The first thing that came to mind was that we’ve bought exactly one house in our life. Purchased in 1982 and we still live in it. The mortgage has been paid off for over 20 years. Every other person I know has owned at least two houses, many three or four houses. I imagine the calculation for house vs rent would need to take that into account. Yes, there are plenty of expenses, but I love owning my little castle.
Cars have been similar. We buy new. I finally have given up the ghost on my 2007 Honda Accord and am currently looking to buy a new car. I’ll take my time doing it. My wife’s 2012 Honda Civic will be our “new” second car.
But if you really want to know what expensive is, try having kids. We paid for two sons including undergraduate degrees so that they started out without debt (we dislike debt). Set us back a pretty penny, but I wouldn’t change it if I could.
I know everyone is different (that’s a good thing), but holding or hugging or hanging with grandchildren is just priceless. They’re so sweet and funny, and sometimes they can be a royal PITA. Life.
As I reflect on my life, despite many ups and downs, I think I’ve been pretty lucky. We were very careful financially, but not every decision was a financial one. Through it all, we managed to save enough for a comfortable retirement. I’d say damn lucky.
But we’re all different. That’s why there’s seldom one right answer for everyone in this crazy life.
I grew up in a Connecticut home with a lawn that had to be mowed in the Summer and then cleared of Maple leaves in the Fall. The was also a long driveway that ended in an apron the width of a 2-car garage that had to be cleared of ice and snow in the winter. I wasn’t looking to duplicate that experience as an adult. I played golf and tennis on the weekends.
This is definitely something that they rarely account for. Selling one house and buying another is ridiculously expensive. It can cost anywhere from $15k to $50k for most people. That’s a large expense that comes directly out of your pocket one way or another. Do that 3 or 4 times until retirement and you’re talking about some real money that could have instead been invested over those 30+ years. Imagine a typical person spending on changing houses of $15k at age 30, $25k at age 40, and $40k at age 50. Add it all up, with a conservative investing return, and that’s worth about $520k at retirement!!!
We’ve also only purchased one house and still live in it now that I am retired. Not only that, but I bought this house as part of a corporate relocation, so the company paid many of the closing costs.
but, But, BUT…the media tells us we must “trade up” to a bigger, fancier, house, periodically. I had an empty nest coworker, that was looking at bigger, fancier, houses, for just the two of them. Of course, she also leased cars, and two years into the 3 year lease, she was looking for a lease 'pull-ahead" deal, so she could get out of the lease, and into something new. One time, she bought a car, instead of leased. Without the discipline of a 3 year lease, it was gone in only a year, for something new.
Salesmen, and finance people live for someone like her.
If you think future AI’s advising people on economic issues will be impartial and have the your best interest at heart, well, I have a bridge to sell you. Every Tom, Dick, and Harry, or rather every Ed (Jones), Chuck (Schwab), and Sam (US Govt) will have an AI, each claiming to be the shiniest.
I grew up in Hartford, right there in the belly of the beast a few blocks from Trinity College. Although 50 years ago it wasn’t as bad as it is today.
Interesting anecdote. Back around 2000 I did a trip to Ireland with my mother to the Dingle Peninsula in Kerry where my parents are from. On the North side of the peninsula near Brandon there’s about a 400 ft high cliff that overlooks the Atlantic that’s popular with tourists. I was there with my mother and uncle when a family from New Jersey drove up in a rental car and asked my mother a few questions about the area. Both my mother and uncle speak with thick Irish brogues so the New Jerseyites thought they both lived there. So then they ask me a question and I answered and they said. “Oh, you’re an American. Where are you from?” So I said, “Well, I grew up in Hartford”. So then the women looks kind of confused and says, “Where in Hartford? Do you mean Glastonbury or Simsbury – surely you don’t live anywhere near downtown.” I guess a lot of people know Hartford. {lol}
Back to Weathersfield for two years. Then to Bloomfield where I was raised. Now in Avon. Mom and dad are on the other side of Farmington.
Hartford has made a resurgence in the last ten years. Not so much the north or south ends but the center business district has higher end condos for younger people. There was a move about ten years before the pandemic for younger folks to want urban living.
Sure, you’ll need to know who designed the AI. But I’m sure Consumer Reports or an equivalent non-profit will eventually field a financial advice AI that trustworthy and impartial. At least I hope so.
I paid for one about three months ago. My sisters and I have plans to retire in part to Ireland or Europe with our closest cousins. The cousins might prefer the south of Spain as that is their Florida.
I’m not sure I agree with the rent being better than owning your home.
My own experience has owning being the better choice.
Here are the numbers.
The house has 4600 sq. ft of living space. The garage is 1200 sq. ft. It’s on 2.5 acres, partially wooded (by Kansas standards) and has a 60’ wide creek as a back property line.
I built the house in 2002/03. I’m 20 years into a 30 year mortgage.
I’ve kept all of our family finances on Quicken since 1995, so it was easy to pull the numbers. When I add the 20 years of interest (not principle), every dime that I have spent on the place (includes expenses for construction, garden, repairs, insurance, loan costs, landscaping, solar construction and miscellaneous) and the property taxes it comes to 95.47% of the current value of the house.
Now I have one advantage that most people don’t. I built the house myself. Did all of it except the concrete and HVAC. This was the 3rd house I’ve built for my family. Each time I estimated I saved 30%. By that I mean if the house appraised at $100,000 at completion I usually had about $70,000 in material. And 1 year of my life gone building it.
So factor in an additional “cost” of 30% for my labor the total now become 124% of the current value.
So the question is, what would the rent be for a place like this? And after 20 years of renting what would I have to show for it? There would be no equity. At least now I could sell the place, pay off the remaining balance and pocket the difference.
I realize I should have written my response differently now GR. I would prefer to rent a house than rent an apartment. But I’m now on my 4th house that I’ve owned, and have a debt-to-equity of only 15%. But yeah, I’ve spent a lot on realtor and moving fees, and repairs. Too much to remind myself of.
The worst offender was house #2, which we moved to a year after marriage to get closer to where both of us worked. But the house was older than me and needed a lot of work. The final straw was $12k in plumbing for me. But that house appreciated like mad for the 4 years we owned it, and the down payment on house #3 was over 50% as a result. We got into that house because we let our realtor push us around on listing house #2 too soon and as a result ended up in a house we really didn’t want. Stayed there 4 years still until we realized “this is stupid”. House #4 we plan at least another 6 years until daughter is done with primary school and off to college. Then who knows. Doubtful we retire in this house but it would actually be possible for us to.
Yep, I got my Irish passport back in 2008 when did a cruise of South America and Antarctica. A US passport got devalued during the embarrassment of the Bush Administration and lots of countries started to charge large visa fees to Americans. I saved about $600 on the cruise traveling on the Irish Passport.
I don’t have any interest in living in Ireland, but I’d be willing to do Barcelona or the South of France.
I’m not sure on the economics of remodeling a house. Being in construction, I’ve helped a lot of friends and family with projects that had to be done but the dollars were not ever going to be recouped when it came time to sell.
And moving often would sure impact costs too. Relator fees here were 6% 20 years ago. That griped my arse when I sold house 1 and 2. Fortunately when you are building you are paying 6% only on the land/lot purchase price.
That’s a nice comparison. I was looking for a dishwasher and found lot’s people happy to give advice. It was both all over the map and exact copies of other websites. People say Consumer Reports is biased in their evaluations of Tesla. Walt Disney bought National Geographic, and I wondered if it would make the magazine less trustworthy. The Governor of Florida probably thinks so.
Your home owning experience was improved by the fact that you converted your “sweat equity” labor, free of wage & salary taxes and FICA into home equity. That same labor bought from a building contractor with his markup, and then financed with a mortgage, would have cost you 5 or 6 times more. That’s the environment most home owners are swimming in.
As Robert Shiller reports, the long-term return on the average US home is inflation plus 1%. So most homeowner’s do make a return. It’s just that it’s far less than some one who rents an equivalent home and puts the savings from not owning a home in the stock market at inflation plus 6% to 7% over 30 years.
I outlined my own renting and home owning experience over the past 40 years here (See #4 in the article.)
Except for the fact that “most homeowners/renters” would not make anywhere near inflation plus 6%. They would be lucky to get inflation +1% (coinkidink?).
Correct. I’m assuming you’re smart enough to invest in a low-fee index fund. We’ve known going all the way back to the 1994 Dalbar study that the average investor picking the next new mutual fund, or the “rare all-in buy recommendation”, and paying a financial advisor to help them, is netting about 2% per year.
