Should You Rent or Buy? The New Math.

For many millennials, buying a home has become almost entirely out of reach. Average 30-year mortgage rates are hovering around 7 percent (fred.stlouisfed.org/series/MO...) - the highest they’ve been since 2007 - largely because of the Federal Reserve’s efforts to tame inflation.
David Leonhardt, a senior writer for The New York Times, discusses whether it is time to change how we think about buying vs. renting.
Guest: David Leonhardt (www.nytimes.com/by/david-leon...) , a senior writer for The New York Times. He writes The Morning, The Times’s flagship daily newsletter, and also writes for Sunday Review.
Background reading:
• Are you ready to buy a home? Should you rent? Take our quiz (www.nytimes.com/interactive/2...) .
• From Opinion: Millennials are hitting middle age - and it doesn’t look like what we were promised. (www.nytimes.com/interactive/2...)
• The New York Times’ review (www.nytimes.com/2023/10/24/bo...) of David Leonhardt’s book “Ours Was the Shining Future.”
For more information on today’s episode, visit nytimes.com/thedaily (nytimes.com/thedaily?smid=pc-t...) . Transcripts of each episode will be made available by the next workday.

[@CollectiveWesterner]

Home ownership seems like some bizarre, foreign dream that is never going to come true. Working 40+ hours a week can just barely keep me in a studio apartment....as long as I never miss a paycheck and never take time off. (Vacations are also in that same category of 'bizarre, foreign dreams' that will never happen)

[@dogsdomain8458]

if you live in a city and don't have a high paying job (finance, tech, etc.) consider just moving out to a smaller city with lower prices.

[@adamp3628]

Rent + invest vs home own, David is presenting an over-simplified argument: If you have $50k investment for a $500k home, and the home increases 5%, you get 5% equity of $500k. If you invest $50k into the stock market you are getting 5% of only $50k. Additionally, you still have to pay rent. Whereas if you pay mortgage, you get even further ahead as soon as you pay down principle. I agree with the fees and maintenance, though, it needs to be taken into account, but the investment comparison is NOT as simple as they make it sound in this podcast.

[@HevaNaisdey]

You forgot about the mortgage interest. You pay nearly all interest for the first 10 years and therefore build very little in terms of equity.

[@anzolomyer4584]

"You will own nothing, and be happy."

[@RingxWorld]

Its wild that left leaning media isn't saying: "Home prices are artificially inflated due to corporate purchasing and treating homes as an investment instead of a need" or "workers need to unionize to have wages that keep up with inflation" or "A wealth tax will help alleviate all this money that never actually trickles down" But instead its, "wage increases cause inflation" or "enjoy not affording a home lmao"

[@nvcn86]

hey, if it was fair and well organized - it would *not* be a problem. i haven't "owned" a book, a cd, a movie, or a game in over a decade. unless the providers don't go back on their deal it works perfectly.

[@anglesoflife8526]

Nowadays people at least question that owning houses is not the only way to get riche, that is good. Thanks New York podcast

[@alexanderh9878]

I've been an owner for over 25 years. I'm still wondering what the advantages are.

[@Cederic201]

I believe it s only in our heads 😊

[@shellibelli4387]

Hopefully, you’re building equity. I’ve quintupled my home value in the past 23 years. I’ve paid off my house and could sell for more than a half million dollars. Better than giving some landlord money for all these years.

[@csr7080]

@@shellibelli4387 However, if you then wanted to buy a different home around there, prices will be similarly high. I feel like this is often forgotten - if you sell in order to buy something else, you've only gained money if you happen to have lived in an area that has appreciated a lot (usually for some good reason) and buy something where it hasn't gone up as much.

[@JohnClarkW]

Don't get me wrong, I have always had to spend money on my house, but typically not just replacing appliances, but upgrading things ( like windows ). That said my mortgage payment isn't the real problem, it is the cost of insurance and property taxes ( which are more than the loan costs me ). If you don't stay in a house for at least 5 years, you are likely wasting money, but if you are there for 10 year, homeownership is basically rent control for the middle class.

[@lloovvaallee]

These sorts of analyses are always done from the perspective of journalists living in very expensive coastal cities. It's a very different calculation here where I live in Wisconsin.

[@maxheadrom3088]

That's not nes at all. Compounded interest is a really old piece of math. Even Leonard Euler made a funny calculation once - what would be the compound interest rate if a 100% gain would be divided into infinite parcels and then we compounded those infinite parcels. That's the Lim[x -> infinite] of (1+1/x)^x and the result is called the Euler Constant or 'e' for the connoisseurs. Long story short: the math is old, the parameters, in the US, have changed.

[@masoudosman6476]

In a city like Khartoum, Sudan buying a house takes from you all your life savings. People there work for more than 20 years to own a house.

[@b0red324]

We pay 30+ years in the USA to own a house

[@nvcn86]

4 minutes in, what is he on about. the whole problem is that previous gen *did* have the savings/resources to afford a house at an earlier age.

[@maxheadrom3088]

rent doesn't build any equity or any equality in your home? I get confused by these two words ... sorry.

[@b0red324]

If you’re renting the money is going towards a landlord not towards yourself. When you own a house the money you’re paying even though you’re only paying a fraction to the principal it is still money you are paying towards the property.

[@indranidasgupta8982]

There’s also taxes. I bought z as condo outright, cash down, for $148K in 2017. The tax was $6000/year. You HAVE to add the taxes to the calculation.

[@FabianTactics]

Huge component of affordability is simply location. Yes, the worker bees at NYTimes will never own a two bed apartment in Manhattan, but they could probably afford a condo in the North Jersey suburbs or a ranch on Long Island. It stinks, but we just didn't create enough new housing over the last 30+ years...that is changing as new housing construction explodes, but won't turn on a dime sorry to say. And this is coming from someone who lives in Boston metro area without a snowballs chance of buying locally given I'm not a multi-millionaire.

[@dogsdomain8458]

jersy maybe but long island is also pretty insane when it comes to housing prices. NY generally is pretty insane outside a few areas upstate.

[@Phil-W]

This podcast is an example of Idiocracy

[@maxheadrom3088]

also, if you think paying rent is throwing money away I'd suggest this experiment: stop paying rent and go live in the streets.

[@LeonardLeon]

It is worst than throwing money away. It's basically participating in an extortion scheme. They basically make you pay for some basic necessities: the need for a shelter and the need for some security.

[@nvcn86]

found the slumlord.