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Comment by darrylb42 | Hacker News Reader

And what I never got when I was younger rent ticks up 2-4% every year, your mortgage costs are fixed. I am now locked in paying the same as what I had in rent 5 years ago. I used the the same rent vs buy cost allocation with a down payment to get the monthly cost I wanted. Percent of my income for housing costs has actually dropped since buying, that never happened when I rented.

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You need to take into consideration the ROI of your down payment as well. The S&P 500 goes up at a pretty consistent 7-10 percent yearly clip. Your $100k down payment will be worth about a quarter of a million dollars in ten years. Are you going to save that sort of money owning vs renting over a decade? Maybe. Maybe not. It's fuzzy.

> The S&P 500 goes up at a pretty consistent 7-10 percent yearly clip. Your $100k down payment will be worth about a quarter of a million dollars in ten years.

Bay Area housing prices tend to appreciate at that rate or faster, and you can acheive much more leverage with better downside risk protection buying housing, since California is a non-recourse state. Plus, it replaces a rental expense you would otherwise have, which a stock market investment doesn’t: you can’t live in an ETF.

Risk is higher, too, so its not all upside.

of course your mileage may vary. Renting is more expensive because it is offloading risk in other ways. I don't need to keep a repair fund for a new roof, or a new dishwasher, or a new furnace. Housing is exceptionally illiquid with a 6 percent+ haircut whenever one decides to sell. In california, specifically, a repeal of proposition 13 would destroy both the value of homes home and tax bills would skyrocket.

Risk is priced in to both asset classes. Nothing is set in stone.

If your dishwasher breaks you can buy something nice and not have the cheapest noisiest machine the landlord buys.

Yes there are maintenance items if you own and need to set aside money for those things.

It varies depending upon the situation but I've never been convinced it's a slam dunk financial decision.

Factors like:

- Can you rent the type of property you want

- For houses in particular, are you willing to put work in

- How mobile do you want to be

- How important is it to customize the property to how you want it

etc.

It's not a slam dunk if you just look at the numbers. With appreciation, my home, taking into account maintenance, renovations, significant raises in HoA fees and insurance, etc, and correlating that with how much it appreciated in value, probably comes a little shy of a triple-fund portfolio investment.

The catch is, I get to live in it. I made it awesome. I put a ton of money on the kitchen, the bathroom, etc to make it something I'll never be able to rent (without paying 9-10k/month anyway, and I can't afford that). I was able to do all that while still coming up only SLIGHTLY below renting + investing the extra.

There's a certain emotional value to buying a house that the math can't capture. Even JUST with the financial math, it's pretty close (and sometimes an amazing investment, in the right market). But once you tack on the emotional value, it shits all over the alternative (for people who want a home to call their own).

I can't think of any other purchase where you can get something you really want, AND have that thing be a mediocre or better investment at the same time. I can't live inside of my S&P500 position.

What I didn't understand when I bought was that property taxes actually will make your mortgage payments go up. Mine went up about 1.5% after one year. I'm very curious what it will be this year, as property values have gone way up.

Property taxes are a small fraction of a mortgage payment though. When property values go up, rents usually go up a similar amount, and renters eat all that cost. However homeowners housing costs go up a tiny fraction compared to renters.

If by a small fraction you mean 20, 30% or more (and higher if your home appreciated a lot since you bought it), then yeah, sure.

My taxes are about 25-30% of my mortgage payment (after a massive residential exemption, too), and if you have a slightly more expensive than average home in a low cost area (so things like school taxes will be higher to raise a similar amount of money per child), it can get reaaaaally expensive.

yeah, our property taxes have been skyrocketing, because the city is raising it by the max legally allowed every year AND they have votes to raise it further (usually by misrepresenting the needs to get people emotionally involved. Also renters generally think tax rates don't affect them, which is incorrect).

On the other hand, I chose to manage my own taxes instead of having the lender escrow it for me, so I get to see them separately. It helps putting things in perspective.

Higher property taxes mean that less property will be hoarded, and that it's likely that real estate will be put to more productive use.

It's the rare market where rents are set according to how much it costs to provide the rental, as that would be a market that is oversupplied, and most governments work hard to prevent that from happening. In supply-constrained markets, rents are set by what the market can pay, not based on how much property taxes are or interest rates for mortgages or maintenance costs.

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