the result of government policy designed to encourage home ownership. Not Bush's "ownership society" of juiced rates and low underwriting standards, but the system that's been in place for the better part of a century. It's designed to promote stability and longer term capital apreciation among the general population. By no means a perfect program, but largely successful. And it is true that the illiquid nature of housing DOES prevent lots of regular people from making bad snap decisions. Setting up such a system is the definition of good, effective governance...it doesn't matter what the capitalists among us think SHOULD BE, the fact is that the system worked really well until people started dicking around with it.
Me, I enjoy the flexibility of renting, so it works for me for now. But at some point, I will look forward to paying a premium to be able to call something "MINE". Again, the difference between renting/owning mentality is the difference between management/employee. People can tell me all day long how I'm "better off" paying $2K/mo for ten square feet in some beehive apt complex in NYC....I'll take half an acre in the sub-suburbs, the ability to throw people off my property, do as I damn well please, have privacy, have the freedom to do what I want on MY land, and not be bothered by a landlord.
One issue I do have with the US housing market was the Mcmansion fad. These were marketed to people by real estate developers building on a bubble. Personally, I grew up in a restored mansion with 12 foot ceilings....but the tradeoff was working on it for almost a decade. If people are willing to earn more money or do the work themselves, great, but let's be honest: most aren't. The average person has always bought much more reasonable homes.
Now we see the micro-home trend picking up speed. Maybe that's a bit much, but think about buying a home that's worth $15-40K, paying whatever the local property tax is, and having the ability to pick your home up and move it if you so choose. Then, people aren't paying rent and can put far more money in the markets.
you're out of sb's? damn, i think if you push up/up/down/down/left/right on your keyboard while on your account page it gives you 100 credits
Whoa cool. I'm going to hold off. Last time I jacked points I really was worried Patrick would boot me.
I think that is actually left/down/right/up/left/down/right/up/r2/r2/l1/r2
The OP's logic is well just flat out wrong. Rents =/= mortgage. Rents = mortgage+expenses+profit. Just take that into account. Your landlord isn't a charity case. You pay more if you are renting because the landlord expects to earn a profit on his investment.
You fail to factor in taxes on investments, money burn factor, escalating rent factor. On average rents are close to 2x principal and interest payments. Taxes, insurance, expenses and profit come out of the remainder of the rent. When you factor in around a 2.5 to 3% annual rent increase in 30 years the renter will be paying on average 4x to 5x the mortgage payment. When you factor in the average person makes more as their life progresses the buyer would be in an environment where their payments will be slightly increasing due to inflation of expenses and taxes. However the buyer over the average life of a 30 year mortgage will have to replace a roof once. With insurance you have a co-pay that you must meet before insurance will cover the rest. However that is usually a small amount in comparison to the cost of replacement.
Also the buyer can pull out the equity tax free. So in 5 to 7 years the buyer can pull out their equity tax free and use that to buy another property and then rent out the first property for a monthly cash flow that will increase on an annual basis. If the buyer does this for the life of the original 30 year note the buyer could have 4 to 6 additional properties all generating a positive cash flow which would factor into the end results. Also since the buyer would now be considered a "professional" their tax write offs would substantially increase due to changes in how the income is viewed by the IRS thus lowering his actual earned income through expenses deductions coupled with depreciation.
Its not as straight forward as you made it out to be.
This is good. Also, if you are patient and purchase a home at a discount to the market value, you can increase the likelihood of making a profit when you sell and hedge against future declines in home prices.
I'm generally in the "don't buy a house because it shackles you down and limits your mobility" camp but this is an excellent point. The fact that your landlord is renting your apartment out implies that buying is cheaper than renting on a certain timeline if you can finance things properly.
Also, the big case I see for home ownership, even for the home buying averse, is access to higher quality people and higher quality amenities. If you rent your whole life you are, to an extent, going to be living around the b team in b level neighborhoods with b level amenities. Something to consider along with the pure dollars and cents.
Agree to an extent, but there are just as many intangible benefits to renting as there is to owning. Also, home ownership many times involves wasted space which you have to pay for. Apartments allow you to precisely pay for what you need.
I don't know about the B league. Maybe for middle income people. I live in a very nice part of town, close to museums that I go to often. Great restaurants, etc. How many people living in McMansions go to whatever shit chain restaurant you want to name, paying for unneeded space. I'll take a maintenance free apartment in the middle of the city, with no painting, mowing, leaky pipes, etc etc etc.
Suburbs is where people go to die.
Unfortunately, there are way to many factors that drive whether or not one should own a home. Not all of these factors are financial. I will say, however, that there is a major difference between owning a home to be your "home" and purchasing a home with the primary intent of it being an investment (and living in it at the same time).
Thanks guys - glad this generated some discussion...
You guys have made some good points. Obviously housing is very much a market by market analysis, and so it's not fair for me to generalize this case to every mkt. But in most, I think it still applies. @Heister argued that average rents are 2x avg principal and interest, which is patently not the case. I cover the homebuilders so am pretty close to these numbers (at least in the top 20 metros). In most markets today, you can still rent a nicer home than you can for the same monthly mortgage payment. This is certainly true where I live, where you can rent a single-family home in the best neighborhoods/school districts, etc. for $5,000. The same home on a mortgage would cost >$7,000 in mortgage payments alone (e.g. $1.5-1.7mm house). This leaves out other costs; taxes, HOA, ins., repairs etc. I think its not right to assume that investors (owners of rental property) are cash flow positive on their units. They can still earn a good return and still be cash flow negative for most of the life of the loan.
Escalating rent is an issue with my calc - I tried to correct for this by not including any money for repair/remodel expenses. In reality, over the course of that 30 yr period you'd have to do at least one and maybe two major remods (kitchen/bathrooms etc.) Otherwise your home won't look current and it will actually lose value relative to the prevailing home price appreciation. I think that's a reasonable assumption (that the amount of rent increases is offset by total R&R spend), but admittedly I haven't done that much analysis there.
The other really important assumption that @DCDepository pointed out - I'm using backward looking returns for my expected returns on housing and real estate. To the extent that equity returns are sustainably lower or HPA is higher, this would be flawed.
The last thing I'll mention is for most ppl on this board (e.g. in finance), we're going to be able to prepay the mortgage as our incomes rise. This definitely changes the math. If you pay it off after 10 years the interest drag is not nearly as much. So i think it could make sense there. This is really for your avg Joe Budweiser who pays his mortgage every month but never adds anything to prepay the loan.
Also, rental property analysis is totally different. I think owning rental property can make a lot of sense (particularly in some mkts), and have considered this myself.
Your assertions that investors are taking a 2k/unit bath is laughably insane. The only way that your analysis is possible is if you are taking about a extremely mature investment market with next to 0 turn over. 5k a year rent equates to renting an entire house for $416.66/month. That in mid metro markets will get you a efficency in some of the shittiest areas.
If you refer to 5k/month the idea that investors are taking a 24k/year bath is even more insane. If this was the case property prices would be squeezed down even more than they were in 2008. BlackRock doesn't buy up entire blocks in residential neighborhoods with a 5 to 7 year timeline and take a negative cashflow hit on those properties.
I have rental property developed, undeveloped, agriculture and forestry land. I can tell you right now that if you think I am going to purchase a property and take a long term negative cashflows on the property well I have ocean front property in Nebraska to sell you.
Yeah obv I'm talking $5k/month. I live in a very high priced metro. HPA was ~25% last year alone, meaning the owner of that $1.5mm house earned $375,000 on price appreciation. If I had to guess I'd say most of those rental homes are owned outright, or the owners have lots of home equity (e.g. >50%), so the $5k probably does more than cover their mortgage payment in their case.
Lots of property owners can make a unit pencil with rent covering 80-90% of the mortgage payment, and then they take depreciation, mortgage interest deductions, HPA expectations, etc. for the rest. The PE's are not present in my market... they like the markets where home prices are at a significant discount to rentals - Vegas, Phoenix, Tampa, Sacramento, etc. Those are the exceptions, rather than the rule (at least today, maybe not 3 yrs ago).
I am curious about land investments though. Seems like a lot more upside on price appreciation there?
Wait, did someone seriously throw MS at me for giving an SB to TNA? lol.
I have been using this arguement for a bit of time now. I think renting is the way to go. The main reason people buy is due to the fact that most people actually think that the market is a NYC based Vegas. I feel that you may have left out a huge factor in my opinion ie Sweat Equity. In the course of 30 years how much time does one spend fixing up their house and repairing things on their precious weekends? This should be costed and added into the equation. In my opinion my free time is actually exponentially more valuable than my at work time. Site best for you. You Contrarian.
This is silly, if the purchase price is greater than 20x the annual rent, then rent. If it's less than 15x the annual rent, then buy. If it's in between - you're more or less indifferent.
It's proven here:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r…
Click advanced settings and set inflation to 2%, home and rent increase to 2% and return on investments to 7%. In NYC it's cheaper to rent.
When has inflation ever been two percent? If you believe the government bs well then I guess you deserve what you get.
Again, look at the assumptions.
The matrix hates when you call it out for being a social paradigm of control.
You know nothing John Snow
If John never sells his home, there are no real estate agent's costs. Not sure if you made a mistake by saying that the buyer pays the realtors commission. The seller always pays the commission. And BTW, the standard realtor's commission is 6%, not 5%. The 5% is only for new construction, i.e. home builder's rate.
There is no way that the HOA dues would be $200 a month on a $500K home. They would be much less, at least in the suburbs.I am aware that the seller typ pays all agent commissions. This adjustment is made to the terminal value of the house (e.g. in 30 years), because this reduces your gain from owning the home. Standard realtor's asking commissions would be 3 & 3, but these are frequently negotiated, and particularly in higher priced metros come out to closer to 5%.
HOA - that's a fair criticism. I've seen lots of HOAs in my area of ~$400 a month. I guess when I wrote this I was envisioning a rental vs. owning a similar quality condo in a similar location, so those would come with higher HOA fees. But you are right, out in the burbs it's probably less.
OP, you clearly have never looked at the London market (before anyone berates me I agree the trend is not wholly sustainable long term), but the benefits of renting vs buying are strongly in buyings favour, and mortgage interest isn't even deductible here.
You are correct... I don't know one single fact about the London market. What's the deal, are rents extremely high? I had thought a flat in London was upwards of a $mil now anyways.
Depends on area, but on a 5 year basis I'm averaging a 20% leveraged return in the house I bought to live in.
I bought a 1 bedroom approx. 2 years ago for 135 and 3 units in my complex have sold for north of 220 recently. Like someone else said, if you live by the rule of 15x and 20x you will always in the long run come out ahead.
There is no fallacy, really, once you make your analysis a wee bit less superficial...
It is true that over a long term, the real return on property is significantly lower than that on equities (1900-2011 property 1.3%, equities 5.4%). In fact, the real return on property is similar to that on bonds (1900-2011 bonds 1.7%). However, it's a pretty well-known and well-established fact that it's not returns alone that matter, 'cause otherwise we'd all just be sitting on a whole bunch of Venezuelan (just to pick one) equities. So the first additional element to consider is the obvious one, i.e. volatility. During the same period of time, the volatility of property has been a lot lower than that of equities and even lower than bonds (1900-2011 stdev of returns on property 8.9%, bonds 10.4%, equities 17.7%). Secondly, the real returns on property are a lot less adversely affected by inflation than bonds and equities (correlation of -0.52 for equities, -0.74 for bonds and -0.2 for property). Thirdly, the benefits of diversification offered by property extend beyond inflation, as property is one of the very few physical productive assets one can directly own (other than one's own body and brain). Fourthly, there is the various tax advantages that come with a mortgage. If you offset these with the other costs and taxes that come with property ownership, you should also take such costs into account when you're computing the returns on equities (e.g. commissions, capital gains taxes, etc etc). Finally, a mortgage is a way that allows one to match asset to liabilities in a pretty reasonable and relatively efficient fashion.
So given all of the above and provided that mortgage that leads to eventual homeownership is the most efficient way to obtain exposure to physical property, I struggle to see why one would consider it a poor vehicle of wealth creation.
Owning can be a great investment when you're a single guy and rent out your extra bedrooms. So not only are you having your mortgage paid for you are essentially paying nothing in rent yourself besides the social cost of having roommates. Then you take your cash and invest it in securities and you have a double lever of wealth building. Of course you make sure the property you buy is on a 15 year mortgage to immediately start building solid equity and the rent you'll receive from the rooms will cover your expenses for the most part. Maybe this can't be done in all markets but it sure can in some.
There are a few things OP is missing.
1.) Cap Rates. 2.) Expected return. 3.). You get a tax deduction on property taxes, too.
In Chicago, I can rent for $1650/mo or buy for $240k. In a nice building, nice location.
If I buy, my cost to own is a $50K down payment + $1500/mo and about $1100 is tax deductible at 28%, 33%, or whatever tax bracket I am in.
So for $50k, I get to reduce my rent by $150/mo and get something like $300-350 in tax savings. That works out to at least a 10-11% return, net of tax- equivalent to a 12-13% return before federal LTCG and state tax. This is before any capital returns on the unit. I argue that this return is no riskier than the stock market, and is perhaps safer than it.
My claim is that cap rates vs. interest rates help drive the decision to buy vs. to rent. For those who don't know, cap rate is how much your landlord makes, on a cashflow basis but excluding financing, from your unit. Take the rent, subtract property tax, HOA, and maintenance, but don't subtract the mortgage payment. That's the cap rate.
If the cap rate in your city is 1-2% above mortgage rates, and if you plan on staying for a few years, it makes a lot of sense to buy. So that makes cities like Chicago, Dallas, and Houston good candidates for homeownership, but it excludes NYC where the cap rate is something like 3%. I believe CBRE also publishes data on cap rates a few times per year, although most of us can figure out what a condo unit would rent for.
Now, as the unit gets paid off, your equity gets less risky, by definition. That is, the condo gets deleveraged. But you're paying down a mortgage that carries 4.5% interest. You originally stepped into a good deal earning a 10% return on risky capital. Now you're getting a 4.5% return to pay down something that isn't quite as safe as FDIC insured savings, but has a lot more in common with it than it does the stock market. Of course, if you don't like this, you can always do a cash out refinancing or get a second mortgage or HELOC and stick the money in the stock market.
Yes, mortgages naturally delever over time. But there's different ways to look at it and deal with it. As you build equity you get a lot more options with your finances and you need a little less in emergency savings. Your family may grow and you may move into a bigger condo- avoiding more in rent. If you don't like that, you can do a cash-out refinancing. Oh, and if interest rates go up, and those options become more difficult, then you've really hit the jackpot- because your rent would have gone up, too.
Bottom line is that John is saving a good $450/month in post-tax money by owning, if he's in the right city. If he sticks that money in the stock market, and occasionally cashes out his 2-3%/year in the nominal growth rate of real estate and also sticks that in the stock market, he'll probably come out ahead.
The problem with your analysis is that you cherry picked numbers and ignored several factors to sway the results in favor of renting. For one, you vastly underestimate the power of a fixed rate mortgage. Lets assume one person finances a home on a 30 year mortgage with a principal and interest payment of $2,000 per month, while another person starts renting at the same time for the same $2,000 per month. Fast forward 30 years and the renter is now paying $4,855 per month assuming 3% inflation per year, while the homeowner is still paying the same $2,000 a month, That is a difference of $34,000 per year in payments the renter is making and you completely disregarded that impact because of home maintenance costs? Come on now. No one is spending $34k a year on "carpets and paint".
I didn't even include the fact that the homeowner's payment will now go to $0 when the mortgage finishes, plus he had the advantage of riding the housing market growth over the 30 year period. You also assume that all in costs per month are higher for having a mortgage than renting, which is false in most areas of the country right now. I did a 15 year mortgage and my all in payment inclusive of principal, interest, taxes, and homeowners insurance was still lower than comparable properties for rent in the area. I gain around half of my all in payment in equity each month while I watch the housing market recover and my home value increase. I will never rent again and will continue to shake my head at people who can somehow convince themselves that renting is "smarter".
My rule is pretty simple. If you plan on staying somewhere for more than 2-3 years, and if your mortgage payment, PMI, HOA, and property tax with 10% down would be less than your rent, it makes a lot of sense to own. (Just be smart and put 20% down. That extra 10% down to avoid PMI saves you ~10% between PMI @ 0.65% on the principal and the 4.5% mortgage rate.)
There are places and situations where it doesn't make sense to own. There are a lot of places and situations where it does. My claim is that the two biggest factors in determining this are #1 how long you plan to live somewhere and #2 how expensive rent is where you live.
Haha, I am a dude.
If you want to get married, have kids and own a home, do it. But do it because you want to, not because you think you have to.
And maybe I will be unmarried and childless. If that happens it will be my decision. You can always tell someone who cannot think dynamically when they reply with anger and hatred when someone questions why you have to do something so many people in life automatically assume is essential.
Personally, I prefer the freedom an apartment provides. I might by a condo, but would only do so in a urban environment so I could easily rent or sell it. I will never live in the suburbs as it isn't conducive to the lifestyle I live or want to live. Furthermore, I intend on leaving this planet a little better than when I came into it. That will be my legacy and how I will live on. I don't consider breeding to be a legacy, but maybe you do.
Love how you assume having kids, a wife and a house magically makes you happy. I suppose you don't see people who get divorced, who slave away paying a mortgage or have shit head kids. But feel free to dismiss or shit on someone who holds a different view than you do. Obviously a sign of maturity.
I never said or implied that having kids, a wife, and a house magically makes you happy. Your exact words were that buying a home, getting married, and having children are all “constructs meant to enslave people”, which I completely disagree with. First off, renting is much more a form of enslavement than home ownership. You are at the complete mercy of the landlord and have no choice but to pay the increased rental rates every year. And if renting is so much smarter than buying, why do you think your landlord purchased the building you live in and rents it out to you? Do you think he’s doing that out of the kindness of his heart and he doesn’t turn a profit? Do you think you are not covering his mortgage, taxes, and insurance?
I’m sorry, but I’m just astonished that people on this forum with finance backgrounds are making the argument that renting is smarter than buying over the long term. It’s one thing if you say you just prefer to rent, which is fine, but you said buying a home enslaves you and is a liability. That’s just plain wrong. Home values have increased 12% over the last year and most homeowners pay less per month than renters with comparable properties. Renters experienced neither the value appreciation or the gain in equity homeowners have. And can you name one 30 year period in all of American history where home values decreased from the start to finish? You can't, so remind me why owning a home is a liability?
As far as marriage and kids, have you considered the crazy possibility that people get married and start families because they want to and not because they’re “supposed” to? People buy homes, get married, and have children because 99% of people would agree that these three choices are superior to the alternatives. Buying a home is better than renting one. Being married is better than being alone. Having kids is better than the alternative. Your comment is amusing because I can tell that you have never owned a home, never been married, and have no kids, yet you voice your opinions as though you know every intricate detail and are an expert on each of the three. It’s similar to someone that is 400 pounds overweight telling us all how we should eat and what to do at the gym. I just felt bad for the people reading your post who might actually make life decisions based on it, so I felt the need to respond with the truth. I’m sorry if it offended you.
Ah yes, thanks for the truth. @"TNA", time to start hunting for your spouse, a plot of land and just-the-right-size crib for your soon-to-be. Because the truth is, that's what's best.
It's funny to me that this argument has been pushed forward several times in this thread. Of course the landlord requires a return on his invested capital, the entire question posed by the OP is whether that return is adequate vis a vis other asset classes in which the landlord might deploy his capital.
Good point. It seems most people here either had perfect parents, or they entirely forgot their childhood.
Man, this dude gets upset when people think differently. Having a home 100% reduces your flexibility. Homes are liquid giving a long enough time frame, but try getting laid off and having to relocate within 3-6 months and tell me how wonderful this illiquid asset is.
I am happy renting, having the perfect amount of living space and being able to increase or decrease my housing as needed. I value having no commute and having the flexibility to relocate as needed. I have no maintenance other than telling a guy to fix shit as I walk out of the lobby in the morning.
Dude, by your response I can 100% tell you love being married and having kids. Good for you. I am not alone and have no issues with being single or alone. I don't think having kids is anything special either. But that is an individual choice.
Ultimately, I would simply like to tell you to shove your self righteousness up your ass. I know this is going to be difficult as your head is pretty far up it already. I've mentioned above that people should do what they want and not what society shoves down our throats. It is obvious that this point is missing you as you are exactly the type of person that shoves these ideas down all of our throats. Bravo to you sir.
Haha. I like how you start with a rational, somewhat thoughtful response, then jump to telling me to “shove my self-righteousness up my ass”. Obviously I hit a soft spot.
I’m self-righteous because I state facts? You are pushing your unsupported views onto others and you are making completely false claims about people who do things that are different than the things you do. I think you missed the entire point of the thread in that it was a comparison of whether renting is smarter than buying over a 30 year period. Instead of giving a meaningful response, you throw out some bullshit nonsense about how buying a home and starting a family is a “construct meant to enslave us all”. As if it’s some big conspiracy and the general public really gives a shit whether you get married and have kids. Yea dude, everyone keeps buying into this stupid relationship and reproduction thing, and living in a home together. You’re a genius. Go fuck yourself.
This is why I will be renting for at least another 5 years. I hate hassle. I do not want to have to go out and solicit bids for getting a new fence. I don't want to worry about yard maintenance, or installing a new water heater. My goal is to simplify every possible aspect of my life - bills on autopay, paycheck on direct deposit, no commute, etc.
That said, I'll probably bite the bullet and buy a house for financial reasons - once I have a job where I am not constantly looking for the "next step". That "house" may actually be an apartment - I'm not a fan of living in the city, but commuting is worse.
I'm in about the same boat as you. End of the day, when you walk away from an apt, that's it, all of that money is just completely gone. When you want to sell the house....you get something back. That and the sense of "THIS IS MINE" is huge for my state of being. Going to knock a wall out? It's mine. Paint it wacky colors? It's mine. Set up a 900 gallon fish tank in the living room, complete with sharks and clownfish? It's mine dammit, I'LL DO WHAT I DAMN WELL PLEASE.
I would just point out that the person who owns the home he lives in has a huge comparative tax advantage. He is not taxed on his imputed rent and gets to keep the "income" on the unit tax-free. He even still gets to deduct property taxes- everything but maintenance and HOA.
Of course, the disadvantage is that selling a home costs a good 6%. But you make that up in 2-3 years on the tax savings.
People buy a home because it is drilled into us that it is the best investment, yada yada. You are a perfect example of this brain washing. Buy it because you want to, not because everyone else tells you to. I value flexibility and mobility. I will never life in the suburbs. Not what I want out of life. You do, great. Whatever. My point is society tells us we have to do something because society needs the majority of people to follow this predesigned path.
Same thing with getting married. So many people do it because "it's the thing to do". Or in your case, because you are afraid of being alone. Get married because you want to, not because others tell you that you have to.
Same with kids.
You are the one getting upset when someone calls into question things you think are an absolute must. You didn't hit any soft spot with me, but the opposite is not true.
And I will go fuck myself. Coming from a person like you I consider it a compliment.
Hey thanks TNA, I think I get it now. All along I thought I had bought a house because it is a smarter financial decision than renting and I got married because I met someone I wanted to spend the rest of my life with, but now I realize I was just brainwashed. Before its too late, I'm going to sell my house, leave my wife, and move into an apartment complex like yours where I can get dry cleaning services. Thanks again for your insightful advice. You've really opened my eyes.
I agree. This dude paints a rosy and unrealistic picture. Plain fact is marriage and children are not easy. Children especially are taxing. Not everyone should, needs to or wants to take on either of these things. They are 100% limiting and anyone saying otherwise is lying. I personally am selfish, which is my right. I want the freedom to travel, eat out and explore new foods, live in cities that allow me to enjoy the things I am passionate about (art, eating out, cultural events).
This is also why I don't want to own a home (although I would probably buy a condo in the city which would allow me to rent it). I value flexibility and zero maintenance. I never want to mow a law, paint a house, fix anything. I want zero commute time, drop my dry cleaning off at the front desk, have a maintenance man fix everything, etc. This is my value choice.
My entire point is many of the things we say HAVE to be done are simply societal constructs forced down our throat. This above poster is a perfect illustration of it. He seems to think being alone is horrible when it is great for many people. How life without kids isn't a life worth living (which is a joke). These types of restrictive thoughts are throughout society.
And owning a home CAN be a great investment, but it isn't always. Unfortunately too many people think owning a home is an absolute when it shouldn't be. Same thing with marriage and kids.
What the hell are you talking about? You made the initial assertion so back it up. And why the hell is the idea of investing excess income preposterous? You show me any wealthy person and more times than not I will show you someone who saved and invested.
My issue with housing is inflexibility, illiquidity and total cost of ownership. Yeah, you'll build equity, but in reality you'll be drained of cash a little bit over time. Of course if we are talking about condo in a city this is different as there is less maintenance and more liquidity.
I am growing tired of this whole discussion. People should do as they please. I don't need to convince others to think like I do as I choose to only do what makes me happy. Others can choose their own path.
You've been outrageously defensive throughout this entire thread, which shows that you lack conviction in your arguments.
The point is, people don't place $50,000 into an investment that they would have otherwise used as a down payment and then $400/month savings from renting for 30 years into that investment. That's just not what happens in reality. If someone were to rent for 30 years and never own a home (which almost never happens--can you think of a single individual with a college degree that you know over the age of 50 who has never owned a house) then it is much, MUCH more likely for that person to take his or her savings and spend it on trips to Hawaii or on strippers or liquor--lots and lots of liquor. It's completely unrealistic to say that someone is going to say at a certain point in time, "At this point in time is where I would have bought a house, I'm instead going to put my down payment into investment X at x% return and then put my $400 monthly savings into a investment y at x% return, and when I'm 55 I'm going to walk away with $1 million more than if I had bought a house."
That's just not how the real world operates. More likely than not, the person in the example is going to put his "savings" into traveling to Europe or to snorting cocaine. The OP's point about investing in, say, the stock market being a better return than real estate is only valid if the person actually, ya know, invests their savings in the stock market instead of in Schedule 1 drugs...
Guys we need to be careful here. If NorthSider and DCDepository get into an argument here, the universe is going to explode.
Traveling to Europe and doing coke? What fucking planet are you on?
And I love the quip about being defensive. I have been anything but defensive. I've stated a personal value I have on liquidity and flexibility. People should do what maximizes their utility. My issue is with society jamming shit down peoples throat and individuals never trying to think outside the box.
@DCD - I am not going to engage you on this any further. You make bullshit assertions and simply pull shit out of your ass. No one who is rich rents? People who rent piss their extra money away on trips to Europe and coke? Fucking mind blowing you can spew this trash and then talk about someone else lacking conviction.
Lets follow simple logic. Every home owner was at one point a renter. And a responsible home owner puts 10-20% down on their mortgage. Therefore every renter has to save money to buy a home. So not everyone jetsets and rips lines on the reg.
Dude, if you are happy then fine. I didn't personally say uou were brainwashed. The level of butthurt you are displaying is beyond rational. Society does say these are the only normal things for people to do and simply because the idea of considering the alternate is somehow insane.
Getting married isn't a good idea. It can be a good idea. Buying a home isn't a good investment. It can be a good investment. Do you see the subtle difference? One is absolute and one is not.
I've said probably 3-4 times in this thread that owning a home or an condo could be a good move. With that said, your '' investment '' will not be that great if you have to liquidate it quickly or if the market turns/stagnated. Furthermore, many/most people buy homes in the suburbs. Well there is a cost in that also. Commuting, distance from amenities, etc. Buying a home, just like getting married, has opportunity costs and hidden costs.
I'm not going to get pulled into this, but I will throw out there that I've never understood what getting married offers over just continuing to date like you have been. I've always figured it basically fell into one of 3 camps from the guy's perspective (from most to least common): 1) you basically realize she's moving on if you don't, 2) you give a shit what dudes like industry84 think and do it because "it's time" and it's just "what you're supposed to do", and 3) you sneaky think she could do better and want to legally "lock" her in before she realizes it. Personally, the only one that would ever cross my mind is 3. But hey, with a 50% divorce rate that is absurdly downward biased by people that refuse to do it for obvious reasons- clearly people are making the "right" decision en masse.
As far as rent vs buy- I think this decision was far easier back in the days of "RE only appreciates". I'm sure there's a ton of underwater homeowners nowadays who'd beg to differ that buying is a no-brainer. In general, I tend to agree with the "if you're okay with being stationary- buy, if you value mobility- rent" idea.
+1
Yeah, I just don't get the vitriol coming from some people. I simply value flexibility and mobility more at this point in my life. Shit, I've worked at 3 financial firms, relocated for grad school, am on my 3rd (soon to be 4th) apartment since moving and am always looking and open to new opportunities in a different city. So my investment in flexibility has paid off.
And I am a firm believe in the saying the things you "own", own you. "Owning" a home is awesome until you have to relocate, lose your job, or want to leave, but can't because you have a mortgage payment hanging over your head. I am truly liquid in every sense of the word. As in boom, new city within 30 days if I want.
But that is my utility function. I'm not here calling people who own a home or get married dumb. I simply think it is bullshit that society parrots things like they are absolute truths. The "American Dream" and all. Think of how many people "dream" of "owning" their own home and then see it crush them. Yeah, bunch of people on a financial site are smart, put money down, keep their mortgage under control. I am not directing my message at these few individuals. I am talking macro, about people who over extend, live in an area with only a few potential employers, do 30 year mortgages, etc. All chasing this American Dream that fucks then.
haha..., this thread went very philosophical. I was merely trying to make a financial argument, and several ppl have made valid criticisms of that, which is what I was hoping for. Some of the criticisms however are without basis. E.g. lots of you have pointed out that there are tax advantages to owning... those have been included in the calculations. The mortgage interest deduction is truly valuable and I've reduced the monthly expenses by the tax savings from the MID. That said, I think there's a decent chance (~50%) that the MID will get phased out by congress over the next 4-6 years, so I wouldn't necessarily count on that for your return. I think I'm still comfortable with the ultimate conclusion that owning a home is a spectacularly bad investment over long time horizons for most Americans. Again, for those of us on WSO, most of us would prepay the hell out of a mortgage so this analysis doesn't really apply. It also doesn't apply to people who own rental property, which completely changes the IRR dynamics (because you're getting cash flow right out of the gate).
On the risk issue, I am not convinced that being invested in equities is more risky than housing over 30 year time horizons. Yes, home values go up over rolling 30 year periods, but the same is also true for the stock market, and the expected return is much higher. I haven't done the analysis, but I would bet you would have to be at least 2 standard deviations below the mean return for stocks over a 30 year horizon just to MATCH the return profile from housing. That's pretty abysmal.
My ultimate point is for most American families who aren't really saving for retirement other than making their house payments, they would be much better off taking that "renter savings" and adding it to their monthly 401k contributions than they would owning a home. Many people aren't even maxing out their employer match on the 401ks, which is ridiculous. I do agree that if that cash ends up in a checking account, the vast majority of people are just going to spend it on crap. But if you have a mechanism for forcing that extra $8,000 savings a year (or whatever the exact amount should be), I think people will find that they are much better off when it comes time to retire. Millennials in particular need to objectively consider this stuff, because social security wont be around by the time they get to retirement age.
I will say this for housing. It is a poor mans forced savings account. I think when you factor in all the true costs of ownership it has a worse performance than alternatives, but it is a simply way for most people to have an asset (since most Americans have no savings or investments). In that regard I will give it props.
I look at some people's views of marriage on this site and realize my head is tilting sideways like "Really??" I mean, dudes in their 20's really aren't interested in marriage as a general rule. Hell, I'm in my early 30's and don't want to get married yet. But I look at these vast rationalizations and wonder if some professional help might be in order at some point. Simple fact is that most people end up married and with a family, and those that don't tend to severely regret it later in life. Not having a family is unnatural. When I'm 80, I want big ass family parties where everyone gets drunk and argues, the dogs and cats and grand kids are running amok, and there's food and fun everywhere. Sure some marriages don't work out, but look at how often first jobs don't work out: you don't quit working do you? A job gives you a paycheck and some measure of social respect, but I have to say that I've met my share of lonely older people in finance and there's no fucking way I'll end up like them.
That is your opinion. Plenty of married people with kids end up 80 and lonely. Families are simply a byproduct of sex, which up until recently couldn't be had without kids happening. That and kids were an asset until maybe 60-80 years ago. Now they are a financial liability.
Some people like kids, bravo. But can anyone honestly say that they don't support more people choosing to not reproduce? The world is overpopulated and far too many people have kids when they ought not.
When I am 80 I want to look back on a self fulfilled life. That might or might not include a family.
You'll have to forgive me, @"UFOinsider", but I object to the platitudinous moralizing below.
Professional help? Unnatural? If I didn't know any better, I might think I was reading from the Neoconservative daily bulletin. I'm certain you don't mean to be so condescending; therefore, I will ignore this part.I just find this analogy mystifying! Your dismissiveness towards divorce deconstructs the entire premise of marriage as I understand it! When a relationship doesn't work out for me, I don't cease dating (which seems like the more accurate extension of your occupational analogy); but, surely, if I accept ahead of time that there is a meaningfully non-zero probability that my relationship won't work out, I ought not consecrate it within an institution that commits it as a life-long engagement. Call it lifestyle parsimony, but if I'm assumed to acknowledge that marriage is fleeting, why not apply a healthy swipe of Occam's Razor and forego the lifetime commitment formalities?
The fact that you view marriage as so inextricably linked to happiness indicates, to me, a lack of independent satisfaction. If, at age 80, my life is so miserable that the only element of my existence that clings me to peace-of-mind is a contractually shackled spousal companion, please commit me to an immediate death. Mercifully, I find far more fulfillment from a crew of incredibly devoted and supportive friends than I ever have from the comfort of knowing that the person seated across from me (at least at one point) shared my romantic desire. Romance may be fleeting or it may be permanent; which one it is doesn't concern me much, since I am not, nor will I ever be, the least bit lonely without it.
Well said, thank you. I have never seen so many people in one place opposed to marriage and family and I just couldn't wrap my head around it. I guess it could be the industry folks from this site work in or the average age, or maybe both. The amusing part is I bet 90% of the people here lashing out against marriage will end up getting married at some point. And I don't quite understand using the divorce rate as a reason not to get married. Only 62% of people who start college graduate so is that a good reason not to go to college? The person who decides not to go to college based on that fact will live with the same regrets as the person who never gets married because of the divorce rate.
Right? Marriage is not for me right now. It's really not for most young people. It's definitely not for most of the guys on here. All fine and well, we're supposed to want to bang lots of chicks when we're younger...and women do the exact same thing. But then I see these intricate constructed theories about this that and the other thing and I'm like.....what a bunch of weirdos. At first, I started actually forming a contextualized reply, and then I'm sitting here thinking "Dude, you want to be single, be single. Let your freak flag fly. It's cool. But these bizzare theories aren't fooling anyone."
The thing that makes me laugh is that these are people that look down their nose on social sciences that have vast, numerous, and documented (as in, with hard data) theories of social relations...and there's still no concensus because there's just too many variations on real life. Bunch of pseudointellectuals trying to rationalize getting laid as a single person living in a big city? It's, just, so.....laughably strange. I guessing most of you have seen 'Big Bang Theory' when you see Penny's reaction to the shit coming out of the Howard's mouth: that's really my reaction right now. Like wait wait wait, hold on...........REALLY?!??
I'm going to stop now, I'm half way done with a pitcher of green beer and there's no sense in shooting my mouth off when I could be drinking more green beer and hitting on chicks.
Peace.
I admire your certitude in the serviceability of your own value judgments, but assure you that your confidence that your opponents are consigned to a life of regret is misplaced. As for this silly analogy, thankfully for the college graduates of the world, the utility of attending college are so empirically clear as to outweigh the improbability of success with the potence of its benefits. Returning to the point-at-issue, the supposed profits of marriage remain nebulous as ever.
It blows my mind that people can't understand this. Here it comes in as simple a form as possible....
Two people have feelings for each other so they: Date-----> if the feelings remain- continue dating. If the feelings go- move on (zero frictions) Marry-------> if the feelings remain- stay married. If the feelings go.........
If you can't understand it after that, I don't know what to say. Two scenarios with the same upsides, and drastically different downsides. Nothing more, nothing less.
Only caveat with this I think is that marriage has more of an upside if you plan on having children and a family. Also, most of the friction in a divorce would likely revolve around said children (at least, that's what I'd imagine)... and maybe the dog.
... and one's savings. Just a thought.
I can't believe I got sucked into this conversation. I'm getting some green beer. Peace.
WTF are we talking about??
Who the fuck knows? The WSO we all know and love.
Not gonna lie, I chuckled at OP's utter confusion regarding what's become of his thread.
http://www.philly.com/philly/living/20140317_Tell_Me_About_It___She_s_n…
My husband and I always wanted children, and six months ago we were blessed with a wonderful, healthy baby girl. I love her to pieces, but whenever someone asks how I am "enjoying" motherhood, I guess the answer is - not all that much.
My husband and I had such a great life before this, and now I feel sucked into this vortex of constant, constant care that is mentally and physically draining. Yes, there are moments of joy, but most of the time is just a grind, mixed in with intense bouts of worry.
I do stay home with her full time and work from home part time, but my husband is extremely hands-on, and we have family nearby who will happily give us the occasional break. I know how incredibly lucky I am, especially to have a healthy child, but I sometimes fantasize about an alternate life of just my husband and me, traveling, going out to dinner, enjoying life as a couple for the rest of our lives.
What a funny coincidence I stumble on this article haha
In all fairness, there are maybe a handful of rogue people in this thread going against convention. Most people will get married and shit out kids, no doubt. But the trend line is more people choosing not to breed and not to get married. More people need to reject boilerplate convention and think outside the box, that is all I am saying.
Dude, I have seen you edit your post 3 times. Go drink your beer. And FYI, when you call someone out for looking down their nose at someone and then do the exact same thing it is called being a hypocrite.
Holy shit Mr. Bro. We get it, you are Mr. Marriage. Like next time E Harmony needs a spokesperson we can nominate you. I think it is a little ballsy saying marriage>college degree when one has intangible value and another has tangible value.
You're right man, I should. Maybe you should open an account so you have more going on in your life outside of work and dry cleaning.
Hey Northsider, you've never been fucked by a Rhino so you can't comment on it sucking or not.
Horrible analogy
Actually the same analogy you made. Telling someone they don't know because they haven't tried it isn't an answer at all. You don't know the benefits of not being married because you got married. So the same answer can be applied to you.
If someone chimed in that they were married and divorced you'd say they just didn't find the right person. So in essence you will always discount someone's opinion or experience that doesn't agree with yours.
Furthermore, no one is attacking or devaluing your individual choice. People are simply explaining their logic behind making a choice you did not make. Regretfully you refuse to see the other side of the coin. Martinghoul is the perfect example of someone engaging a differing opinion in a thoughtful way.
And yes, I have more going on in my life than dry cleaning. Not sure why you focused on that element of convenience, but whatever. No need to engage in personal attacks as it doesn't help your case.
You're trying to say you are right when you are missing the fact that both marriage and home ownership have large, intangible benefits or costs.
Example. Suppose someone hates being alone. Marriage would have nothing but benefits in this regard and would obviously be the optimal choice. If someone liked and needed alone time then it would have negative costs.
If someone loved an area and stayed their long term and also wanted a house of their own, home ownership would have massive benefits. If someone moved frequently and was relatively lazy then it would have negatives.
My original assertion was that most everyone gets married, buys a home so kids because society tells us to, instead of looking at their individual needs and decides for themselves. In today's world where a person needs to look for jobs nationally and more times internationally, the benefits of renting are more often greater than owning a home.
Same with kids and a wife.
You seem to be projecting your utility function on everyone else. Furthermore, I don't need to smoke crack to know I don't want it. I also don't need to buy a house to know I'm going to move or get a new job and don't want to deal with it. I also prefer an urban lifestyle and hate Commuting, etc. For me the liquidity premium and quality of life outweigh benefits of owning a suburban home. So for me the old addage is a bad guiding light.
Having kids is 100% a personal value benefit or cost. The economics are always on my side in regards to this topic. If someone wants kids fine. I'm not a fan. Doesn't make my life any less enriching and vice versa.
Same with marriage.
And stop discounting everyone's opinion or argument. Your individual experience isn't applicable to everyone else.
May I point out that you're being a little inconsistent in your arguments above, TNA? Especially, in light of your points above regarding people engaging in excessive generalizations and projecting their views on the rest of unsuspecting humanity, yourself included. Are you not doing the same by asserting that "most everyone gets married, buys a home and has kids because society tells them to"? For instance, I am part of "most everyone". Why are you not extending to me the courtesy of assuming that I am doing all of those things as a result of a carefully considered choice?
We can dissect language all day I suppose. I could come back and also argue that the members on this site do not reflect society at large as we are having a pros/cons argument about marriage and are looking at the various benefits. Therefore "most everyone" excludes us.
I probably should have said majority or simply omitted saying that and instead said "standard social mores should be questioned more, instead of simply followed". A more open statement.
The essence of my statement is that things society (in this case US or Western) value should be questioned by people more and not simply accepted at face value. That would be the core of what I am trying to convey.
I like how this thread has devolved into a pissing match about how much marriage sucks/is great.
@martinghoul @northsider
This is awesome.
I think the crux of this topic is we each value different things. Marriage and non-marriage have pros and cons. The cons for one might be a pro for others. I don't think there are any absolute right or wrongs regarding this. My only issue is I think too many people do things because everyone else is doing it and should open their mind.
I don't think these issues are effecting most of the people in this thread.
I agree in the sense that 1) everyone should be free to enter into any voluntary arrangements with other parties and 2) one man's values are not superior to another's in any a priori sense.
However, I am nevertheless willing to defend the case against marriage for two reasons:
1) as with many fringe views, I find all-too-often that people are too hasty in dismissing the rationale behind an unmarried lifestyle and thus haven't considered it as a plausible alternative. From that perspective, it is useful to present a case
2) I wholeheartedly believe that both pro-marriage and anti-marriage advocates in this thread are seeking the same ends. Once this is recognized, both parties will agree that if we can achieve the same ends, we should prefer the society without marriage to the one with it (Occam's Razor). The only factor currently preventing us from achieving those ends without marriage is a culturally-encouraged and psychologically-destructive romantic jealousy, which people feel is mitigated by boilerplate legal obligation. If we can transcend the destructive power of jealousy (as people throughout history and in modern society have), we can: i) eliminate the astronomical social costs of divorce, ii) dispose of the misogynistic elements of marriage (man asks father's "permission", father "gives up" his daughter to the groom, etc.), iii) potentially improve the home environment for child rearing and iv) promote more bespoke contracts between monogamous couples (destigmatizing prenuptial agreements, providing for various types of "breakage provisions", create financially conscious arrangements, etc.) and admit that marital arrangements ought not to be 'one-size-fits-all'.
I means let's get down to brass tacks. The average us male has around 4-5 sex partners before marriage. That number is skewed by the 10% of dudes crushing it. Most people simply would be pretty miserable single for the long term.
Also, the bottom 90% make less than 100k. Considering that you need some coin to get laid as you get older it makes perfect carnal and financial sense to get married.
You're right, people only get married because they haven't had a lot of sex partners and they make under $100k. Do people really think like this?
I believe the exact opposite is true. The broke guys who can't get laid are the ones who end up single, because no one wants to marry them. Again, you're pushing your biased opinions on others. You aren't special because you're single and rent an apartment.
http://www.kinseyinstitute.org/resources/FAQ.html#number
I was a tad low, but pretty spot on. Most dudes suck at getting laid and don't make a lot of money. Deff makes marriage look pretty good.
Wow, pretty surprising.
I literally have less than zero interest in engaging you in any discussion as you seem to be unable to have one calmly.
People get married for a ton of reasons. I am simply saying many men would lead a lonely ass life being single, which is supported by the above data. Being married has a bunch of benefits, including a live in friend and someone who has regular sex with you (one would hope).
Dude, you are absolutely nuts with this shit. I'm not PUSHING anything on anyone. I am simply throwing some ideas out there. And frankly, everyone was having a great discussion and examining reasons behind things before you come rolling in here.
Wow, read the posts you just wrote and you say I'm nuts about this and you are calmly having a discussion? You are insulting anyone who is married.
We get it. Dating hasn't gone well for you. You don't have enough capital to buy a house. Just stop taking it out on people who are ten steps ahead of you in life who own homes and are starting families.
Oh, sure. I am not going to insult your life choices. I really don't understand why you cannot have a calm discussion. Your life choices are not mine, mine are not yours.
Relax and enjoy your family and house. I will do the same on my end.
Furthermore, how on earth is your idea that broke guys end up single? Lower income, less educated people actually have more sex than higher income, educated people. Additionally, since the average HOUSEHOLD income is $50K, I think it is fair to say that most broke people get married. I guess the definition of broke is subjective, but I am coming from a finance forum frame of mind.
And where on earth did I ever say I am better than someone with a house, etc. I simply value an apartment lifestyle more than a house lifestyle. My personal decision.
You sound like the person trying to shove their OPINIONS down other peoples throats. Just relax. You made decisions that you deem to be valuable, enjoy them. I don't share your views, values or opinions and do things to maximize my value and enjoyment.
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