r/Money • u/ImCoyyWR • 14d ago
Is it worth buying a house in 2024, or renting?
25 years old, using my VA home loan. Just curious if it makes sense to buy a home, or wait for the market to subside and just rent?
I’m making 70k yearly, and pre approved up to 240k
Just wondering lol.
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u/CaptainPrestigious74 12d ago
We are in your situation. We have been waiting for about 2.5 years for the perfect little property. 3 acres popped up with a house and small building. Nearly no brush and a huge fenced area for 300k. With 50k down we will be around 2400 a month for a house, 3 acres, a building and a shit ton of room to develop more for farming/homesteading or enclosed storage of some sort for neighbors. If you can afford to be patient and wait for what you want and be ready to go when the opportunity arises you can succeed.
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u/MovingUp7 13d ago
Depends on your target neighborhood. In my town there are areas where rent is straight up cheaper. 3500 to rent, mortgage would be 5700/mo. Appreciation MIGHT help, but probably not enough.
Then you have areas where rent is 2500 and the house is $300k. Then it's probably better to own and pay down loan, deduct interest, and get Appreciation.
I don't recommend buying older homes, say, anything before 1960. The maintenance is relentless.
Source: I am a real estate investor FT
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u/Financial_Clue_2534 13d ago
So I bought in 2021 with a VA loan a year I wouldn’t be able to buy the same place I live in due to appreciation. In 2023 with interest rates being so high and appreciation I wouldn’t even be able to guy in the downtown area.
Essentially buy when you can afford to you can always get a lower interest rate.
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u/RealUltrarealist 14d ago
A rule I live by: buy where rent is high and prices are low. Rent where prices are high and rent is low.
That, and try to buy something with enough units that you can afford a property manager to take care of it for you.
Buying a house for financial reasons is bullshit. It's the dream you were sold that no one questions, and is comparatively a very poor financial decision.
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u/Acceptable_Aspect_42 14d ago
BUY! NEVER RENT!
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u/enginerd2024 14d ago
Never? Why, it’s not obvious from a Total Cost perspective that buying at these prices at 7% would remotely be worth it
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u/Acceptable_Aspect_42 14d ago
Renting is throwing money away, and rent is usually just as high or higher than a house payment.
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u/enginerd2024 14d ago
I bought in a great market with low interest rates. But rent isn’t usually higher and more now than ever but when it is then that changes things. 20% down payment invested instead, yearly maintenance and upkeep, property tax, usually more shit you buy. It’s not so simple.
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u/Acceptable_Aspect_42 14d ago
Think about 30 years from now, if you decided to buy you would be coming up on the last payment, sure you still have property taxes and fire dues and whatnot but those things are significantly less than mortgage or rent. Now, if you rented for the last 30 years, you still have rent due and there's the possibility of the old owner dying and his kids selling your home so now you have no place to go and nothing to show for the last 30 years because you couldn't save any money because you spent it all on rent, basically paying for someone else's house or property and you have nothing...
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u/enginerd2024 13d ago
Still oversimplifying this if you ask me, there’s so much nuance. Sure if you buy a house and stay in that house for all 30 years of your mortgage it’s hard to beat. But you’re still not considering the opportunity cost of not being able to invest the difference. Since the average person sells their house after 7 years. Every time you sell a house you’re paying 6%. That’s huge. I could go on but before I bought my house I did a very in depth total cost and opportunity cost analysis and my scenario was a breakeven after 6 years so I bought. With a 7% interest rate I’m betting the breakeven value rent is well north of 10 years which is a long commitment for most
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u/steven01122 14d ago
Pre approved for 240k is pretty good. What factors helped that? Credit score? Deposit?
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u/ChoiceCurrent804 14d ago
I’m 24 turn 25 this month. Recently bought a house one of the better decisions I made. I make double payments every month to have it paid off by 32. After it’s paid off I can then contribute 80% of my income to my index fund.
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u/DullNoise4563 14d ago
It is always the time to buy. Look at what a house cost in 2000, in 1990, 1980… so on. You won’t lose money on a house unless you severely overpay what the market is and if you don’t do the upkeep along the way. There is no better time to buy than today. 7% interest is scary but you can always refi if it’s worth it in the future, and it’s possible you may be glad you got in at 7% if it goes back to 15-18%… good luck my friend!
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u/chrisdpratt 14d ago
Be advised that many sellers won't do a VA loan, because the costs and hassle for the seller is pretty severe. You do what you need to do, and you're certainly entitled for your service. Your options just may be a little limited.
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u/Worldly-Delivery-834 14d ago
Idk where you live but we just purchased a $300k home with a VA loan. $3,000 down. Nothing due at closing. $20k incentives. $1980 mortgage
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u/IAmPandaKerman 13d ago
I may be looking in a few months. What were the incentives? Kinda new to this game
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u/DangKilla 14d ago
You will get a very small house compared to 2019. Do the math and add $500/month on top of it. If it’s worth is subjective. I would expect to live there 6 years at least.
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u/disgruntledCPA2 14d ago
With a VA home loan, I would buy. If you’re living in a LCOL area, it’s worth it.
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u/321applesauce 14d ago
There's not enough info here to make a decision
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u/ImCoyyWR 14d ago
Ok fair enough, 25 single, no kids, other than my 3 year old Aussie shepherd ESA. Not looking for a big home, but a starter. To then live at for 3 years, finish my recruiting tour and then transfer to Texas and buy again down there after selling.
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u/mtbchuck3 14d ago
Don't think it's ever worth it to rent regardless of what year it is lol
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u/haikusbot 14d ago
Don't think it's ever worth
It to rent regardless of
What year it is lol
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u/SapientSolstice 14d ago
A mortgage will never be cheaper than rent at that point in time. That's what you have to remember.
When I bought my house in 2018, rent was about $1100 a month. My house was $1030 plus $280 HOA, so about $1300 a month. A lot of friends said they would never buy a house to pay more than rent, but your house payment stays the same.
Now, rent averages at 1600 here, while my payment is the same.
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u/IempireI 14d ago
Depending on where you're looking to buy. Also how long you would be planning to rent. Ownership is always better.
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u/PNCYoungbeef 14d ago
Buy a duplex and rent out the other half and it will pay for itself. Move in 4-5 years and get the house you want while the duplex pays for that. Could probably get approved for more that way also since it’s cash flow. Not advice just my opinion.
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u/TheBeardedAntt 14d ago
We bought last year a $296k house at 7.25%. Looking to refinance this summer. My house is already worth $334k longer you wait longer you aren’t investing in your future.
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u/skyphoenyx 14d ago
Former realtor here. There are a lot of factors that go into what’s best for you. If you can find a home that has decent quality of living and a similar price to what you’re renting, I would say go for it. Building that equity is an important component of building wealth. You will be paying the bank mostly interest for the first 10-13 years, but that’s the point you would most likely at least break even depending on interest rates. There is no way to break even with 10-13 years of renting; it’s all vanishing into someone else’s pocket. $240k is not a lot of breathing room for finding a starter home in many metro areas, but very possible in rural areas. Especially if you’ve got handyman skills and are willing to start with a fixer upper.
If I was in your situation I would at least be going on showings and getting an idea of what homeownership might be like in your area. There’s no timeline, and you don’t have any obligation to buy. It might very well be a condo/townhome/fixer, but someone 5-10 years from now will be happy to take it off your hand as their starter home.
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u/ImCoyyWR 14d ago
South Stl, so Fenton MO area, all the way west to Eureka and north a bit around O’Fallon. That’s my areas of interest.
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u/trickstersticks 14d ago
Time in the market beats timing the market! In general, the best time to buy real estate is ASAP.
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u/Puzzleheaded_Sign249 14d ago
It’s down to personal choice and circumstances. But if you asking for pure numbers, renting is in fact cheaper
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u/mdocks 14d ago
That’s a question only you can answer. Do you really want to own a home and be tied to a place for years? Then sure it’s worth it. But don’t do it just because you think it’s a smart financial move. Owning a home is rarely the investment people think it is. The only reason (IMO) to buy a home is if you wanna live in it and own it for a long time. Unless you’re a developer/flipper of course.
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u/_Visar_ 14d ago
There’s so much more to buying a house than just the finances
Do you like renting? Are you currently in a good spot roommates/landlord wise? How do you feel about home maintenance? Are you planning to stay in the area for a long time?
When I bought my house the independence, permanence, and not being beholden to a landlord far outweighed the money as a motivator. The money does work out in my case but depending on your current rental and housing market it may or may not.
If you were buying a house as a rental this would be a different conversation but buying a house as a place to live is way more nuanced than a financial calculation. You can plug numbers in a spreadsheet (a good test is going out to 30 yrs to see total value each way) but ultimately you do need to live in whichever place you choose
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u/ImCoyyWR 14d ago
This is not gonna be a permanent solution for more than 3 years, unless I really enjoy the home.
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u/_Visar_ 14d ago
If you are not planning to stay in the house more than 3 years you won’t really be building any equity
Most of your payments in the first 5-10 years will be interest rather than principal
Very likely this means that renting is financially a better option.
However, interest payed on a mortgage is usually tax deductible - and VA loans are lowkey baller - so check the numbers to see if it makes sense (basically, if you can match your rent in a mortgage you are likely going to come out ahead)
But also consider that buying and selling a home is a lot of work - so some small financial gain may not be worth the insanity of trying to buy and sell within 3 yrs
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u/Paid-Not-Payed-Bot 14d ago
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u/IShitMyFuckingPants 14d ago
Why do you want to buy a house?
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u/ImCoyyWR 14d ago
Honestly, because I’ve always wanted to own a home, but the three year mark is that’s when my recruiting tour ends, unless retained and turn into a careerist recruiter. Renting seems attractive but I can’t fathom paying 15000 a year for a property that isn’t mine. (1250 x month in rent)
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u/IShitMyFuckingPants 13d ago
I can’t fathom paying 15000 a year for a property that isn’t mine
That's basically what a mortgage is for the first several years. Look up mortgage amortization tables and you'll see what I'm talking about.
My mortgage payment for example is about $1300/month and I'm 13 months in. Of that $1300, about $200 is paid to the principal, the rest goes straight to interest. Then there's another ~$700/month due in taxes/insurance. So it costs me $24,000/year to own this house (I bought for $250k with $50k down), and at the end of year one, I only paid off $2,400 of my $200k loan.
So all in all for the first 3 years..
$24k * 3 = $72k mortgage/tax/insurance
+$50k down payment
+$14k for closing costs/inspection/lawyer fees, etcComes to $146k I'll have spent in 3 years, and the equity I'd have is the $50k down payment, and only about $8k from payments, so about $60k in equity. If I were to sell, that would cost me about $15k. So after having paid $146k over 3 years.. I'd end up with a grand total of $45k after the sale of the house. That would essentially be like paying $100k to live here for 3 years.
Now, if the house value goes up, the story looks much better. My house is worth $50k more than when I bought it last year, so taking that into account it would really only cost me $50k to live here for 3 years.
But on the flipside, if house values were to tank and it was worth $25k less than when I bought it.. It would have cost $125k to live here for 3 years.
Or mortgage rates could drop down and refinancing would be an option. If I could drop to 4% for example from the 6% I'm at now, that would save me $250/month, and that changes things pretty dramatically.
Basically, there's a lot to think about. If you want to buy for a short term stay, you should be buying the cheapest thing you can find, and doing what you can to add value to it before you sell.
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u/Geebdabber69420 14d ago
If you own and live in the house for 2 of the 5 years before sale then up to 250k of the profit is tax free. Good to keep in mind as well.
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u/laggyservice 14d ago
Sure it is! There is almost never a bad time to add a home to your portfolio.
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u/BytchYouThought 14d ago
Housing is a long term decision not about term. Either you're in a place to buy a house or you're not. You say nothing about your goals, expenses, debts, area, etc. I would advise doing your own research on buying a house in general including how to protect yourself with things like title insurance, inspections, etc. If you are at least rated 10% on disability you will have finding fee waived.
Basically, you have a ton of considerations to consider before buying. You should do enough research on your own based off your own goals to be able to come up with a reasonable estimation on whether you should buy a house or not and why. As for when, what people often fail to realize or consider is refinancing. If a crash happens and interest rates fall then you can just take advantage. I recommend a IRRL then. Also, if you're worried about property value you should be thinking long term already anyhow and have a good idea about the area you're buying in and factor that all in.
You're trying to time the market. Maybe house prices go down shortly maybe not.
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u/Alarming_Flow7066 14d ago
Time in the market is better than timing the market. Though I would prefer to go small. I’m in a similar boat, navy 28 and I’m buying a small place
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u/Visual-Departure3795 14d ago
Buying a home is a hedge against inflation as rent will continue to go up with inflation.
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u/werner-hertzogs-shoe 14d ago
generally there is about a 40% difference in cost of renting vs owning right now and 7% interest sucks. I think that will probably get better in the next couple years. I would probably continue to rent and be sure to invest an extra 30-40% of your rent cost for a future home purchase. If you are just going to piss the extra money away probably better to go for a house if you think you will live there for 10+ years because over the long term the house will be great, but not if you sell it in 5 years.
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u/fentonsranchhand 14d ago
It sucks right now. But in 15 years the next generation will be making memes about how people used to be able to buy houses for $240k and now they're $2.4 million.
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u/julioni 14d ago
240 is about 1800 per month in mortgage just remember that
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u/ImCoyyWR 14d ago
I’m looking at like realistically 180/190k about 900-1000$ month.
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u/julioni 14d ago
That’s about right
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u/ImCoyyWR 14d ago
My BAH&BAS is around 2k, BAH at 1460 and will go higher next month when I get promoted so I have a decent safety net.
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u/Bacon-80 14d ago
The right time is when you can afford to buy & also still afford to live your regular life without scrimping and pinching pennies.
Lots of people rent for a while because it fits their lifestyle, better cost/savings for their situations, etc. and some people rent forever 🤷🏻♀️ I would take the info you have, look at homes in your area for sale & see if the math tells you it would be beneficial.
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u/Batman_bread 14d ago
In the north east that 240k won’t even get you a townhouse. Prices are through the roof, no pun intended.
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u/benslongerr 14d ago
Got a house in Saint pete Florida move in ready for 230,000 on 6500 sqft lot. They are out there
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u/RyeToast92 14d ago
Yes but north east is insane right now. Down south or out west has seen prices go down a bit lately. I’m in Michigan and the housing is ridiculous. I’m not buying yet
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u/Batman_bread 14d ago
That’s awesome considering it’s not too far from Orlando. Close to the coast as well. That’s a win.
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u/throwmeoff123098765 14d ago
If the buy price is close to rent then you can buy. If far apart invest the difference. Remember when you rent you only pay rent but when you buy the mortgage is the lowest expensive you will have repairs and roofs and all that shit extra to pay.
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u/throwmeoff123098765 14d ago
Consider house hacking, you buy a 3 or 4 Plex with your VA loan and rent the other units and you should be able to rent for free while making some income and benefit from appreciation. Then take the rent payment you would have to have paid and invest it.
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u/kelement 14d ago
Trying to time the real estate market is no different than trying to time the stock market.
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u/damero72 14d ago
Housing prices won't go down anytime soon, except for this winter due to seasonality. Seasonal price changes are normal and happen every year.
Buy now if you see a good deal.
If u buy it later, you will be OVERPAYING for the house because of the competition. It'll be the pendamic market all over again.
The fed will cut the interest rate, which will increase the demand, but the supply won't change that much! Remember when you saw the interest rare go down to around 6% a couple months ago? Competition was so much higher in those months. Imagine if it went down to 4%.
personally idk if it'll ever go down to 3% but going down to even 5% will literally flood the market.
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u/JackTwoGuns 14d ago
Lower rates will mean supplies increases, which will bring down prices. The rapid flux in rates is why supply is at a 25 year low right now
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u/MicrowaveDonuts 14d ago edited 14d ago
Lower rates will make prices go up... pretty fast.
There are multiple things at play here... And you're half right.
First, **most** people don't buy a 400,000 house. The buy a $2500/month house. Because they have $2500 a month. They're willing to pay $2500 a month. If rates go down, the same person who can pay 2500 a month used to shop for a 400k house, now shops for a 600k house. They're the same people. They're the same houses.
Raising rates cools off the housing market, lowering them heats it up. Absent some other catastrophic event, like mass unemployment or something, this is pretty much universally true.
The 2nd part is that the vast majority of homeowners are not "selling houses" or "buying houses"... they're doing both. They're trading one house for another. And trading houses of similar sizes is effectively refinancing the same investment.
The current supply shortage IS DRIVEN BY A DEMAND SHORTAGE. Because the vast majority of homeowners are doing both. And nobody wants to sell becuase that means they also have to buy... and nobody wants to buy.
Nobody will sell their low-rate house for a high rate house unless they have to, or they have a very compelling reason. It's just less house for the same payment. If you're sitting on a 3% rate, you wouldn't refinance the same house at 6%... that would be crazy. There need to be really compelling reasons for people to do it.
There will be a supply shortage as long as the rates are higher than the rates that most people are already paying.
The opposite is also true. When the rates are lower than what most people are already paying... it becomes an absolute frenzy, there's lots and lots of supply and turnover, and prices go bonkers.
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u/thebestdecisionever 14d ago
You think lower rates will increase supply in relation to demand? I'm certainly no expert on the matter, but I cannot fathom how that could possibly happen.
There are a ton of people waiting for rates to go down. When they do housing demand will increase. The only thing I could see causing more people to decide to sell their homes is if prices go up, which is kind of the opposite of what you're suggesting will happen.
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u/JackTwoGuns 14d ago
It’s basic microeconomics. Price is decided by supply AND demand not demand being decided by price.
Prices are high because demand is high and supply is low. There is currently little supply due to rates causing people unwilling to move (and therefore keeping transactional inventory low) and low new supply due NIMBYism and other macroeconomic factors.
Lower rates will increase supply and in theory bring down prices assuming the demand side remains constant (it won’t). The lower rates as well decrease the cost of ownership as well.
All the pandemic inflation was driven by compounding supply side shocks and horrific monetary policy. Assuming we can return to some semblance of normalcy (read not 25 year high rates) prices should hopefully subside, although it won’t be by much long term
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u/thebestdecisionever 14d ago
Lower rates will increase supply and in theory bring down prices assuming the demand side remains constant (it won’t).
Right, and there you have it: the demand side will not remain constant. It will increase significantly.
edit: also, demand is heavily influenced by price.
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u/JackTwoGuns 14d ago
I think you don’t really understand the economics terminology in play here. Price is reflect of demand not the other way around. Prices go up when demand goes up.
Supply increases won’t suddenly make demand for new houses decrease or increase, it will simply allow more to facilitate purchasing houses, which has no impact on the demand itself.
I could build 10,000 overnight and that wouldn’t suddenly increase the amount of people who want new houses. It would decrease prices for the market overall.
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u/thebestdecisionever 14d ago
It is entirely possible that I don't understand the correct terminology and am poorly articulating myself here.
When I say demand I mean the total number of people who are able to purchase homes (which I understand is likely incorrect). The point I'm making is as rates go down, more people will be willing/able to purchase homes. When more people are able to purchase homes then the market for buyers becomes more competitive and home prices increase.
Do home prices not typically increase when rates decrease?
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u/damero72 14d ago
Lower rates increase demand even more
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u/JackTwoGuns 14d ago
Supply and Demand are fundamentally different….
Rates are high, no one wants to sell their house at 3% to move into 8%, keeping supply low.
Lowe rates would increase supply, lowering the supply side equation.
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u/gimmetendies930 14d ago
More people are waiting on the sidelines to buy than they are to sell.
There is a huge chunk of 20 and 30 something’s than make just enough to be qualified for 200-400k houses, which depending on area are either non existent or insanely competitive starter homes. If interest rates come down 1-2% those same buyers are suddenly qualified at 100k more.
Prices will surge.
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u/Rakadaka8331 14d ago
Looked into a loan. My rent is $1200. It will be 19 years at about $3k/mo before my interest/tax is less than my rent currently.
I invest the difference for growth.
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u/joey0live 14d ago
Damn! $1200. I’d love to live where you are.
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u/IllusionsForFree 14d ago
I live in a tiny town in WNY and pay $725 for a 2bedroom 2 story house with a fenced yard. You could buy a house for 100-150k, for sure.
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u/Rakadaka8331 14d ago edited 13d ago
I am blessed with amazing in-laws.
We rent half a duplex that would go for $1800 for the other half they also own.
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u/ChiefKene 14d ago
Pretty much me expect rent is $1400. Just invest the difference for growth and CD my down payment
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u/UnrulyTrousers 14d ago
When I bought my house in 2021 everyone was saying how over inflated the market was, and how all the foreclosures that were put on hold for Covid were going to collapse the housing market. Today my home is worth 60-70% more than what I paid for it. The best time to buy a home is today. If interest rates go down drastically refinance. If the market collapses, don’t sell. My mom bought my childhood home in 2007 right before the crash fast forward to a few years ago and that home doubled in value.
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u/PostMahomess 14d ago
Just bought one with my VA loan last year. Im renting it out now making a bit of profit and theyre paying my note. Ill HELOC cash from it in 2 years and buy another rental. Rinse and repeat.
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u/Altruistic_Sock2877 14d ago
I’m planning on making my primary a rental and getting another home. Who is managing your rental property?
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u/PostMahomess 14d ago
My wife is a broker, so she handled my sale, finding me a renter and managing the property.
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u/ImCoyyWR 14d ago
So I’m doing recruiting duty right now, so I’m in Missouri for the next 3 years, found a couple good homes around 180-200k, with the VA loan did you have to live there for a year minimum to then rent it out? That was my plan initially.
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u/PostMahomess 14d ago
Yes, it has to be your main place of residence. After that, you can rent it out. Unless you can find a multi family for that price, in which you can occupy one a day rent the other from Day 1.
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u/camroon817 14d ago
Does it have to be your place of residence for the full year? What if you have to move after 6 months unexpectedly or something like that? Just as an example
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u/ImCoyyWR 14d ago
Definitely can’t find a multi family right now for 200k unless it needs a renovation job lol.
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u/werner-hertzogs-shoe 14d ago
you could also have roommates if it's single family. I bought my first house at 24 and had room mates for 6 years, which helped me afford it.
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u/PostMahomess 14d ago
Thats the ultimate va home loan hack right there. I found a few for 300k here in san antonio a few weeks ago but they do need some renovation work but nothing too crazy. Hopefully i can get one in the next couple of years.
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u/Engineered_Muffin 14d ago
Timing any market is really hard and kind of an effort in futility. If you know you're going to be in one place for a long time, find a good house, and have your emergency and retirement funds on point it might be worth it.
Depending on where you live going rates for renting a 2 bedroom may in fact be cheaper than buying something comparable. But if you do buy you are gaining equity. I don't think there is a one size fits all answer here.
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u/eat_sleep_shitpost 14d ago
"Gaining equity" is kinda irrelevant if you can invest the difference in cost and come out ahead.
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u/LOP5131 14d ago
Curious so I ran some numbers for my area.
2 bedroom apartments in nice-ish areas going for $2100/month (mid price range, cheapest is $1800, pricer are over $3k)
Comparable condo in my area: 2 beds, 2 baths, 2000 sqft in the same part of town going for $275k with a $216/month HOA
Putting $0 down (not realistic, just want to compare total investment) at current rates (7.8%) gives a monthly payment of $3000 for the condo.
The difference is $900/month
The average home increases in value at an average of 4%/year, whereas index funds are 10.3%/year
This means that the condo will make $275k x .04 = $11k average home value growth/year
$900 saved x 12 months = $10,800/year saved
$10,800 x .0515 (half of 10.3% since you'd be investing monthly) = $556 in gains
$556 + $10800 = $11356 annual for the apartment savings.
So, if you're doing it for a year, you come out ahead by buying the house, not the apartment. $11,356 saved/earned from the apartment and $11,000 + principal paid off for the house, which would be $2,389, puts you at $13,389 earned/saved from buying the condo.
Obviously, there is a lot more at play here. What's the true down-payment? What's the closing costs of the house? Taxes and insurance can vary widely depending on location. Also if you're talking longer term, then you have to factor in year 2s apartment savings investment starts at $11k+ compared to $0 year one, however the home principal paid off will also increase with a lower loan balance.
Ultimately, you need to know a lot of details to truly know the correct answer, but they are a lot closer than it thought they would be as far as which is the better investment.
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u/eat_sleep_shitpost 14d ago edited 14d ago
I pay $1750 for a 700 square foot apartment in Cambridge MA that is freshly renovated in 2019. Condos that size don't exist for less than $650k. It really depends on the area.
For your area it looks like it makes sense to buy. In basically every major metro right now it makes zero sense. I'm saving $3000+/month by not buying.
BTW, the average home absolutely does not increase at 4% per year. Residential housing has appreciated by 0.8% annually between 1915 and 2015 across the USA.
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u/LOP5131 14d ago
I'm located in the burbs of a major city, which is much more affordable. The 4% year is based on the previous 30 years. From 1994-2024, a touch under 4% has been the average, but that's obviously heavily influenced from the past several years. But also factors in 2008-2010, so, long enough to be relevant to today's world.
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u/eat_sleep_shitpost 14d ago
Since 1915 it has been 0.6%.
https://journal.firsttuesday.us/real-estate-a-disappointing-long-term-investment/54141/#
There is no guarantee we will see 4% appreciation moving forward, the last 30 years have been an anomaly.
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u/MicrowaveDonuts 14d ago
there's a lot of leverage in home value gains. In the market you might be investing 20%...or $50 grand, and in your house you are "investing" $250k.
You only need 1/5th the return to come out ahead.
There are also an insane number of tax incentives to get regular people to own their house.
If you can afford it, and are relatively confident you can be there for 5 years or so, you should usually buy. If you're going to move around a lot, then paying the commission will eat all the gains and you should probably rent.
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u/eat_sleep_shitpost 14d ago
Doesn't matter in the current market in many places. I'm paying $3000/month less for my apartment vs an equivalent condo. Leaving $150k in my investment portfolio and contributing an extra $3000/month will annihilate the appreciation of the equivalent $650,000 condo.
Also, the leverage only works on the down payment. All of the payments towards your mortgage don't work the same way and most of your payments for the first 20 years are interest.
It's also not as simple as only needing 1/5th the return because homes cost money to maintain, which a stock portfolio doesn't.
Residential real estate only appreciated by 0.8% on average annually from 1915-2015. I can easily get 4% or more in the stock market. It's not even close actually.
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u/MicrowaveDonuts 14d ago
the maintenance aspect is real.
The rest assumes you don't get to keep 100k in your portfolio (you do), or that the $3k going to the mortgage isn't the exact same money that goes to rent (it is), or that you get to keep the 3k going to your mortgage (you do).
Its not for everybody. But society will pay you a boat-load of money to shepherd real-estate for a decade or more.
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u/eat_sleep_shitpost 14d ago
How would you keep 100k in your portfolio if you pulled it out to use as a down payment?
And it's not the exact same money. I pay $1750 to rent a 700 square foot apartment. Equivalent 700 square foot condos in my area go for $650-$750k. With a 20% downpayment the mortgage + insurance + HOA would be over $5000.
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u/MicrowaveDonuts 14d ago
I mean, if you think your $1750 rental is the same value as a $700K house, then sure. Congrats. I'm not sure why i'm having a talk about money with you.
Where I live 1700 gets you a 900sqft 2br in a cheap part of town... and 450k across the street gets you 3b 3ba, 1830 sqft house with a yard and a garage.
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u/eat_sleep_shitpost 14d ago
It literally is. I pay under market for my area, but market rate for my unit is around $2600. A 700 square foot condo in my area starts around $650k. Cambridge MA.
Once again, as I have already said, it is area dependent.
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u/gimmetendies930 14d ago
I basically just redid your comment above before I saw this. So many reasons why real estate *CAN be just as good if not far better vehicle for wealth building that just stocks/index funds.
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u/Elegant_Record9340 14d ago
Land does not depreciate. Buildings can, stocks can, bonds can. Land will not.
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u/eat_sleep_shitpost 14d ago
Ok? And in the past 120 years stocks have outperformed real estate by 9% or more. What's your point?
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u/frankreynoldsfanclub 14d ago
False lol read a book
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u/eat_sleep_shitpost 13d ago
One of the most well-regarded indices tracking home prices since 1915, the case-Shiller home price index, would completely disagree with you.
Real estate has appreciated by 0.6% annually since 1915, while large cap stocks have appreciated by 10.2% since 1900.
https://journal.firsttuesday.us/real-estate-a-disappointing-long-term-investment/54141/#
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u/Mandajoe 14d ago
That’s not accurate
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u/eat_sleep_shitpost 14d ago
Residential real estate has appreciated by 0.8% annually from 1915-2015. It's not even close.
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u/Mandajoe 14d ago
Tell that to a Realtor, lol
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u/eat_sleep_shitpost 14d ago
It's literally hard data. The case-Shiller home price index. But alright, champ.
I was also wrong. It was 0.6%.
https://journal.firsttuesday.us/real-estate-a-disappointing-long-term-investment/54141/#
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u/pablotweek 14d ago
Even if you use CPI adjusted figures, not even close, especially over the last 30 years. You're suggesting home appreciation doesn't even outpace inflation. That would mean houses are getting cheaper. Is anyone under that impression?
It's closer to 4-5%. Plus a home is a leveraged asset. So your investment better make a multiple of that ROI.
There is a rent vs buy calculation which, given current interest rates and the larger federal standard deduction, might make renting preferable in some cases. But do it with the right numbers.
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u/eat_sleep_shitpost 14d ago
it's closer to 4-5%.
It's not.
0.6%.
https://journal.firsttuesday.us/real-estate-a-disappointing-long-term-investment/54141/#
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u/nikzyk 14d ago
Google stock vs real estate returns over the last 100 years it is true.
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u/DirtyDiamondHustler 14d ago
Again, not true if you’re looking at current Google stock prices & current RE market. Over the past 50 years? Perhaps. 🤔
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u/DirtyDiamondHustler 14d ago
NOT true. With raw land at $12K/acre MINIMUM, there is NO stock that outperforms real estate ownership. Why do you think the 1% & their corporations now own more farmland than private owners?
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u/gimmetendies930 14d ago
This does not account for the money you safe by not renting, nor does it account for any rent you might receive from roommates or future tenants. It also does not factor in tax breaks and incentives for buying a home.
There is a reason why 99% of millionaires have some type of real estate, it opens up all sorts of ways to save on taxes and build wealth that stocks alone can’t do.
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u/EVOSexyBeast 14d ago
It also doesn’t take into count property taxes, maintenance costs, homeowners insurance, interest, etc…
The argument you two are having is quite futile, because it depends on a lot of different things.
This all varies by location primarily. Past gains were apart of several factors, anyone who bought before the 90s has artificially reduced demand because minorities were excluded, zoning laws artificially reduce supply, and the areas most responsible for the real estate returns had amazing population growth. Now redlining is illegal and enforced, population in coastal states is decreasing, and people are starting to fight back against zoning laws. Are those 3 situations likely to repeat themselves over the next 30 years? Maybe, if you live in a more promising place like Texas.
But also, if you only need a 1 bedroom because you live alone, live in a coastal state, and take the difference in what you would be paying in maintenance, insurance, and property taxes, and invest it in the S&P 500 each month, it absolutely would probably be more of a net gain than buying a house in the long term.
However if you live in Texas, have 2 kids and need a 3BR, have a solid down payment, don’t stray far out from your budget, you would perhaps benefit more from buying a house.
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u/eat_sleep_shitpost 14d ago
The first 20 years of a 30 year mortgage are like 85% interest. The reason why 99% (this stat is completely wrong btw) of millionaires have some type of real estate is because most people suck at being disciplined to save money and need to force themselves into a debt obligation in order to do so.
Most real estate owners do not get any tax benefits from owning property ever since the standard deduction was drastically increased in the 2010s.
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u/gimmetendies930 14d ago
I bought a house in 2017 for 200k. Only had to spend 10k total to get it. Since I bought it I’ve had roommates (and now have bought a few others houses and no longer live there but continue to rent it out) pay the mortgage and then some and have never out another dime into the place. Overall it has MADE me money not counting appreciation. It’s now worth 450k and the rent is double the mortgage.
Tell me what stock I can put 10k into, never add another dime, and have 250k + $1500/month is income in 7 years.
Real estate uses leverage, and beats other investments every time.
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u/EVOSexyBeast 14d ago
You can get a loan to buy stock too.
Most people don’t do it though because it’s risky, but it has pretty much the same risk as real estate it’s just not normalized.
And you’re a landlord, you have a job.
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u/eat_sleep_shitpost 14d ago
Cool, you invested into the perfect real estate market at an incredible time where appreciation didn't reflect reality. You got lucky. That's like saying you bought apple in 2005.
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u/Mandajoe 14d ago
Every time! Also stocks are diversified. my first property was mortgaged for 90k at 800 a month. It is currently valued at 540k. Today rents are 2400.00 each month. Had I bought stock it would be diversified with winners and losers. Diluting my gains. More millionaires are created by real estate than any other asset class. PERIOD.
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u/jarald6969 11d ago
In Saint Pete Florida I can say renting is cheaper they buying I would know I own a home and am looking to purchase another in a different city