[ameliaquining]

An important fact that this doesn't account for is that, in the United States, living in housing that you own is highly tax-advantaged, at least if you can get a mortgage on it. For example, mortgage interest is tax-deductible for owner-occupied housing (whereas landlords usually can't deduct interest on their mortgages and so those taxes are passed on to renters), and mortgage rates for owner-occupied housing are far below market due to government subsidies and guarantees (whereas landlords have to pay higher rates that, again, they pass on to renters). This isn't good policy, but as long as it's the case, buying a single-family home is a smarter financial choice for most Americans than renting one.

[hintklb]

I live in the US and I'm aware of this. Those tax deductible interest should be calculated in the complex buy vs rent equation.

In fact, even when taking them into account, it still doesn't make sense for most Americans to own. (In today's market).

Renting and investing is still the way to go for at least 75% of Americans (this is slightly more nuanced for low cost of living areas, but hold true for any MCOL or HCOL areas).

Eventually the math could make sense again, but right now owning is a huge luxury that will cost you millions in the long run.

I invite you to play with this calculator: www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html

[deanmoriarty]

I am a renter so I don't have a horse in this race, but renting is many times the financially worse choice even in HCOL.

Why? Because rent inflates like crazy over here! In the Bay Area 7%+ a year is completely expected, and 10% is not unusual. I have been all over the Bay Area for more than a decade (San Francisco proper, East Bay, South Bay) and know this well. It's been nuts.

Random example: the 1 bedroom apartment that I lived in 2012 and was then going for $1,500 a month, is now going for $3,800 in the exact same building (with no/minimal renovations it seems, I just looked it up). An ~8% YoY increase. That will do it to any buy vs rent calculator, very easy to break even in under 5 years, and that's excluding the speculative ability to refinance if interest rates go down from the current 7%, in which case it becomes a huge boost.

Renting as a long term choice just works in European countries where normal people can lock in 5+ year leases with no or minimal rent increases. America is too profit-seeking and greedy for that.

I still rent for flexibility reasons, but I definitely see it as a luxury lifestyle choice, the most financially responsible thing would be to buy, even in HCOL.

All this in my opinion and personal experience, totally fine if people see it differently.

[hintklb]

SF is the poster child of a HCOL where buying makes absolutely no sense.

Even if rent increases a lot, the buy to rent ratio is so horrible that it could continue to increase for MANY more years before buying could make sense.

I invite you to use the NYT Rent or buy calculator, It is clear as day: www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html

[deanmoriarty]

I just did, picturing exactly the situation I'm in right now:

- Rent: $3,500

- Home price: $700,000 (a similar unit just sold for this price a few months ago in my building)

- Rent increase: 8%

- All other parameters left as default, which seem reasonable (and as I said, there might be chances of refinancing over the next 10 years, which would drastically skew the picture, but I'm leaving that assumption out)

The ratio of 0.5% monthly rent/price is common for non-luxury "dated" condos all over the city, so I think my situation reflects well the typical renter.

Once again, in my personal experience, guided by a decade+ of living here, what people miss is the crazy rate of rent inflation. There is always a massive rent increase right around the corner, and God forbid if you are forced to move (because the landlord wants you to, it happened a couple times), then you take a gigantic hit at market rate. Once you factor in these occasional resets and the standard yearly increase, you get very close to 10% rent increase.

[hintklb]

Is this a condo with an outrageous HOA that you are not including? Many such cases that explain why condos are valued so much lower.

In SF I have been renting a 1.6M$ townhouse for 4k$/month, and that is very typical of what you can find in SF and in SV.

That has been my experience. Rent increase have been outrageous, but not as bad as the ratio between renting and buying. I would still rent even if my rent went up 50%...

[socalgal2]

I think you're leaving out other expenses. You'll be paying HOA fees (one friend in SF pays ~$1000 a month and I've heard of worse). You'll also be paying property tax at around $650 a month. You'll probably be paying some maintenance that your landlord would have had to cover (though maybe HOA fees cover some of that?)

[exodust]

On a related note, how do routine inspections work in the US? Does someone walk through the house taking photos every 6 or 12 months, making sure you're keeping the place clean and no damage etc? That's how it is here in Australia, and is absolutely the worst aspect of renting IMHO.

[ameliaquining]

Nowhere I've lived has ever done that and I don't even think there was provision for it in any lease I've signed.

[gaws]

> Why? Because rent inflates like crazy over here! In the Bay Area 7%+ a year is completely expected, and 10% is not unusual. I have been all over the Bay Area for more than a decade (San Francisco proper, East Bay, South Bay) and know this well. It's been nuts.

The great thing about renting? You can move.

[archagon]

If you live in rent controlled housing in SF, your rent increases are gonna be a lot less than 10% a year. And you're unlikely to ever be evicted due to a house sale.

During our last apartment search, it was not particularly difficult to find a rent controlled apartment.

I wish other cities would do the same thing.

[gaws]

> During our last apartment search, it was not particularly difficult to find a rent controlled apartment.

They're not hard to find, but the competition is cutthroat, sometimes worse than among potential buyers bidding on a house.

[bombcar]

Rent controlled housing (depending on how implemented) can effectively create “land gentry” who have access to a valuable asset at below market prices that they can’t sell.

[archagon]

Nevertheless, I think it's unconscionable to let landlords arbitrarily increase rent and evict people at will. Rent control and increasing the housing supply should be orthogonal issues, more or less.

[ninetyninenine]

The strategy is to buy now. Because you can refinance in the future.

That calculator should include an interest rate change in the future.

[hintklb]

So take a bad deal now with the promise of maybe refinancing in 10 years. If that even ever happens again. And most of the interests are being paid upfront.

[ninetyninenine]

It will happen again. Look back like 10 decades. Interest rates oscillate. Follow the long term trend.

[gaws]

Interest rates will never fall to pandemic-era levels again. It was a once-in-a-lifetime event that catapulted the equity of those who were smart enough to pounce on a house during a world-shaking event.

[hintklb]

Sure but almost never close to zero. And how much are you really going to save when they go from 6.5% to 4.5% in 10 years? While most of the interests will already be paid?

Hell, most people will not even want to live in the same place in 10 years.

Honestly this sounds like yet another argument from a realtor to push prices irrationally to all time high.

[ninetyninenine]

That's just perspective. The loan is 30 years. The monthly payment never changes right? So you can think of monthly payments as flat principle + interest that's constant.

It's the same thing. The only difference is in taxes.

If you refinance your monthly rate goes down. And you get a tax break.

[silisili]

It's not all numbers, though. Both have a lot of intangibles that can and should affect your decision.

Owning can feel suffocating at times, and like a ball and chain at others. You can't just decide you don't like it or the area anymore and go. Maintenance is also no joke.

Renting feels ephemeral. Getting kicked out at lease end sucks, it's hard to uproot everything and start over. Having inane rules and a landlord constantly drive by can make you feel both infantile and spied on.

I've done both off and on and those are my own thoughts on the two.

Financially only it's easy to pick a winner. But for some, one of these factors may be worth the extra however much money the difference is.

[hintklb]

The best way to calculate those intangible is to associate a value to them, Most people love to say that owning is so good because they can decide on their own house improvement.

Ok, but how much do you really value this over? Is it worth 2M$ over 30 years? Because in a lot of cases this is what you leave on the table by deciding to own.

[silisili]

How much is your kid's smile worth because they are able to build a treehouse, or ride a go kart around the yard?

Breaking everything into some numerical value misses the whole point of life. But hey, who cares if you're rich when you're old?

[socalgal2]

I agree there are pluses to living in a house. One, you can rent a house. But also, there are benefits for kids living in apartments, condos as well. If we're just talking about money, maybe the things you can afford (more travel with your kids, more activities for your kids, more money for kids hobbies, etc...). More time (instead of spending time maintaining your house, gardening, mowing the lawn, etc... you can spend that time with your kids).

I'm not saying an apartment is better than a house. I'm only saying it's not about "rich when your old" vs "kids treehouse and go kart".

Thinking about all the things I loved about my house. Had a pool (but so do many apartment complexes). Could be much noisier than I can in an apartment. Had a garage for tools. I thinking most of the other things I liked have analogs in apartments/condos. But again, you can rent a house.

[ameliaquining]

In the U.S., renting a single-family home is not usually a particularly good idea. Because of the tax disadvantages that I mentioned upthread, but also because the market's relatively thin (in part because of said tax disadvantages) and this makes it harder to find a house you like as much.

(You can pay people to do maintenance tasks on your house, and if you rent then you're already indirectly paying for that. Professional landlords benefit a bit from economies of scale and such, but it's a minor difference.)

[hintklb]

I think you are missing the point entirely and have an "holier than you attitude"

The whole point of optimizing for some things is exactly so that I can spend more time with my kids and wife. I will be retired in the next year (in my 40s) and spend time with them while most people will continue to work in their 70s to pay their mortgage.

I am regularly traveling the world with my son and loved ones while most people use their weekend to "repair their homes".

The exact reason I do all of this is to spend way more time with my loved ones. Most people that act in autopilot mode never think about this and therefore end up not spending time with their kids (But Go Kart around the yard!)

You seem to think the only way forward is to provide a house to your family. I think retiring early, spending more time with them and experiencing the world is a good trade off for renting. I would invite you to consider different point of views

[gertlex]

Aww, they ~~paywalled~~ login-walled(?) the calculator since I last used it (my saved link of https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... also redirects to your 2024 version)

[Cyph0n]

But mortgage interest is an itemized deduction, which means it only becomes a tax benefit when your interest + other deductions exceed the standard deduction. And if you do take the deduction, only the delta between it the standard deduction is a benefit.

[hintklb]

At this point, the so-called tax benefits are mainly a realtor talking point (the same as "Renting is throwing money away")

[PopAlongKid]

>whereas landlords usually can't deduct interest on their mortgages and so those taxes are passed on to renters

This is incorrect - landlords of course can usually deduct mortgage interest from their taxable income.