> it’s cheaper to buy a home than to rent in 74% of America’s 50 largest cities
This "statistic" wouldn't happen to come from a company that earns its revenue primarily through the buying and selling of houses, would it?
Most Americans should rent, especially in today's dark economy. The average American is unskilled, has not saved for retirement and lives paycheck to paycheck. Such a person should avoid big purchases because accumulating debt is a gamble on future earnings.
When my wife got accepted to West Chester University in SE PA, we went looking for a place to rent in the nearby area. Coming from Harrisburg, where I could rent a house for $500/mo, I was blown away that a 2br apartment generally ran $1200/mo (Stop snickering, New Yorkers)
We decided to buy a 2br fixer-upper on the cheap and ended up with a mortgage of ~$600/mo. That was five years ago. We've since renovated the crap out of the house (it's now the nicest on the block), bought a second house in Philadelphia (wife's getting her PhD at Penn now, and I can now walk to work), and are about to put it out for rent. We'll be getting at least $1200/mo for it.
Renting's okay while you get your financial situation together. Maybe most people shouldn't live paycheck to paycheck. You don't have to be well off in order to make a budget. If you look at my social security statements, I was making jack squat while I lived in York PA, and still managed to squirrel money aside.
Some people's lifestyles are more conducive to renting. I quite like having a place I can mangle and customize as I see fit. Some people like not having to worry about maintaining their building and grounds. Maybe when I can't do things for myself, I'll go back to having a landlord, but especially given how low mortgage rates are right now, I feel fortunate to have bought a house or two.
You and your PhD wife do not sound average, which serves my point that buying a house is a gamble on future earnings. You both are investing in yourselves, improving your assets and generating wealth. The average American watches 4 hours of television a day, he isn't prudent.
> Maybe most people shouldn't live paycheck to paycheck.
More importantly, the "statistic" also seems to contradict recent scholarly research that indicates that areas with high home ownership are the last to return to full employment.
"Oswald showed a correlation between homeownership and unemployment both within and across countries. These results have been confirmed by Nickell and Layard (OECD countries) and Green and Hendershott (U.S. states). The present paper tests the hypothesis with an individual household data base. We track through time individual households with people who enter unemployment. We find some evidence that earners in homeowning households who become unemployed find work less quickly than do earners of renter households."
I agree with the last bit about big purchases, but surely it's not an absolute rule that applies to housing unquestioned. You will always have the cost of housing whether you rent or buy. There are more risks with buying, but if you are in a market where you pay a premium for renting, is there a point where that no longer makes financial sense? I think the real epidemic was that Americans were acquiring too much house, disguising the extravagance as an "investment." You can also rent too much house.
I can't speak for all houses in all cities, but when I left the Bay Area, it was shocking- you really could pay same as rent in a middling place on some of these houses.
The tricky bit then becomes not "can I afford it" but, "will I be moving again? If so, how soon?"
This "statistic" wouldn't happen to come from a company that earns its revenue primarily through the buying and selling of houses, would it?
Most Americans should rent, especially in today's dark economy. The average American is unskilled, has not saved for retirement and lives paycheck to paycheck. Such a person should avoid big purchases because accumulating debt is a gamble on future earnings.