
Why You Should Never Buy a Home Again - jaltucher
http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/
======
gr366
The title on the post itself (and the slug in the URL) is "Why _I_ Am Never
Going to Own a Home Again" (emphasis mine). In the article, the author states
"there are many reasons to not buy a home," and the reasons are from his
perspective, which presumably is what his friends are asking for.

However, the title here on HN makes it sound like the author is suggesting
nobody ever buy a home again — probably not his intent. Sure, there are
numerous reasons for not buying a home just as there are numerous reasons
_for_ buying a home — it depends on your situation.

I can personally relate to some of the author's arguments. Having rented out
the house I bought 5 years ago while I'm living abroad, I'm essentially paying
a 2nd rent to make up the difference between what I'm getting from my renter
and the sum of my mortgage, taxes and homeowner's insurance.

~~~
zeroplus
Read the article. The author is definitely saying nobody should buy a home
again. He structured the article as advice using his own personal experience.

~~~
gr366
Just because we had different interpretations, you shouldn't assume I haven't
read the article.

To me, there is a difference between saying: "From my personal experience,
when my friends ask my advice, I present them these reasons for not buying a
house," and: "Nobody should ever buy a house."

If nobody bought a house, who would we rent from?

Update: fixed spelling

~~~
billpaetzke
>If nobody bought a house, who would we rent from?

James is saying: don't buy a home and make it your primary residence. He is
fine with buying real estate (homes, condos, apartment buildings, REITs, etc)
as investment properties.

An added interpretation of mine: he assumes that you would have a property
management company take care of the landlord duties for you. In the case of
REITs, it's really hands off.

Sources:

 _By the way, this is going to sound like a contradiction: but I think housing
is a great investment right now. I think housing prices have gone down far
enough and I can list the reasons why housing as an abstract investment
concept is going to go higher from here._

\- from the linked article

 _Rather than spend $100-200k+ on a down payment for a house (which is like
throwing money away since it is completely illiquid as long as you own the
house) you can put that money in a portfolio of diversified REITS (REZ is an
ETF of residential REITs, for instance) if you truly believe in housing. You
can do it with some leverage as well if you believe in the idea (like 90% of
Americans do) that you should leverage up 200% the single largest investment
in your portfolio (your house)._

\- from <http://www.jamesaltucher.com/2010/02/never-own-a-home-again/>

------
frankus
The man's got a point. And I say that as a homeowner of nine years.

The first point I would make is that unless you're independently wealthy,
you're either going to be renting housing or renting money. All else equal,
thirty years later you'll own some money or you'll own some property,
respectively. The trick is in the "all else equal" part, because given rent
versus price ratios, interest rates, and inflation expectations one or the
other may be a far better deal.

Secondly, in a lot of desirable areas renting an equivalent property is far
cheaper than buying. A lot of that has to do with the fact that rentals aren't
usually quite as nice in terms of location, condition, and accoutrements as
owner occupied places, but the effect often remains after correcting for this.

Good reasons to own your house? If you have pets, finding a rental can be
really hard. If you enjoy renovating and general handypersonship maintenance
might be a feature as well as a bug. Finally, if market conditions make it a
no-brainer.

Tl;dr don't pay more in mortgage than you'd be comfortable paying in rent, and
don't feel like you need to own a place to be a grownup.

~~~
ericb
Another good reasons to own is that when you own a home, no one can kick you
out. When you rent, whether you live there next year is at the landlords
discretion. A landlord may decide to sell next year, to renovate, to find
tenants who never complain, to let their children live there, etc.

Also, fixed mortgages stay the same price, but rents rise.

~~~
TamDenholm
I understand that your point probably is "as long as you pay your mortgage and
taxes, no one can kick you out". I think the likelyhood of being kicked out in
both instances is extremely low if you continue to pay your rent/mortgage.

~~~
rahoulb
last year there were a number of stories in the UK press (not that that is
necessarily an indicator of accuracy) about renters having a month's notice to
move out as the landlord had defaulted on the mortgage (and not informed the
tenants).

~~~
gamble
They were lucky not to live in the US! Since the foreclosure crisis began, a
lot of people have found out their rental home was foreclosed when the sheriff
showed up on their door to evict them.

------
pg
"Lets spell out very clearly why the myth of homeownership became religion in
the United States. Its because corporations didn’t want their employees to
have many job choices. So they encouraged them to own homes."

If that was their plan (which I doubt), it wasn't very effective. Americans
move much more frequently than people in most other countries.

~~~
orijing
Possibly true, but what if employees had the additional flexibility that being
tied down to their homes prevented? I think you are confusing this effect with
a more general bias towards mobility relative to other countries.

The most recent housing market collapse has made America much slower at
readjusting to restructuring of the economy--for example, workers in Florida
can't easily sell off their homes to move to a different location with greater
job density, for instance. I'd like to see more data supporting your
assertion.

~~~
pshapiro
What do you mean by, "Possibly true"?

~~~
orijing
Sorry for being unclear. I was referring to:

> Americans move much more frequently than people in most other countries.

That fact may be true, but my point is that it may hide the effects of
uncontrolled-for variables

------
justinph
Life is not all about money!

Buy a house because you want someplace to be your own, that you can customize,
and really be part of a neighborhood, and not worry about asking a landlord
for permission.

I bought a house because all the apartments I looked at for the price were
dumps, and in a house at least I had incentive to fix the stuff that made it a
dump.

~~~
jaltucher
Thats why I divided the post between "financial" and "personal". The personal
stuff is my own reasons, the "financial" stuff is why I think financially
buying a home is a big mistake.

~~~
billswift
The financial aspects depend a _lot_ on where it is. In and near the large
urban areas, no, owning a home does not make financial sense. But in small
towns, well away from the large cities, it is a different matter. Rents vary
from one area to another much less than home prices do.

I moved in 2001 from the DC suburbs (College Park, MD) to Cumberland MD. The
duplex I rented was about a third what it would have cost in College Park.
Later, I bought both sides of the duplex, for less than a sixth of what it
would have cost in College Park.

From what the _Places Rated Almanac_ said, that sort of variation is normal
across most of the country. Note that in my case I even stayed within the same
state, so I didn't benefit from the regulatory and tax changes that occur in
some inter-state moves.

------
mikebo
Decide for yourself: [http://www.nytimes.com/interactive/business/buy-rent-
calcula...](http://www.nytimes.com/interactive/business/buy-rent-
calculator.html)

------
petercooper
_There must be some ancient evolutionary tic that makes us want to tear down
walls or put nails in them or paint them._

And? Most people decorate their homes, put up art, paint, or otherwise like to
decorate and furnish their homes. It's what makes it feel like a _home_ rather
than a box you sleep in each night for, and I'm sticking my neck out here with
a guess, a plurality of humankind.

------
bdlang
> _Starting March, 2009 I was renting an apartment directly across the street
> from the New York Stock Exchange. It was fun. I’d look out the window and
> see Wall Street. How exciting! Before that I lived in The Chelsea Hotel with
> Chubb Rock. Last year we decided to relax and move a little north. Now I
> look out the window and see the Hudson River. And its quiet and I can walk
> along the river in the morning with no noise._

I can't imagine that was cheap. Most of the article is inflected with desire
to retain hoards of cash and sleep on top of a pile with many beautiful women
(well, that's the undertone). Yet he's blowing what must be a huge wad on an
apartment in NYC in an upscale area.

~~~
jaltucher
Well, I moved to a nice little suburb about 65 miles north of NYC.

------
dctoedt
One big macro-scale drawback to home ownership is that it impedes labor
mobility: It anchors homeowners to a particular city and makes it harder for
them to consider moving elsewhere to find employment. A few months ago I heard
economists on _Marketplace_ saying this was a significant national policy
problem.

~~~
teyc
Labour mobility is a relatively new concept too. In the days before nuclear
families, people have large extended families to rely on for childcare, and
are in a better position to look after their elderly without having to send
them to a nursing home. I'm not saying labour mobility is a bad thing, but
they have their own policy issues.

------
joshuaheard
I could easily refute all the points in that article if I had the time. I'll
suffice to give this example:

"A" buys a $100,000 house, "B" rents a $100,000 house. Both pay about $1,500
per month. At the end of 15 years, "A" owns an asset worth $100,000, "B" owns
nothing. You decide.

~~~
true_religion
I agree in theory, but in practice people don't go from renting houses to
buying identical houses---they always trade up: from a 2 bedroom apartment to
a 3 bedroom condominium, from a 3 bedroom house to a 5 bedroom McMansion, etc.

Because of this the costs of ownership once mortgage, taxes, utilities and
maintenance are tallied up are often more than what a person was previously
spending on rent.

Secondly, his major point is that home ownership involves a cash _down
payment_. Its' not a case of person A/B spending 1500 per month, its a case of
person A buying a 100k home and paying 20k in cash for the right to a loan.
That 20k may have been better spent in more volatile and profitable investment
than home ownership.

Third and lastly, a house can lose value. Did the major employer leave the
area or downsize (e.g. Detroit most prominently, Ghost towns, and a scattering
of towns all over US that relied on heavy industry)? If so, then your house
value has fallen. Did the area fail to gentrify or did you buy in a bubble? If
so, then your house value has fallen. Has there been a disaster that the
economy hasn't recovered from (e.g. Katrina, coal slush floods in W. VA, BP
oil spills effect on homefront properties)? If so, then .....

The argument that a house is an investment fails because it is the least
liquid of investments, and thus harms the buyer the most when the prices fall.
You can always sell your stock even in a strong downturn, but who is going to
buy your drafty McMansion situated in an edge of town neighborhood in a down
economy?

~~~
jeffepp
The conditions of Detroit actually make it one of the most attractive areas
for Real Estate investment in the country.

High & mid-rise buildings Downtown are being purchased (Dan Gilbert is one
such buyer) for 6 figure sums.

[http://detnews.com/article/20110127/BIZ/101270352/Quicken-
Lo...](http://detnews.com/article/20110127/BIZ/101270352/Quicken-Loans-buys-
Detroit-s-Madison-Building)

~~~
true_religion
Yeah, its a buyers market but if you already bought a home, you're a _seller_
and likely hate the current situation in Detroit.

------
diego
Why is the title of the submission different from the article's? "Why You
Should Never Buy a Home Again" sounds trollish. It's does not apply to a large
number of people for whom buying a home is indeed a good idea. Please edit the
submission title to match your current title:

"Why I Am Never Going to Own a Home Again"

~~~
zeroplus
He structured the article as advice to others. The title is interchangeable
with you should never own.

------
laujen
This is a beautiful piece of link bait. His advice might make sense if you
live in New York, but it doesn't work at all in most places in the country. If
you live in the suburbs you can't find places to rent. If you have kids and
care about where they go to school, you don't want to follow this advice. If
you live in a city like Cleveland or Detroit or a hundred other Midwest towns
where the price of a house can approach $50k, it may not be worth it either.

~~~
jaltucher
I rent, I live in a suburb, I have kids. So what else can I say? I wrote the
article.

------
dpcan
Yeah, I used to have a similar mindset before starting my (big) family. I can
understand what he's saying (though very arrogantly) but I hope he's open to
changing his mind someday, just in case.

He mentioned he likes having a hassle free life. Once you have a lot of kids,
not only do you have your own hassles, you get to be a part of everyone's
hassles and there's no such thing as a hassle free life.

All I'm saying is, never lock yourself into any mindset as circumstances can
change.

------
ulrich
This is a very biased view and it might become invalid in different market
conditions. Just think of a great inflation or any market collapse. If you own
a house, you can still live in there. But you can only burn your cash for
heating.

As long as our financial system works, cash is of course the best form of an
asset.

~~~
teyc
That's absolutely right.

All discussions about the merits of investing in houses must be compared to
something else that is available at the moment.

Cash may be king now, but one needs to always be aware of inflation.

I am surprised though at his figures for housing:

> Housing returned 0.4% per year from from 1890 to 2004.

I wonder where he got that from.

There are times when you can buy for less than the cost of replacement, due to
rising cost of building materials, labour et c.

------
nachteilig
Someone has to say it: this site is full of bad writing and logical fallacies.
Can we please stop linking to it?

~~~
billswift
You should notice that it's the author mostly linking to his own site.

------
epall
I just had the opportunity to sell a large 30-year fixed-rate bond with
massive leverage into an overheated bond market with damn near a guarantee of
serious inflation over the next 30 years. Thank you, Bank of America!

------
mkramlich
A simpler point I didn't see emphasized is that even when you "own" a home you
do not own it. You're renting it from the government, home owners association
and utility companies. Disagree? Stop making payments to those three entities
and we'll see how long it takes for men with guns to come and evict or arrest
you. Owning is renting. Free your mind.

~~~
abalashov
I agree about the other two, but the utility companies one seems hyperbolic;
if I actually wanted to live in a place without electricity, running water,
Internet access, etc. supplied by someone else's infrastructure - which I do
not own - I think I could very easily cancel all of those and be fine.

------
rbranson
Housing is not an investment, it's an expense.

To compare another investment, if you were to save $200/mo away into an
investment account bearing 9.0% (like an S&P index fund), this would amount to
$368,894 after 30 years. The whole time these funds are liquid and accessible
to you, not subject to foreclosure, nor is this a required payment. $400/mo is
$737,789.

~~~
ErrantX
Great.

Except that money can't go into an investment account because you still need
it for rent. Actually, around here I'd be paying about 50% more than my
current mortgage to rent the same sort of house, so month-to-month it is a
greater expense. So the only difference is you still have the down payment.

And even then, for me, having that downpayment makes little difference
financially over the course of 25 years. I seriously doubt it would _stay_ in
the bank over that time.

I had an argument with a friend a couple of years ago along these lines; he
claimed that renting was much more financially stable, but now he seems no
more or less stable than myself... There is a lot of FUD around the "buy a
house", "don't buy a house" argument, it's best to treat it all with a pinch
of salt and make your own decision.

------
mrschwabe
I'll buy a home with cash. Never with debt. Mortgages are pointless. I'd
rather pay my rent to a landlord than a bank.

~~~
ericb
Mortgages are an excellent inflation hedge. Consider it--you borrow a large
pool of dollars to buy the home. The value of the dollar drops through the
floor. Now you are paying back the loan which was for a fixed amount and
doesn't change with dollars worth half as much.

~~~
ootachi
But surely the interest makes up for this. It wouldn't make financial sense
for the lender otherwise; why lend money to homeowners if it won't beat
inflation than, say, invest it in the stock market?

~~~
ericb
In the US, the interest is tax deductible, so if you have earnings to match
against that, the effective interest rate to the buyer is only 2/3rds of the
nominal rate on the mortgage.

~~~
ultrasaurus
So then wouldn't the buy/rent decision depend on your income tax rate?

------
jeffepp
There are several advantages of home ownership that most people do not take
advantage of.

A tax free gain for the sale of a primary residence (2 years + ownership) is
one in particular. I am on my 2nd 'primary residence' in 3 years.

~~~
shawnee_
Flipping houses, ah yes. This is a beautiful tax loophole created and endorsed
by the lobbying NAR that enables salespeople the ability to make bucketloads
of commissions based on unrealistic appreciation of house values in a very
short amount of time. Housing market go boom, boom, bust.

------
arepb
(adds on to headline)..."if you have a difficult time reading market
conditions, don't understand your financial situation and feel comfortable
moving your belongings from house to house every few years."

~~~
joezydeco
..."and don't mind being at the mercy of inflation when your landlord jacks up
your rent 10% with a month remaining on your lease."

~~~
rbranson
Outside of property tax increases (at least in the State of Tennessee), the
landlord can't increase rent on you if you've got a lease contract. Things are
much stricter in many other states.

~~~
fr0sty
I think the GP was saying that the landlord was announcing a 10% increase in
rent with only 30 days notice not an increase of rent for the last month of
the lease.

~~~
joezydeco
Right. Maybe I overexaggerated by saying 30 days instead of 90. But sooner or
later you get that notice "Hey, it's time to renew your lease. By the way,
it's a 10% increase on the next year. Take it...or start looking for a new
apartment. Good luck with the market out there."

------
ajays
.... and he ends with this sentence:

    
    
         By the way, this is going to sound like a 
         contradiction: but I think housing is a great 
         investment right now.
    

Go figure.

~~~
mrkurt
Housing is an investment, a home is not.

~~~
nuxi
Of course it is, just not the monetary kind.

------
meowzero
I think his post is a bit extreme. It depends on a lot of factors on whether
to buy a house or not. I think most of his reasons aren't really valid for not
owning a home.

I'll make some comments on his financial arguments:

A) If you pay off your home fast, you won't have anymore mortgage payments.
And you actually own something that you might be able to sell later, getting
some money back. If you rent, you won't see that money ever again. So
technically your cash is good as gone if you rent. If you own, you can get
something back at least.

This depends on the house you buy and the market. For example, I rented a lot
until I found a good deal on a house. Now I pay less on my mortgage than on my
apartment I rented.

The rent may increase every year too. At every place I stayed, they always
raised the rent every year. At least with the home, you don't have to worry
about that since you have the same mortgage payment every month.

B) Usually the seller pays the closing costs, especially at the current
market. If not, negotiate so the seller pays. You don't usually have to worry
about this if you're buying a home.

C) He's right on this one. The comfort of calling the maintenance person at my
apt was one of the benefits over owning.

D) This is simliar to A). It depends on the market and the home you get. For
me, the taxes + mortgage turned out to be simliar to what I paid in rent. Plus
I now get a huge refund because of my deductions. So I paid around the same
amount as my rent, and I got a bigger refund on my taxes.

E) I agree with the author. This is probably one of the disadvantages of
owning a house.

F) I don't consider my home an investment. It's a place I bought to live in. I
don't expect to make a profit from it. I have my stocks and mutual funds that
I consider to be investments.

Now my comments on his personal reasons on not owning a home:

A) I agree with the author. This is same as E) above. I don't know why he put
it twice.

B) I don't see how this is a reason not to own a home. The benefits of owning
a home is that you can do whatever you want with it without worrying about the
landlord looking over your shoulder.

C) I don't understand this argument as a reason for not buying a home.

D-F). Not everyone is same. Some people's hobbies are gardening and
maintaining the home. They actually enjoy doing it. Some people like the sense
of stability. But if you're like the author and like to change things up a lot
and be mobile, a house is probably not good for you.

G) I got stressed when I rented because the landlord needed to raise the rent
every year. Then I had to go through the stress of negotiating the rent
increase. If I wasn't successful, I had the stress of budgeting for the higher
rent or had the stress of packing all my junk up, finding a new place, and
moving. So renting isn't always stress free.

H) This is true. But if you plan wisely, you should still have a lot of cash
available for emergencies, even after buying your home.

~~~
rbranson
The problem is that many in the US have been brainwashed into believing their
house IS an investment and this justifies purchasing above their means,
because "at least I'm not throwing the money away in rent."

~~~
jaltucher
Right. The big issue is people think they are wasting money on rent. But if
you factor in mortgaeg, taxes, maintenance, etc it still comes to rent or
more, EVEN when the house is paid off and there is no mortgage (but taxes keep
going up)

------
mark_l_watson
In general, I think that this is not good advice.

It is not a bad idea to buy a modest size home that meets your family's needs
for a reasonable price.

As you get older and have hopefully had a good career, try to own at least two
modest homes and become a landlord.

There is a good chance that we will see a lot of inflation in the next 10
years or so. If this happens, owning rental property may help to protect your
assets.

------
16s
Places I rented over the years either had music blaring next door or loud
parties periodically or I could hear other couples having sex, cockroaches
from neighbors, etc. (this was in the _nicer_ areas).

I've had my fill of all that. Owning a home is just as cheap as renting one in
my area. The peace and quiet I have is priceless.

------
aashpak1
He also says >>> housing is a great investment right now. I think housing
prices have gone down far enough and I can list the reasons why housing as an
abstract investment concept is going to go higher from here.

------
aneth
How can he make such sweeping statements about the financial implications of
buying a home without actually making calculations based on real numbers?
Depending on real estate to rent ratios, the calculation varies dramatically.

------
tedjdziuba
Yeah, that's it. Lease everything, don't own any assets. Let me know how that
works out for you.

~~~
true_religion
Surely, you have to own some assets. "Leased food" doesn't sound like fun.

