Homeownership is Overrated

What are the pros of renting an apartment? It’s assumed owning is better than renting, but homeownership is overrated. Here’s 6 reasons why.

All the studies say that owners are wealthier than renters.

But are homeowners wealthier because they own, or are the wealthy just more likely to own?

I’ve never seen a study take that question into account.

Regardless of the answer, there are still plenty of reasons to rent a home instead of buy. Here are 6 reasons to Rent and feel great about yourself:

1: Housing Prices Have Soared Beyond Inflation Rate

Check out this report from the U.S. Census Bureau. Average home prices for select years:

  • January 2000 – $200,300
  • March 2007 – $329,400
  • January 2009 – $245,200
  • November 2011 – $250,000
  • December 2018 – $381,800

At first glance, one might say, The increase is due to inflation! 

Wrong.

If you use an inflation calculator, and input the data, you’ll see housing prices have far surpassed inflation:

homeownership is overrated

In other words, it’s become freaking expensive to buy a home these days!

2: Debt Sucks. Debt for 30 Years is Even Worse. 

One reason homes have crept up in price is because most Americans take out a mortgage to buy a home.

Mortgage lenders make their money on the size of the loan you borrow. The larger the loan, the higher the mortgage origination fee is that they can charge.

So to line their pockets, they offer you a loan for hundreds of thousands of dollars more than what you need.

Fuck it!, you say, let’s use the extra money to buy our dream home!

And now you’re in prison, living that glorious American Dream.

If you take out a loan for $300k using a 30-year mortgage, you won’t own even half your home after making payments for fifteen years. That’s because for the first 15 years, the majority of each payment is interest.

And they say renting is throwing money down the drain?!!

The way to take advantage of a 30 year mortgage is to pay it off in 15 years. But most folks struggle making the payment at all, let alone paying extra.

Related Reading: Why The 30-Year Mortgage Sucks

3: How Long Does it Take to Sell a House?

Answer: Possibly a very long time.

And this is the single best reason to rent.

Life moves fast. When you pay attention, you’ll notice you have ideas on a daily basis how to make your life better. Maybe it’s a business idea, a dream to live abroad, or buying an RV to travel the Pacific Northwest.

How many of us act on these ideas?

Not many. People let daydreams and plans pass them by because they fear the unknown and lack confidence.

A perfect excuse (since they don’t want to reveal the real reason they can’t move) is to say Well, I have a mortgage so.. ya know, it’s tough. 

Homeowners get comfortable. Selling a home could take several months, and costs money. They need to find an agent, make repairs, etc. Too much work. It’s a bad market you say? Oh no, I better just stay here then, I can fulfill my dreams another time. 

Renters aren’t weighed down by anything beyond a lease. And leases can be broken.

Homeownership is overrated at a time when our economy is moving fast and flexibly has become an invaluable asset.

4. Property Rights; HOA Rules and Regulations

When you buy a home, you might think, This is my house, I can do whatever I want with it!

Not true, my friend.

You have less freedom with your home today than in any other time in history.

The Founding Fathers knew the importance of private property rights. Politicians today couldn’t give two shits.

According to the Lincoln Institute of Land Policy, when population, urbanization, and industrialization expanded in the twentieth century, the government began to limit individuals’ right to use and develop their lands.

As conflicts emerged, the Supreme Court ruled that the government has the legal right to take away your property at any time.

Another reason your house isn’t really yours is because of power-hungry HOAs.

My friend recently bought a house and planted a couple trees only to be fined hundreds of dollars for doing so (by her HOA).

Other crazy yet common HOA rules:

  • The color you paint your house must be approved
  • Cannot grow vegetable garden
  • Approval required to plant trees
  • You may not run a business out of your home
  • It is prohibited to rent out a room or level in your home
  • You cannot build walls inside the home to convert a 1 bedroom to 2, ex.
  • You cannot put signs in your yard
  • Your grass must always be kept green and trimmed
  • Your dog must always be on a leash when outside
  • You cannot dry clothes on a clothesline outside your home
  • You must own visually-appealing cars (no ugly or broken down cars)

And to have the freedom and pleasure to do all this, you must pay steep HOA fees every month. FUN!

Related Reading: How to Save Your Soul as an Adult

5. A Home is a Money Pit

These are the numbers for a $350k home purchase:

  • Down payment (10%): $35k
  • Interest on a $315k loan @ 4% over 30 year period: $226,388 (amortization here)
  • HVAC, roof, lawncare, repairs, etc. over 30 year period: $75k (low estimate)

The longer you make payments, the more equity you build. After 15 years, you’ll have $9k in equity and after 30 years, you’ll have $315k in equity. In total, you’ll have spent about $650k on your home, but the home has increased in value (probably) and that’s how you justify it.

Can you access this trapped capital?

Yes, your bank will gladly offer you a home equity loan or line of credit, or cash refinance. They will charge you thousands in paperwork fees and commissions, and the repayment schedule will re-start so that future payments will be 90% interest (again).

This is absurd but people do it all the time.

If a homeowner needs cash, he should sell his home and NOT spend the proceeds on a new house unless he or she can do so using a 10-year mortgage.

Plain and simple.

Renters who pay less than 30% of their income on rent will 100% be wealthier than the homeowner stuck in a 30-year mortgage.

Just another reason homeownership is overrated.

6. Homeownership Tax Benefits were Eliminated

Many real estate advocates, especially builders and real estate agents, tout the tax benefits of homeownership. While that used to be true, recent changes in the tax law have severely restricted those benefits.

Under the Tax Cuts and Jobs Act the following changes impact the tax benefits of homeownership:

  • The standard deductions have been increased to $12k for individuals and $24k for couples
  • Few homeowners will be able to itemize housing costs; for those who do, the deductions aren’t significant
  • Deducting state and local taxes (SALT) has been limited to $10k. In high tax states, this can severely limit the deduction of property taxes
  • Mortgage interest deductions are now restricted to mortgages less than $750k (or $375k for single filers)

In other words, renters win.

The increased standard deductions are a major blow to homeowners. In fact, the tax benefits of homeownership have never been worse.

Related Reading: America’s Socialist Housing Market

Homeownership Is Overrated

Americans has been sold a bill of goods. From a young age we’re told that owning a home is the American Dream.

Just like graduating from college?

What both these lies have in common is they imprison people in debt and enrich the financial services industry (everyone knows there’s a revolving door between Wall Street and Congress).

There is no proof that homeowners are wealthier than renters. Buying a home today is unattainable without taking on mountains of debt. And the product you’re led to believe is the best (the 30-year mortgage) is absolute garbage. After 15 years of making payments, you don’t even own half your home. It’s designed to make the banks rich and keep you in debt.

Moreover, in today’s fast paced job market, people stay complacent because they have a mortgage to pay. Renters can jump at opportunities, fulfill their dreams and remain flexible which is way more valuable than being trapped.

And to pay all this money only to be at the mercy of your HOA? Saying you can’t paint your house whatever color you want or grow a vegetable garden? Owning a home is a total money pit and the tax deductions for doing so don’t even exist anymore.

The truth is a tenant will pay rent to occupy a property; an owner will pay interest on the mortgage he took out to own the property. What’s lost in translation is that interest is paying rent to borrow money

The homeowner is no less a renter than the tenant.

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