I have been in the real estate business for about 20 years, and am a financial planner.
The water is muddied by propaganda from the real estate industry that tells you that you SHOULD buy a house, then a bigger house, then another bigger house. Don’t fall into the trap without running the numbers.
Here’s the real skinny: Housing is a commodity – you need it, and you must acquire it somehow. You can buy a home, rent an apartment, live with your parents, live in a homeless shelter, live on the street.
Each method of acquiring shelter has its own costs and its own benefits. Our job, as consumers of shelter, is to try to get the maximum benefit for the minimum cost.
As for rent vs. buy – renting is NOT throwing your money out the window. It is an excellent way to acquire shelter. It has many advantages: you don’t have to repair the roof, you can move on short notice, it doesn’t take much capital to rent an apartment. It is a very reasonable way to procure shelter.
Buying is generally more costly upfront, gives you more autonomy (some of it imagined) and has many responsibilities. In the short- and medium-term, most people spend a lot more buying shelter than renting it.
If you don’t believe me, just look at my checkbook: $300 for my Home Depot card payment. $350 for insulation at the plumbing supply store. $8000 for a new boiler. $1500 for the replacement of a small part of the roof. Need I go on? If I were a renter, I would just pay, say, $1500 per month, and I wouldn’t have all those extra expenses.
The most expensive way to buy shelter is the way that most people (including many real estate pros who should know better) is to buy homes for short-term stays. Buying a “starter-house” could be the most expensive housing you ever buy.
Every time you trade-up to a newer home, 10% or so of the value of the house disappears into the pockets of real estate agents, brokers, lawyers, bankers, movers. You don’t even know that the money is gone, but it is.
Figure that you buy a “starter” for 250k-live there five years. You think your cost is only your mortgage, taxes and insurance, but no, there’s an additional $25,000 or so in overhead, divided over five years that’s over $416/month going to support the real estate industry. (not that I’m against that, I’m in the real estate industry, I just like my clients not to have to pay that.)
Compare the cost of buying that house with buying a house you can live in for 30 years-there is a much smaller monthly cost for this overhead.
In general, most people here are right. It will be much less costly, in the long run, to buy a home. But, buy the right home, buy the one you can stay in. Don’t buy those short-term homes.
It’s also not only money. People live better in homes they own. It’s harder to lose the home and people feel much better about their home when they own it. But make sure the home you are buying will give you good utility and last for a long time.
The worst trap I see is when young couples are pushed into buying apartments when they really should be renting apartments. They don’t intend to stay once the kids go to school, so it’s usually short term. So, you can buy the apartment, pay the taxes and mortgage and the extra overhead for only $2500/ month when you can rent an apartment in the same building for $1500? It’s better to save up more money for the down-payment on a real house rather than buy-sell-and buy.