Only in very specific, unusual market conditions. Less than 3 years it makes sense to rent, but even then itβs difficult to time it so you align with the lease end.
I live in a national average housing market, bought a house in 2006, and save about 30% on a monthly basis as compared to a much smaller two-bedroom apartment. I include mortgage, tax, insurance and a 7% holdback for repairs.
Long term, renting is always losing proposition given the low cost of capital.
Except in NYC, SF, Seattle, and maybe a few other HCOL metro areas. HOA fees usually make it a losing financial proposition even on an infinite timeline. There is literally (and not figuratively) no benefit, financial or otherwise, to buying unless you get a really good deal. I know because I'm in the market to buy something and there's not much out there that will "beat" my current renting situation long term.
The housing boom of the last few decades is a 'very specific unusual market condition'. Is it realistic for housing prices to keep rising at their current rate?
Also in your cost calculation did you include the rate of return you would've made of your principal by putting it into equities? I imagine if you bought in 2006 and held you would be very happy right now.
I'm talking about living in a stupid place, like in the 75 mile radius from San Francisco as an unusual market condition.
From a cash flow perspective, I'm spending about $20k in housing related costs annually. Given that it was 2006, I did a 15 year 105% ltv fixed mortgage. Renting, I would have saved a few bucks for a few years. Right now, renting a 3 bedroom in a neighborhood acceptable to me would add about $750/mo in costs. Total cash in hand with market returns would be around $10k.
Meanwhile, the house will be free and clear in a few years. When we move in 5-7 years, we'll be recovering the original equity, plus capital gains, which will likely be in the $50-150k range depending on the market timing.
If the choice was between have near zero housing costs and living on property my family owns or buying a house as an investment, I would agree you that the market is a lower cost, likely higher return investment. Unfortunately, I don't have that choice!
I live in a national average housing market, bought a house in 2006, and save about 30% on a monthly basis as compared to a much smaller two-bedroom apartment. I include mortgage, tax, insurance and a 7% holdback for repairs.
Long term, renting is always losing proposition given the low cost of capital.