Should You Rent or Buy? The New Math.

David Leonhardt, a senior writer for The New York Times, discusses whether it is time to change how we think about buying vs. renting.

Background reading: 

[DisinterestedParty]

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)

[adamp]

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.

[anzolomyer]

"You will own nothing, and be happy."

[konormccracken]

At '24 rates, the average renter of a two bedroom apartment will spend about $115, 000 over the next five years on housing.

[alexanderh]

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

[anglesoflife]

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

[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.

[lulufulu]

How are you going to keep paying rent when you are too old to work? Where is the money going to come from? The government? What happens if the govt goes broke, along with the retirement fund paying you a pension?

[indranidasgupta]

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.

[maxheadrom]

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

[masoudosman]

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.

[maxheadrom]

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.

[nvcn]

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.

[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.

[Phil-W]

This podcast is an example of Idiocracy

[maxheadrom]

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