I miss renting. I'm such a bad house-keeper and maintainer than I long for the days when I didn't have to lug garbage cans to the curb (mind you, my curb is pretty close), pay a separate water bill, or fix appliances when they break. I do love being able to paint my home whatever color I want, but sometimes, I would relish having less responsibility and more disposable income.
This is an interesting analysis of home ownership for short-term financial planning, but I think it's overly simplistic when taking a long-term view. Most seniors squeak by on their social security checks and retirement savings only because they purchased modest homes 30-50 years ago and paid off the mortgage. Yes, they must pay property taxes, insurance, and do maintenance, but those usually cost far less than renting. Sure, renting may be cheaper in the short term, but how many people are -really- disciplined enough to put the extra savings aside and invest it wisely so it grows through bull markets and bear?
Furthermore, with all the corruption coming to light in the financial markets, what's to stop those "safe" investments you made while renting from imploding along with the rest of the market and leaving you out on the street? Or evaporating from runaway inflation? Who can guarantee social security will be there (or keep up with inflation) when you 30-somethings retire as Congress has been borrowing against the social security trust for decades to provide tax breaks to the wealthy?
If you live in a real estate "bubble" area where housing bears no relationship to salaries (such as San Francisco Bay area), then renting may be attractive. Otherwise, I'll take home ownership any day. Home ownership may not be glamorous once you eliminate buzz about long-term capital gains deductions and "house flipping" for profit, but at least you can live in it, plant a garden, raise hens, and clean up deadwood to burn in a wood stove for heat (things a landlord would never permit) and trade home-grown veggies to pay your property tax bill while the rest of the economy implodes.
This, of course, assumes you buy a -modest- home and pay it off as soon as you are able and not a McMansion with an exotic mortgage...
It's a scary feeling to suddenly be physically unable to nurse a baby, and wonder what you are going to do. Thank heaven we have good infant formula availible here in the US, and if a parent does her (or his) research, then chances are pretty good that everything will be alright. I was quite amused to find during all of my research (and I spent weeks looking into everything to make sure I was giving my son the absolute best) to find that all milk-based, regular infant formulas (not the ones for babies with special digestive or health needs - I didn't check into those) are very close in their nutritional content, and made by one of four major manufactures. It took years for formula makers to get approval to add DHA and ARA because the FDA is so strict about making changes and testing with regards to formula. I appreciate the article, Lindsey! It is always reassuring to have a reliable source of information, like WiseBread.
Those responsible WILL have their "Heads Roll"...Literally and Without Question....unlike the US where the responsible management will just get a Smaller Bonus and a Golden Parachute on the way out the door to the Yacht in the Carribean or at most a "Naughty, Naughty" Slap on the Wrist and Probation with some Community Service from the Courts.
Old enough to remember the 'be-ins' and sit-ins of the pro-ecology, anti-war activists, I'm delighted to see the Green Movement literally being recycled once again. In those days, we mostly tried to cut down on driving, reduce landfill and clean up the water and air. Today's movement goes much further. The locavore is closest to my heart; this summer we had a garden which supplied all produce for months except for potatoes, onions and carrots. (Guess what we're including next year?) Our on-line business is moving rapidly away from printed, bound books to downloadable products only, and we recycle copy paper, paper clips, etc. until they're no longer useable.
Are we green? Yes, but we can do better. And it looks like this nifty book has the answers. Can't wait to get my hands on it and start my granddaughter 'growing up green' at seven months!
Our family of 4 use green methods of living, but we not consistent enough [I think] with those methods. I think having more reference material on the subject would help. Not to mention that Linsey gave it a good review, which doesn't hurt. Thanks
Another point is that buying a house adds to your diversity. If I had rented I would have been able to save more money each month (even now, after 12 years with a fixed-interest loan, surprisingly). But where would I have saved it? The same places I'm saving all my other money: stock funds, REITs, CDs/high-interest checking accounts. I like that if my taxes get too high for me, because my house has become too valuable, then if I have to move, at least I get a big pile of money (from selling my extremely pricy house).
I usually suspect I would have been better off renting and saving the extra money, though. Especially as the things that I don't like about my house start to drive me nuts. When you move all the time, the annoyances change. But now I want to renovate to fix those annoyances. (I want a dishwasher. And a dryer. And shaded parking that's off the street, for both cars. Even though no one really needed these things back in the 1950s when my house was built.)
Which leads me to another issue: decorating costs. People usually spend way more decorating something they own than something they rent (which they are usually not allowed to paint, etc., anyway). Ideally, moving less, I'd buy less furniture, because I'd always have stuff for the place I'm in, but if you keep switching roommates, or you keep buying more stuff, your needs change anyway.
From my point of view I always look at the debate in terms of retirment planning. I am currently thirty and I should (all being well) be mortgage free in about 15 years at the most. This means that for the following 15 years I'll be able to put considerable sums away for my retirement (or more likely, enter a long period of semi-retirment straight away). On the other hand, if I were to rent, this period of reduced outgoings will never arrive.
The UK has been a very pro-ownership culture for the last 50 years, and I don't really see that changing much.
@Guest
It's true that your mortgage payment stays fixed (assuming a fixed-rate mortgage), but that doesn't mean your total housing costs are fixed. Property taxes, utilities, and maintenance costs continue to rise with inflation. In my case, my property taxes have almost doubled in the 20+ years I've owned my house. Water, power, garbage hauling, insurance, and other costs have risen at least as much. My housing costs increase every year, even though my mortgage doesn't.
Great article. In romance opposites may attract, when it comes to retirement, opposites can distract. Couples, if they want to avoid problems later in their marriage, should talk and agree on a retirement plan before they get married.
Here's a list of questions you should ask your soon-to-be life partner.
Philip, I largely agree with you. There is one important aspect you didn't touch on: inflation.
I just bought a house. Even though I got a good price and a good interest rate on my loan, I still pay substanitally more each month than I would to rent a equivalent house.
However -- and this is the important part -- rent tends to increase each year. My mortgage payment will not. So 10 years from now, I expect my mortgage payment will be lower than the rent on a similar house. 20 years from now, I expect my mortgage plus home-upkeep expenses will be lower than the rent on a similar house.
All good points. Those sorts of issues--travel to work, access to shopping and entertainment, etc.--are really orthogonal to whether you own or rent. (They're a function mainly of your address.) In any particular place, of course, some neighborhoods will have lots of rentals a few opportunities to buy, and other neighborhoods the reverse.
In fact, that sort of selection limitation is a major issue. Around here, for example, it's pretty easy to find an apartment that's roughly equivalent to a small house, but there are very few that would be equivalent to a large house--if you want 2000 sq ft, there aren't many apartment options.
Exactly. This is what I meant by "control"--the ability to make your own decisions about such things as keeping animals. (And this is the reason I continue to think about buying a house, even though where I live, renting is cheaper.)
It's certainly possible--it depends entirely on local prices in your area. Do make sure that you're including the entire maintenance burden--each year's share of large future expenses such as a new roof, new furnace, new air conditioner, new appliances, doors, windows, painting, floor coverings, etc.
I always find this sort of analysis useful and enlightening. One thing I will add though is that as a long-time renter, I rarely had the opportunity to be more self-sufficient by gardening and never by keeping animals, as I do now as a homeowner. Landlords don't tend to allow renters to do much with the yard, at least in the various places I lived. Right now we derive a very significant financial benefit from our property by gardening, keeping hens and from the very large old apple tree that came with the property. We're now spending much less than $100 per month to feed two adults. This is only possible because we have the garden and the hens. I would have to figure this into our valuation of our home.
I miss renting. I'm such a bad house-keeper and maintainer than I long for the days when I didn't have to lug garbage cans to the curb (mind you, my curb is pretty close), pay a separate water bill, or fix appliances when they break. I do love being able to paint my home whatever color I want, but sometimes, I would relish having less responsibility and more disposable income.
Plus, my mortgage is pretty hefty.
Thanks for offering a chance to win a copy of the book!
This is an interesting analysis of home ownership for short-term financial planning, but I think it's overly simplistic when taking a long-term view. Most seniors squeak by on their social security checks and retirement savings only because they purchased modest homes 30-50 years ago and paid off the mortgage. Yes, they must pay property taxes, insurance, and do maintenance, but those usually cost far less than renting. Sure, renting may be cheaper in the short term, but how many people are -really- disciplined enough to put the extra savings aside and invest it wisely so it grows through bull markets and bear?
Furthermore, with all the corruption coming to light in the financial markets, what's to stop those "safe" investments you made while renting from imploding along with the rest of the market and leaving you out on the street? Or evaporating from runaway inflation? Who can guarantee social security will be there (or keep up with inflation) when you 30-somethings retire as Congress has been borrowing against the social security trust for decades to provide tax breaks to the wealthy?
If you live in a real estate "bubble" area where housing bears no relationship to salaries (such as San Francisco Bay area), then renting may be attractive. Otherwise, I'll take home ownership any day. Home ownership may not be glamorous once you eliminate buzz about long-term capital gains deductions and "house flipping" for profit, but at least you can live in it, plant a garden, raise hens, and clean up deadwood to burn in a wood stove for heat (things a landlord would never permit) and trade home-grown veggies to pay your property tax bill while the rest of the economy implodes.
This, of course, assumes you buy a -modest- home and pay it off as soon as you are able and not a McMansion with an exotic mortgage...
Good analysis. I would suspect for most people the financial aspect of owning vs. renting is secondary, however.
It's a scary feeling to suddenly be physically unable to nurse a baby, and wonder what you are going to do. Thank heaven we have good infant formula availible here in the US, and if a parent does her (or his) research, then chances are pretty good that everything will be alright. I was quite amused to find during all of my research (and I spent weeks looking into everything to make sure I was giving my son the absolute best) to find that all milk-based, regular infant formulas (not the ones for babies with special digestive or health needs - I didn't check into those) are very close in their nutritional content, and made by one of four major manufactures. It took years for formula makers to get approval to add DHA and ARA because the FDA is so strict about making changes and testing with regards to formula. I appreciate the article, Lindsey! It is always reassuring to have a reliable source of information, like WiseBread.
Then you just have to monitor what you take in....there are of course organic formulas as well.
Margaret Garcia-Couoh
Alexia, some women cannot produce milk, or some babies can't latch on. But I hear you...I prefer breast milk by far.
Looks like a pretty good read. Thanks for taking the time to review it!
for one thing.
Those responsible WILL have their "Heads Roll"...Literally and Without Question....unlike the US where the responsible management will just get a Smaller Bonus and a Golden Parachute on the way out the door to the Yacht in the Carribean or at most a "Naughty, Naughty" Slap on the Wrist and Probation with some Community Service from the Courts.
It's per se, FYI.
Just a thought...
Thanks for the review; I added it to my reading list. Would like to enter to win a copy.
Old enough to remember the 'be-ins' and sit-ins of the pro-ecology, anti-war activists, I'm delighted to see the Green Movement literally being recycled once again. In those days, we mostly tried to cut down on driving, reduce landfill and clean up the water and air. Today's movement goes much further. The locavore is closest to my heart; this summer we had a garden which supplied all produce for months except for potatoes, onions and carrots. (Guess what we're including next year?) Our on-line business is moving rapidly away from printed, bound books to downloadable products only, and we recycle copy paper, paper clips, etc. until they're no longer useable.
Are we green? Yes, but we can do better. And it looks like this nifty book has the answers. Can't wait to get my hands on it and start my granddaughter 'growing up green' at seven months!
Our family of 4 use green methods of living, but we not consistent enough [I think] with those methods. I think having more reference material on the subject would help. Not to mention that Linsey gave it a good review, which doesn't hurt. Thanks
Awesome post, as usual.
Another point is that buying a house adds to your diversity. If I had rented I would have been able to save more money each month (even now, after 12 years with a fixed-interest loan, surprisingly). But where would I have saved it? The same places I'm saving all my other money: stock funds, REITs, CDs/high-interest checking accounts. I like that if my taxes get too high for me, because my house has become too valuable, then if I have to move, at least I get a big pile of money (from selling my extremely pricy house).
I usually suspect I would have been better off renting and saving the extra money, though. Especially as the things that I don't like about my house start to drive me nuts. When you move all the time, the annoyances change. But now I want to renovate to fix those annoyances. (I want a dishwasher. And a dryer. And shaded parking that's off the street, for both cars. Even though no one really needed these things back in the 1950s when my house was built.)
Which leads me to another issue: decorating costs. People usually spend way more decorating something they own than something they rent (which they are usually not allowed to paint, etc., anyway). Ideally, moving less, I'd buy less furniture, because I'd always have stuff for the place I'm in, but if you keep switching roommates, or you keep buying more stuff, your needs change anyway.
What we should all strive to be! Looks like a great read. Thanks for the tip.
From my point of view I always look at the debate in terms of retirment planning. I am currently thirty and I should (all being well) be mortgage free in about 15 years at the most. This means that for the following 15 years I'll be able to put considerable sums away for my retirement (or more likely, enter a long period of semi-retirment straight away). On the other hand, if I were to rent, this period of reduced outgoings will never arrive.
The UK has been a very pro-ownership culture for the last 50 years, and I don't really see that changing much.
This sounds very interesting. My family is lloking for ways we can live greener>
@Guest
It's true that your mortgage payment stays fixed (assuming a fixed-rate mortgage), but that doesn't mean your total housing costs are fixed. Property taxes, utilities, and maintenance costs continue to rise with inflation. In my case, my property taxes have almost doubled in the 20+ years I've owned my house. Water, power, garbage hauling, insurance, and other costs have risen at least as much. My housing costs increase every year, even though my mortgage doesn't.
Great article. In romance opposites may attract, when it comes to retirement, opposites can distract. Couples, if they want to avoid problems later in their marriage, should talk and agree on a retirement plan before they get married.
Here's a list of questions you should ask your soon-to-be life partner.
Marriage and Retirement
I speak from personal experience. A disagreement over retirement resulted in the end of a 17 year marriage.
Philip, I largely agree with you. There is one important aspect you didn't touch on: inflation.
I just bought a house. Even though I got a good price and a good interest rate on my loan, I still pay substanitally more each month than I would to rent a equivalent house.
However -- and this is the important part -- rent tends to increase each year. My mortgage payment will not. So 10 years from now, I expect my mortgage payment will be lower than the rent on a similar house. 20 years from now, I expect my mortgage plus home-upkeep expenses will be lower than the rent on a similar house.
@Julie:
All good points. Those sorts of issues--travel to work, access to shopping and entertainment, etc.--are really orthogonal to whether you own or rent. (They're a function mainly of your address.) In any particular place, of course, some neighborhoods will have lots of rentals a few opportunities to buy, and other neighborhoods the reverse.
In fact, that sort of selection limitation is a major issue. Around here, for example, it's pretty easy to find an apartment that's roughly equivalent to a small house, but there are very few that would be equivalent to a large house--if you want 2000 sq ft, there aren't many apartment options.
@Kate:
Exactly. This is what I meant by "control"--the ability to make your own decisions about such things as keeping animals. (And this is the reason I continue to think about buying a house, even though where I live, renting is cheaper.)
@Lucille:
It's certainly possible--it depends entirely on local prices in your area. Do make sure that you're including the entire maintenance burden--each year's share of large future expenses such as a new roof, new furnace, new air conditioner, new appliances, doors, windows, painting, floor coverings, etc.
I always find this sort of analysis useful and enlightening. One thing I will add though is that as a long-time renter, I rarely had the opportunity to be more self-sufficient by gardening and never by keeping animals, as I do now as a homeowner. Landlords don't tend to allow renters to do much with the yard, at least in the various places I lived. Right now we derive a very significant financial benefit from our property by gardening, keeping hens and from the very large old apple tree that came with the property. We're now spending much less than $100 per month to feed two adults. This is only possible because we have the garden and the hens. I would have to figure this into our valuation of our home.