Streams

Should We Not Care About Owning a Home?

Thursday, April 24, 2014

owning a home in monopoly

This segment originally aired live on April 24, 2014. An edited version was included in a best-of episode of The Brian Lehrer Show on August 15th. The unedited audio can be found here. 

Americans still view home-ownership as an important investment and a key part of the American dream. But is it time to move past our ownership fixation? Catherine Rampell, opinion and economics columnist at The Washington Post, broke down some of the latest numbers in her recent column.

 

 

Guests:

Catherine Rampell

Comments [91]

llg from New York

This discussion is colored by the times we are experiencing. Inflation has been low for a couple of decades. People don't remember the double-digit inflation in the 1970s. What if it happens again, and your salary doesn't keep up with your rent increases? Even now, rent is rising faster than median household income, which is stagnating. See http://online.wsj.com/articles/apartment-rents-rise-as-incomes-stagnate-1404273662?KEYWORDS=rents+rising

I bought a studio apt in 2008, while the housing and stock markets were crashing. Maintenance has risen a bit, but the mortgage is fixed. I don't know what the current assessed value of the apartment is, and I don't care. The combined mortgage and maintenance is $700, less than the cost of sharing an apartment with roommates. It was the first time since I'd moved to New York that I was able to afford my own apartment. Rent for equivalent apartments in my neighborhood is $1100 and up. When the mortgage is paid off, even as the maintenance increases, it'll still be far below rent.

People I know live in a rent-stabilized apt in Chelsea. It's a very good deal compared to the market-rate apts in their area, but cumulatively, over the years, they've forked over hundreds of thousands of dollars to someone who already has way more money than they do.

Aug. 15 2014 12:14 PM
Katie from Manhattan

What about the psychological impact, the non-monetary currency, of knowing that you don't have a landlord? In New York City, landlords are notorious for trying to get tenants out so that they can raise the rents. I faced that situation and saved up for my first apartment which I bought 3 years ago, and it was the best decision I ever made. The value of knowing my home is mine is really priceless.

Aug. 15 2014 11:43 AM
Talia from Brooklyn, NY

New York is not a friendly place to middle income first time buyers. I look at neighboring states like Pennsylvania where there is a grace period before businesses can make an offer. As a single person I can't compete with investors who want to buy. It is really disheartening. I am only now considering starting to save up for a down payment, but I'm not sure it's worth it to bother with the market here just because of how much I would have to save to get approved for a mortgage and compete against businesses who only want to invest in this market. It is cheaper to rent in New York, and there are some very good reasons laid out in this story for renting, but I don't want to support a corporation when I pay my rent, I don't want to be someone else's 'good investment'.

Aug. 15 2014 11:41 AM
Peter from Rockland County

Has the guest done any research into how many renters actually do invest the difference? Her numbers make sense, but only if that investment is actually made. Owning is sort of a forced saving program.

Aug. 15 2014 11:34 AM
Reuven from Washington Heights

A classic example of regressive taxation -- those who cannot afford to buy subsidize through their taxes those who can. (I apologize if others have made this point earlier.)

Aug. 15 2014 11:34 AM
Salma from Manhattan

What about landlords who raise the rent as much as they like to meet "market rate" and push you out of your apartment and neighborhood? Are we just supposed to be at the mercy of our landlords?

Aug. 15 2014 11:32 AM

A point that should be emphasized is that, although the stock market may produce a better return, people are not likely to set aside money monthly to invest -- whereas they MUST send in their monthly mortgage payment. Thus, home ownership is a form of forced savings.

Aug. 15 2014 11:31 AM
Michele Fenniak

For me owning a home in NYC is about control. When I rented I could never commit to a neighborhood because I could not be confident that I would be able to stay there - would the landlord up my rent too much? Now I have children and I want to stay where I am. I am very glad to have bought our home.

Aug. 15 2014 11:29 AM
Eric from Manhattan

What would you advise when the case is that monthly rent will be significantly higher than an equivalent mortgage?

With rent in Manhattan so high, its actually possible to buy an equivalent apartment with a mortgage that will be LESS than rent.

It would be obvious to buy, right?

Aug. 15 2014 11:25 AM
Julian from Parsippany, NJ

It's not just the cost of Mortgage vs. Rent, but additional taxes, insurance, utilities, and maintenance. By maintenance I mean not only the cost of upkeep like paving driveways, roof repairs, broken water heaters and such, but pulling weeds, mowing the lawn and other things that most apartment complex's do normally. Time is money, time pulling weeds and shoveling snow adds to the cost of owning a house I say. This is what discourages me from owning a home, what do you think?

May. 14 2014 03:42 PM
Evan from Kansas City, MO (via Manhattan, NY)

http://www.nytimes.com/2014/04/27/realestate/a-renter-does-the-math.html?hp

Just wanted to bring this article to the show's attention, as I understand there will be a longer follow-up segment on renting this week. Apparently there are still plenty of New Yorkers—and, for that matter, NYC papers—that consider owning a better option. Looking forward to the show this week.

Apr. 28 2014 11:21 AM
Chris

As many other commenters have stated, NYC is an exception to the national rule. I have lived in NY my entire life, and real estate has always been expensive. Except for a few corrections, it has only gone up in value. In the 90's I could afford to buy, what at the time, was an expensive Manhattan studio apartment($100,000!), but was told that studios don't appreciate. Besides I didn't want to make the sacrifice of living in a cramped studio. Although I could not predict the future, that was a poor decision.

Now, I live in a market rate rental, with no security whatsoever. My next move will probably have to be outside of the city, My advice to younger people who want to make a life in New York, would be to make the financial and other sacrifices necessary to purchase any apartment. In ten years, I'm sure you'll be able to trade up to something better.

Apr. 27 2014 09:36 AM
Shawn from Manhattan

How am I supposed to afford a house when any professional degree from a decent college requires me to basically mortgage my education? Maybe I'll look into home ownership once I have my student loan debt paid off.

Apr. 25 2014 09:19 AM
Doug from Lindenhurst

I heard some of the conversation (not all) and found it interesting. Clearly if you look strictly at the numbers home ownership may not have the RoI of the S&P 500 or other investments. The massive tax incentives to owning a home were touched on, but not enough from what I heard. The gentleman from Westchester who found limited housing stock for rent, and at prices similar to a mortgage on a comparable house was illustrative of what many of us have come to realize: the monthly expense of housing in some areas is almost the same when you compare renting to buying. My mortgage pymt, which includes my property taxes, is still less than I could hope to pay to rent a comparable house (basement, garage, yard) in a safe neighborhood with decent schools on Long Island. Even when other expenses are considered (repairs, insurance) it's still close. Then when you factor in the dramatic tax incentives, it starts to become more of a "no-brainer" on the financial side.

All that said, is it really even an investment at all, when you only have one? You have to live somewhere, and pay for that. When I look at it that way (not focusing on long-term RoI), I make out better financially as a homeowner than I could as a renter in my market, and when viewed through the income statement and not the balance sheet.

And then of course are the intangible non-financial factors that were discussed. Stability, pride, commitment and maturity/status are all values that many hold dear, and that can add to a community or neighborhood in powerful ways. These are also transferred to our children, for what it's worth. I take better care of my house and property than did the people who rented it over the years before I bought it, and the neighbors are grateful. So that's something.

Economics is a social and behavioral science, so even when you get lost in the numbers, it's hard to ignore the non-financial factors that go into so many economic decisions that people make. When all we care about is RoI, we get fracking, deforestation, strip mining, dirty drinking water and shabby cars that don't get recalled when they should...

Apr. 25 2014 05:20 AM
Ana from LES

It's so dependent upon individual circumstances, needs, desires, etc. I'm not sure you can even make any meaningful generalizations. And location is a huge factor. We're lucky enough to have a rent-stabilized apartment in Manhattan. If we'd had to deal with NYC market-rate rents we probably would have found a way to buy something. We also don't have kids, another huge factor.

I do know people who have done very well in NYC real estate because they had great timing. I also know quite a few people in the Tri-State area who would like to move but are tethered to houses they cannot either sell or rent. In more than a couple of cases they are underwater.

Apr. 24 2014 07:44 PM
Ownership

You guest is clearly siding with the owners and landlords, thus she is not impartial.
It is fine to own a house and live in; it is a completely different story to rent it for financial gain. Case in point is the highrises in Manhattan, ex-mitchell lama buildings..
In Independence Plaza North many older , poor tenants opted for section 8 subsidies. While their rents are more or less reasonable, the landlord still receives the difference from HPD for the "market rate", say $ 3 -4000 for an apartment.
Yet, these apartments are still equipped with stoves and fridges and kitchen cabinets from the 1970's! The shelves are broken with rusty hinges hanging by a thread, apartments remain unpainted, etc.
i have friends living in such neglected conditions - the landlord still gets the full price from HPD as if it was a"luxury" place.
Where is the maintenance your guest is talking about?the landlord pockets the full fare for complete neglect. Tenants are afraid to complain to HPD because when the landlord is scrutinized for the neglected apartment, the tenant might lose "the privilege" for minor infractions.
Non-subsidized tenants next door paying the full $6,000 or whatever, get normal maintenance.
Speaking about the tale of 2 cities!
This is a story worth to look into and to speak w. the president of the tenants' assoc. in north moore st.

Apr. 24 2014 07:24 PM
Ryan Kimmett from South Carolina

I'm sorry but this only holds true for maybe people in New York or very Urban areas where your living in apartment buildings. Living in South Carolina I own a 3 bedroom home and pay 665 a month (this includes taxes and insurance). For a three bedroom apartment to rent right up the road it costs 1100 a month. To rent a home similar to mine it costs upward of 1200. Even adding in the costs of maintenance and the HOA we come out way ahead. The advice your giving only goes for certain places.

Apr. 24 2014 05:14 PM
Kristen Balouch from Brooklyn New York

New York real estate is different than the rest of the country. I bought a home in 1997 in Brooklyn for 190k. I put 20k down and almost instantly the rental income from my 2 family home covered the costs of the mortgage. And now 17 years later my home is worth over 2 million. I consider it my best investment. I hope new yorkers don't follow your guest's advice. Furthermore it's important for New York neighborhoods to be occupied by home owners and not investors.

Apr. 24 2014 03:46 PM
BrightIdeas from District 33

The real issue is this entitlment that we have about where we live. If your rent is to expensive in New York than guess what maybe you shouldn't live in New York. Buying a home is not the solution. How about investing in commercial real estate you can purchase a building with 4 or 5 apartmets for the same price of a suburban home. You will become a landlord and now your splitting the cost of your mortgage.

Apr. 24 2014 03:10 PM
dave from North Carolina

Owning your home is important and significant and worthwhile. The key is to own a home you can afford, and to pay it off quickly. Make eliminating your mortgage your number one financial priority. If you cannot pay off your home in ten years or less, you have purchased too much home. Borrowing money is stupid and identifies you as an easy mark. Mortgages are a little less idiotic than car loans and credit cards, but not by much. At least a home appreciates in value. Once you pay off your home, pay yourself that payment and make interest work for you. If you can go further and cut up your credit cards, pay cash for your automobile, all the better. Create financial autonomy as soon as you can. If you do have a mortgage, your monthly payment should be 1/8th of your take home pay. Match your monthly mortgage payment with a double payment on the principal, until the loan is gone forever. The American debt industry is a con game. Paying rent to a landlord, and building their wealth is just as crazy. We left New York City, when our landlord raised our rent to $4,000 a month. We now own a home and we could fit four of our NYC apartments in our current living room. We paid off our mortgage, have a garden and are on the cusp of installing solar, to wipe out our electricity bill. We have never been happier. When we come back to NYC, and squeeze into our friends' tiny, expensive apartments, we feel vindicated.

Apr. 24 2014 01:37 PM
Keith from Queens

Catherine Rampell is a Princeton educated trust baby who looks like she's 22 or 23 years old. She is the definition of an out of touch, contemptuous academic. Clearly she enjoys provoking this kind of response

Apr. 24 2014 01:17 PM
Olivia from NYC

With all due respect I have to question the timing of this report - and the influence on the timing from Wall Street/Hedge Fund interests. When the housing bubble burst all anyone talked about was mortgages, and before then all the banks talked about to subprime "customers/prey" was mortgage price. I tried to point out all the other factors that should have been on the table - such as all the other costs involved in owning a home - maintenance, taxes, insurance, etc. The ususpecting were mislead into thinking that if they could make the mortgage payment all was well in the world. Now, all of a sudden, with hedge funds owning distessed properties that they bought and which aren't selling, people are being told about all the negatives of owning and the perks of renting - such as investing more in the stock market! It smacks of manipulation, just as the housing boom was manipulated. We would not have had the economy collapse if from the start home ownership was presented with integrity. The " ownership society" policy was a fraud. That said, I completely agree with the caller who pointed out that renters rarely have the same moral, financial, community minded investment that a home owner does. We will suffer as a community/society if the owners are all equity firms/hedge funds/banks rather than "ordinary" people. It is true there are countries with majority renters, but those countries also provide much more in services and safetynets for their citizens - think education, healthcare and retirement.

Apr. 24 2014 12:57 PM

Dividends of not owning a home (and living in a rent stabilized apartment).

Our super has to shovel the snow and fix the plumbing.

We can visit many community gardens and two major parks within three blocks of our apartment without ever having to water, garden or landscape. If, on the other hand, we suddenly desired to dig in the dirt, we could join a community garden.

Our son can hop on a subway to attend one of the best public high schools in the United States. We don't have to worry about him drinking and driving. He also went to very good elementary and middle schools. We could afford to donate to his schools because we didn't have to pay private school fees.

From the savings from using public transportation rather than having to buy, maintain and inure a car. we can afford to go out to dinner, pay for our son to engage in any number of diverse activities (e.g. piano, guitar, sailing, cooking, scuba diving, martial arts), and take vacations. We have surprisingly learned that there are many places where you can vacation without having to rent a car either.

We don't accumulate clutter. As our son has grown up, there are always other people who will happily accept his used toys and clothes. When he turned five, he figured out that you can sell your used toys on the street corner and make more than the minimum wage.

Prior to moving to New York City, I was a nomad --- working in international development and very comfortable with owning so little that I could pack it all up in two suitcases and a few boxes. Being a nomad is the ultimate liberation.

Apr. 24 2014 12:18 PM
LF from NY

Bought a house outside the city proper and it is true that we are paying a lot between mortage and taxes etc BUT we live well and happily with more room and beautiful surroundings and no nasty landlord to fight with. A born and raised New Yorker who was exhausted mentally and physically by fighting with landlords about substandard repair and lack of proper heat among many other things. Loosened laws about building one time resulted in a building being built right in front of our windows cutting out much of the light..etc etc. As was pointed out, landlords are in the business of making as much money as possible and when this is problematic, the city rarely if ever positively helps renters. Shelter and stability deeply effects peoples lives. I am a teacher and I see the rabbit warrens that many students have to share I see it is deeply demeaning. It is culturally and socially hobbling. Being treated as chattel does no one good in the long run.

Apr. 24 2014 12:01 PM
bobo from Newark

This show's blurb has it reversed: Americans are not "fixated" on home ownership...it's that American society has a private property fetish (private property as the source of all virtue...i.e., the family and all that--blah blah blah). As Marx said, social conditions (plus legislation favoring private property) determine one's point of view. Have room for this opinion in the middle of the road?

Apr. 24 2014 11:53 AM

Coops are not home security= NYS Attorney General refuses to enforce the NYS co-op laws (BCL's) when boards are self dealing,in cahoots with the managing company/x-sponsor.
The managing company/x-sponsor now has the previous rent regulated building as its cash cow. It will break all the laws to make sure it stays the managing company. The AG will do nothing to help the shareowner when NYS laws are violated.
In this building the owner occupancy ratio is less than 50%, but they tell the few buyers that it is 90%, and the Westchester DA states they don't get involved in this mortgage fraud.
The president and treasurer of the board bought in total violation of the proprietary rules.
There are no shareholder coop lawyers that i have ever heard of, they are all primary Board lawyers.

Apr. 24 2014 11:46 AM
Elizabeth Scott from Brooklyn, NY

I don't think this argument holds true if you live in NYC. Rents and housing prices go up so quickly here, people who don't own their space get displaced. I'm an artist, and the older artists I know who bought space where they could live and work have a kind of stability that those who rely on renting either living space or work space simply do not have.

Apr. 24 2014 11:44 AM
jgarbuz from Queens

Take away the tax breaks (which non-owners contribute to) and then make your calculations!

Apr. 24 2014 11:31 AM
Marc Anders from L.E.S.

I think your guest is giving bad advice. Real Estate has cycles, that's true, but the age old wisdom applies: Their not making any new land (especially in NYC). My retirement is largely funded by the profits I gained by buying and selling homes over my adult life (say, 1979-). I believe that
had I chosen to rent, I would never have been able to save the kind of money I earned (my penultimate purchase, an apartment in Chelsea I bought for $156K, live in with my wife (deducting the mortgage interest costs), and sold in 2005 for almost $700K, put the icing on a comfortable retirement.

Yes, slumps occur regularly and crashes once in a longwhile, but I have never met a renter - even those who had the Holy Grail, a rent controlled apt. - who amassed as much wealth as I have while satisfying the need for shelter we all have to pay for one way or another.

marc

Apr. 24 2014 11:31 AM
Cat from Strasbourg, France

After 10 years of living with persistent chronic asthma in NYC apartments and suffering with mold in one apartment, neighbors' smoke in 2 others, my husband and I are buying our first home together. We left the city for asthma reasons and rented a home in a rural area, and it was full of mold come springtime. We are buying a house largely to be able to control the infrastructure: when a pipe bursts, we can fix it, rather than watching mold spread while placing calls to unresponsive landlords and management companies. Owning a home means controlling the indoor environment, which so often makes me dangerously ill.
PS: Still listening after having moved to France. Thanks for all you do, Brian.

Apr. 24 2014 11:29 AM
julie

I cannot take this woman seriously. When she catagorically says "Lots of considerations went into these calculations" but lacks the data to outline them, yet has an arguement against every valid point (rents increase at alarming rates in NYC, renters being at the mercy of landlords, moving costs and fees from looking for new apartments every couple of years.) Are ALL of these considered in your piece?

Pay-off a mortgage and cost of living goes down. Own your home and you have equity - something a renter will never have.

Her math is not adding up.

Apr. 24 2014 11:27 AM
christy from Rochester, ny

Many Americans are aware of the past tradition (?law) that if you didn't own property, you couldn't vote. It's still the case in many areas of this country that you don't have a voice in your community if you are a renter. In other words, you're considered a kind of transient. That's why in terms of quality of life and depending on where you live, owning vs. renting may be a major consideration.

Apr. 24 2014 11:23 AM
Tina from Brooklyn

I think there is a larger point here that is naively not being addressed. Owning a home allows you to have an asset that you can borrow against. No bank will lend to anyone with a stock portfolio because of the volatility. But if you own real estate, have a mortgage, make on-time payments, your credit score goes up and you can borrow for other things without depleting your savings. To buy well you need knowledge and experience, not just the desire to have more money. There is a much larger picture (window) here…..

Apr. 24 2014 11:23 AM
Carol

While it might be financially more logical to invest the money else where, IMO many people, including us, would not have the discipline to put the money into the alternative investments. A mortgage forces us to "invest" the money because it's also our home. Also, is the 1% ROI on the mortgage or on our investment? Would make a BIG difference.

Apr. 24 2014 11:23 AM
Beth

Dividends of owning a house, for us:
Joy of picking roses from our own bushes
Growing our own fresh herbs
Satisfaction after making a repair
Stability of monthly payments while friends are struggling with rising rents
Control over heat this winter, while friends complain about trying to get landlord to give more heat
And so much more

Apr. 24 2014 11:21 AM
jm

I don't live under the tyranny of a mortgage commitment, and have the freedom to pick up and go anywhere at anytime without worrying about my investment.

I've worked in real estate and am thoroughly familiar with the NYC home buying process. I've also kept close tabs on my friends' experiences with buying and selling in different neighborhoods. Not everyone is seeing the benefits of ownership, and if I calculated potential ownership vs rent for my particular place over the last 10 years, I still come out ahead as a renter.

I'll probably own a small co-op at some point, and I know exactly where I want to buy. It's a good sign when I mention the name of this neighborhood to others who are in the market and they respond, "What? Where? Uh...ok."

Apr. 24 2014 11:20 AM
Dave from Summit nj

Your guest should consider a family's desire to stay in a neighborhood/town while raising children. Houses for rent are generally only available temporarily (few years) while owners are away or waiting for the value to increase. So this puts the renter of a home - even if a good home is found - forced to move every few years.

(Dave from summit nj)

Apr. 24 2014 11:19 AM
Shana from Brooklyn

I think your guest is underestimating the insane cost of rent in this city, and the instability of rent for people who don't have rent stabilization. Getting priced out of your neighborhood is just a reality for renters in New York. Owning might have additional costs and thoughts, but it provides a stability that renting in this city does not.

Apr. 24 2014 11:19 AM
Alan

A reminder to New Yorkers: homeowners here, over the last 30 years, have done very well. But there's no guarantee that homes will increase in price— my parents bought a house in a neighborhood on the edge in inner-city Milwaukee in 1980, trying to work with neighbors to make the neighborhood a better place. They bought a duplex for around $30,000 back then, and sold it for about the same in 1988. Homes in that neighborhood are still around $30,000.

They moved to a close-in suburb and bought a house that pretty much has gone up with inflation. But housing hasn't made them rich, and they would have done much worse had they stayed in a neighborhood where they tried but failed to help stanch the decline, helpless in the face of Reaganomics.

Apr. 24 2014 11:18 AM
Guy Misterioso from Brooklyn

I'm mid-30s, married and just had a child. Live in North Brooklyn. We rent a two bedroom very cheaply in a decent area. For the equivalent apartment to own our monthly payment would at least double and we'd sink all our liquid savings into the place. It makes no sense to do this. We have no debt and we'd be putting on tons of it. And instead of owning a home we'd be owning a big, fat bank loan. For 30 years! Over the course of ownership we'd be paying an extra 60 - 70% over the life of the loan. Plus upkeep, taxes, maintenance fees, etc. Again, it makes no sense to do this! Keep our savings liquid, max out 401K, and rent cheaply. And vacations in the south of Spain.

Apr. 24 2014 11:18 AM
CRAIG from new jersey

So the landlords, DON'T MAKE money, they own properties and rent to help people?? Yes, buying a 4 bedroom home vs renting a 1 bedroom apartment may over a life time be cheaper. But Renting a 4 bedroom home will not be cheaper then owning a 4 bedroom. Yes, changing homes every 5-6 years, renting again could be cheaper.

Apr. 24 2014 11:18 AM
The Truth Is from Down South!

Only in NY would they debate home ownership as opposed to renting!! They don't have that mentality in the south. Eternal apartment dwellers!

Apr. 24 2014 11:17 AM
Ed from Larchmont

Home ownership is the basis of liberty (Chesterton).

Apr. 24 2014 11:17 AM

It is more appropriate to compare home ownership to renting, not buying stocks. Most of us are not investors per se. The first two options are not options at all; everyone needs a roof over their heads. Even 0.5% annual gain is better than the loss over time of rent that benefitted only the landlord. Plus deductibility of mortgage interest improves the bottom line. However, people should be at least a little mindful of timing. Outside Manhattan at least, housing prices are still relatively low and when in the future will we have access to 4.5% interest rate? It is tragic that so many people lost money in the housing bust but we recovered from similar slumps in the mid-90s and late 80s. Home ownership is all about the long haul, like your retirement account. Speaking of which, NYC coop-owners: get lobbying HUD for reverse mortgages for coops! It was in the charter but never implemented. HECM's, as they're called, are perfect for aging homeowners to enjoy life by tapping income from their home equity with zero risk of loss.

Apr. 24 2014 11:16 AM
Angela from Farmingdale NY

You don't mention the creation of community. Owner-occupied neighborhoods are safer, have better schools, and a host of amenities because people care about keeping their property maintained, about their children's schools, etc.

Apr. 24 2014 11:16 AM
MikeInBk from Clinton Hill

Nonsense! Nonsense!

I own a 1867 row house and MY COST OF MAINTENANCE HAVE NOT GONE UP OVER 25 YEARS OF OWNERSHIP!!!

Apr. 24 2014 11:16 AM
BK from Hoboken.

What many people fail to take into account is the opportunity cost of the higher mortgage payment. Everyone keeps talking about building equity etc, bit what about what you would have done with the savings?!
That said, many people don't have the financial discipline to take the savings they are realizing by renting and invest those savings.

Apr. 24 2014 11:16 AM
Sue B from Brooklyn

We bought a small place in Brooklyn in the late '80's. Our original mortgage rate was 10.5%!!! We refinanced a few years later for a more reasonable 8% but switched from 30 year to 15 year. By 2002 we only had a small amount of principle left so we paid it off. For the past 12 years we've only had to pay RE tax, insurance, W&S and fuel which is MUCH less than rent would ever be for the same place.

My take away--as long as you're staying put (and I plan on being taken out in a coffin)this is the BEST investment you can ever make.

Apr. 24 2014 11:15 AM
MG from West New York, NJ

The guest is right about property taxes. I bought a home in Hudson County NJ 5 years ago and as soon as I closed and moved in, our taxes went up by 24% - that's a LOT and not something I counted on.

I love my condo, the shorter and better commute to work in NYC, but I have sunk a lot of money in the home and I do sometimes wonder if I could have gone for a smaller, less expensive home.

On the up side, there is building galore happening on the waterfront here now and I understand that the values of our units have begun an upward move after several years of being stagnant or depressed.

I do love having a place that is "mine" (well, mine and the bank's).

Apr. 24 2014 11:15 AM
Hazel from Brooklyn

I'm in NY to help out family.I own a house in another state, that I plan to return to. I've wanted to sell my house because it is a hassle to own, & expensive to keep up. However, I'm now thinking i'll keep it because I'm 68 and will be low income. I don't trust the stock market to take care of me, either. I can't afford to pay the maintenance fees an apartment would require. If I keep my house, I will at least have a roof over my head, won't be subject to a landlords whims. I can also rent a room to cover expenses, and can leave the state if I need to by renting the house, as I now do (and maintain a space there, if I like). If need be, my home can go into disrepair, but I'll still have a roof over my head!

Apr. 24 2014 11:14 AM
Sue from Manhattan

Rent regulated housing has allowed millions of New Yorkers a middle-class life we could not otherwise afford (and without worrying about who's making repairs. We're down to about a million rent-regulated apartments now - but more people need that opportunity in NYC. If we preserve and build affordable apartments, ownership need not be the stepping stone to a decent life.

Apr. 24 2014 11:14 AM
jgarbuz from Queens

I prefer living high up in a penthouse to the nicest and largest suburban home flat on the ground. I like overlooking the ocean as I do, and don't want all that extra room to clean all the time. I will take half the space but quadruple the height so that I could look down on all of your suburbanites.

Apr. 24 2014 11:13 AM
Marrach from Brooklyn!!!

Brian...you and your guest are talking like Upper Income people who've NEVER been subjected to Landlords who Own to Get Rich. They don't give out 5 year leases. Nor do they renew your lease just because you have a family. And they don't care how long you've been there already.

In a House, you don't have to worry about the predatory Rent increase. And when your Mortgage is PAID, your costs PLUMMET. It is a Better deal for the Long term.

Apr. 24 2014 11:12 AM
John A

It's physical reality, substance, versus an increasingly virtual investment market (which can crash away, if you don't yet get the point).

Apr. 24 2014 11:12 AM
james from nyc

1.What about the rate of return in real estate in NYC, specifically? How does this compare to the rest of the country? Maybe its worth to buy here versus other parts of the country.

2. Also, home ownership tax benefits may provide an annual benefit separate from the technical return rate.

Apr. 24 2014 11:12 AM
RKWhite from levittown

My wife and I bought our home in 1961. As an 84 yr. old widower, I have learned the hard lesson not often considered before buying a home. When (if) you live long enough you grow old with the burden of homes that can never be absorbed. This is a critical fact in the "older suburbs." Homes get much more expensive as we age. There are many suburbs where the aging population has become a major issue for communities as well as the individual home owner. And your choices as an aging homeowner to make, considering the major drop in home prices. I grew up with the WW2 ideology, we must buy a home, the younger generation will not have the same motive. The WW2 and Korean War lead to the belief that having served you had to either use the
government (GI Bill) or continue to live in the deteriorating conditions of the cities. It seems to me that the young who are choosing the rent (and moves back to the city). are a lot wiser than a life long burden of the suburban home ownership.

Apr. 24 2014 11:11 AM
GandyDancer from Manhattan

This discussion is a good example of the ways in which economic analysis can't (or doesn't) take into account the psychological aspects of people's behavior.

Apr. 24 2014 11:11 AM
chip

Two factors you are forgetting. Investing in a house is not the same risk as investing in the stock market. A riskier investment always has a higher return than a less risky one. Also a higher risk of losing your money. Second, buying a house is a hedge. If you want to retire and sell your house in the suburbs, and move into the city or to florida, the housing markets in those areas are likely to closely track the housing market elsewhere. I know of very few wealthy people who do not own a house.

Apr. 24 2014 11:11 AM
ej

Given the super low inventory of homes in Westchester and the high demand, why hasn't a renting bubble developed like in the city ?

Apr. 24 2014 11:11 AM
Jesse from Ny NY

One thing that needs to be pointed out are the transaction costs of coming in and out of real estate. Unless you plan to live in the same place for like 25 years, you will lose money on brokers fees and taxes when you sell becuase it is unlikely the house will appreciate enough. Stocks, on the other hand, have far fewer transaction costs.

Apr. 24 2014 11:10 AM
NANCY from NYC

Rarely does anyone add up the expenditures of home owning when they figure out how much they have gained in the house as an investment. The caller just on keeps saying he "feels" all of the benefits of ownership. It is an emotional desire.

Apartment life does not come with new boiler costs, real estate taxes,
myriad of repairs over the years.

Rent an apartment for less than what you would pay for average real estate taxes ( especially in NJ) and you will always be ahead FINANCIALLY.

My own family are home owner biggots. Many people look at renters as losers. They look down on people like myself who don't want the expense and hassle of owning a home. They are math challanged

Apr. 24 2014 11:10 AM
Suzanne from Plainfield. NJ

Brian: we may not yet live in "Landlord Nation," but buying a home keeps us in "Banker's Nation." I don't own this home I bought for $520K and put in excess of 100K$ into it over the last 9 years. I am trying to sell it for $400K now and having trouble. The dream of owning a home is part of the shrinking middle class - giving more fodder to banks that own all of us. Worst investment ever.

Apr. 24 2014 11:10 AM
MikeInBk from Clinton Hill

Does this guest even own a home?

Most of what she has said so far is nonsense! Monthly mortgage payment higher than renting? Maybe if you buy a 1M home without any income. But that, for most is never the case.

Over time it is cheaper -- if you don't over leverage your home -- to own. Rents go up, mortgage payments stay stable. And let's not forget the benefits that come from appreciation/equity. Of course as with all investments, there will be losers.

There are people who never should own a home. And I get the sense this guest falls in that category. These are people who buy a home and turn all functions related maintenance and upkeep over to contractors. They often buy for status as oppose to making sensible choices. For those, apartments and coops/condos is the only way to go.

Apr. 24 2014 11:09 AM
Cynthia from NJ

We own a home in NJ and an apartment on the Lower East Side in Manhattan. Our apartment is worth twice as much as what we paid, our home is not. I would rather rent - not have the headaches and be tied into these places, (my husband does not feel the same) - but, the rent for our apartment is such that we could not afford it, and our house, in its location (and it's not anything super-special or in an amazing area - but it is just right for us), would not be available for rent. People who we know who rent houses here pay more than we could afford, and the length of the rental is limited (either owners are moving back or owners are looking to sell) which would not work for us now since we have children in the schools who we don't want to destablize. I still loved my life of renting in NYC for over 20 years! Even when landlords didn't fix things so fast or the heat wasn't as warm as I wanted, but there was less stress.

Apr. 24 2014 11:09 AM
Mr. Bad from NYC

This is a worthwhile debate to have but the whole premise seems to be that owning a house is at least partly an investment. If you're going to take up that part of the argument at least be honest about the fact that until very recently home prices NEVER went down. Then the housing bubble popped and for the first time ever home prices dropped. This guest compares the HISTORICAL performance of the S&P500 vs. home prices... how is the cognitive disconnection not being addressed? As EVERY prospectus state over and over and over "past performance does not predict future performance". I'm not predicting the "end of days" but their is no guarantee that taking the $ you put into a house will result in gains in the market. Our economy is not returning to post-war growth levels, ever and the recent stock market bull market is owed ENTIRELY to unsustainable fed intervention. Why not discuss that? The market doesn't have to go up or down, it can go sideways for a long time and in a deflationary crack up it's much better to own something more tangible than a stock certificate.

Apr. 24 2014 11:09 AM
Margot from new york city

There is the downside of not being mobile. In the recent collapse a lot of people suffered because they could not move to where the jobs were. Equity or anchor?

Apr. 24 2014 11:09 AM
Mr. Bad from NYC

This is a worthwhile debate to have but the whole premise seems to be that owning a house is at least partly an investment. If you're going to take up that part of the argument at least be honest about the fact that until very recently home prices NEVER went down. Then the housing bubble popped and for the first time ever home prices dropped. This guest compares the HISTORICAL performance of the S&P500 vs. home prices... how is the cognitive disconnection not being addressed? As EVERY prospectus state over and over and over "past performance does not predict future performance". I'm not predicting the "end of days" but their is no guarantee that taking the $ you put into a house will result in gains in the market. Our economy is not returning to post-war growth levels, ever and the recent stock market bull market is owed ENTIRELY to unsustainable fed intervention. Why not discuss that? The market doesn't have to go up or down, it can go sideways for a long time and in a deflationary crack up it's much better to own something more tangible than a stock certificate.

Apr. 24 2014 11:08 AM
jm

"or renting, which has a ZERO return on investment"

Given the expected down payment can range from 10-50% (commonly 20% in NYC), you must maintain stellar credit to obtain a decent mortgage, ensure thorough inspections prior to purchase and have the ability to keep up with self-management (with entire buildings), endure co-op approval processes OR find a condo with a lower maintenance fee, etc., I'd say renting as a personal investment has returned plenty in terms of stress not experienced. And of course there's no guarantee you'll receive any monetary return if you do buy.

Americans are brainwashed to think ownership is a necessity rite of passage. If you truly think you're more of "grown-up" as a homeowner than your renting peers, you're part of the problem.

Adam from Westchester ought to stay in the suburbs with such an attitude toward city parents who choose to raise families in apartments. Perhaps he's bitter he couldn't make it work.

Apr. 24 2014 11:08 AM
Bernie from Bronx

In looking at homebuying as an investment, you have to take leverage into account. You need to calculate your investment return on your downpayment, not on the price of the house. If you put down 10% and the house increases in value 10%, that's a 100% return on your investment. Unless you are borrowing money to invest in stocks, you will probably not get the same return from investing in the S&P 500.

Apr. 24 2014 11:08 AM

In a "Landlord Nation", property taxes would be abolished/transferred to the renters…

Apr. 24 2014 11:07 AM
mr nyc

Who wants to live under the tyranny of landlords and rent increases? Also, homes are usually in better neighborhoods with better public schools which is a huge money saver. Also, for some people, not everything is about making money - which I'm sure is a shock to your guest.

Apr. 24 2014 11:07 AM
Inquisigal from Brooklyn

This conversation is a little strange to have in NYC; every year rents here keep going up and up, and owning something is the ONLY way to really create any sense of rent stabilization these days.

In two years, my 2-family, 3-story house has gained 800K in market value. What I paid for my house and mortgage, locks me in at a monthly nut of $2200 a month, plus utilities. This is far cheaper than what I would pay for a similar sized space, in most neighborhoods in NYC today.

Apr. 24 2014 11:07 AM
Ed from Princeton

In addition to the mis-perception of the change in overall prices, people forget about all the costs of home ownership; taxes, mortgage interest, maintenance and repairs etc.. This adds to the cost basis and reduces the overall return on the value of the house (as an investment)

Apr. 24 2014 11:07 AM
Kris Diehl

And it's not just a class thing,
-I'm solidly middle class, and I live in a great apartment, but I hate not having control over mt future. What do I do when my landlord dies or sells the building or whatever? I can never do any home renovation I want. I'm beholden to him. The lack of control over my own life drives me nuts.

Apr. 24 2014 11:07 AM
Bob from SI

Brian you should do this show on Social Security. Do this analysis for Social Security based on age.What is the rate of return if you invested your money and what is your return for Social Security. Then compare if you are a Baby boomer , Gen X , etc

Apr. 24 2014 11:06 AM
jgarbuz from Queens

Do away with the tax subsidies for owning a home and let's see what happens then.

Apr. 24 2014 11:06 AM
ccinjc

Real estate has a cycle. Now prices too high.
Owning +
Did you state it is a good tax deduction.
Looking at the ratio of cost of renting/mortage payment this is what one has to consider. Neighborhood and schools.
There is limited real estate.

Apr. 24 2014 11:05 AM
David from Bronx, NY

The data on home price appreciation doesn't include the tax break from the mortgage interest break deduction or property tax deduction.

In the end doesn't it simply make sense to do a cost analysis between what it costs to rent in a certain market vs cost to stay in a home?

Apr. 24 2014 11:05 AM
jgarbuz from Queens

Do away with the tax subsidies for owning a home and let's see what happens then.

Apr. 24 2014 11:05 AM
ej

My folks bought their uws apt for a song in the 80s and sold it in 2004 "for the best price" . The apt was resold a year later, with a modest kitchen renovation , for 250k more. They still think they got the best price. Thoughts?

Apr. 24 2014 11:05 AM
Bob from New York

the guest does not mention the tax benefits for owners vs renters

Apr. 24 2014 11:04 AM
M from brooklyn

is she factoring in rent increases??? rents have climbed from the 1980s til today - is that part of her calculation?

Apr. 24 2014 11:04 AM
Carol from Lawrence, KS

I'm 38, married, and renting. I'm terrified of buying a home. The responsibility of having to fix everything when it breaks or finding myself paying for a house that isn't worth anything anymore the next time the market crashes is just overwhelming.

Apr. 24 2014 11:03 AM
anna from NYC

I can't even consider buying if I want to continue living in the city. As a family of 3 (incl a baby) we earn $ 100.000 and we can hardly go on a vacation.
We live from pay check to check.

Apr. 24 2014 11:02 AM
brooklynmom78 from Brooklyn

I'm in my mid 30s, separated, and have two kids, and buying a home is at the top of my list as far as financial goals. I have some other, very conservative investments including an annuity under the cover of an IRA, which has not performed well. IN addition, buying a home allows you to allocate the money you would spend on an apartment into something which is also an investment, which you can eventually borrow against if you have medical bills or other emergency, even aside from the potential of financial gain through appreciation. Eve in the current market, it's still a far more stable investment that other investments.

Apr. 24 2014 11:02 AM
Kris Diehl

But over the course of a lifetime, ESPECIALLY after the mortgage is paid off, isn't home ownership ultimately a better investment? I desperately want to buy a home so that when I retire I can look forward to suddenly eliminating a grand or two a month in expenses. If I rent, that's not an option.

Apr. 24 2014 11:02 AM
Nick from UWS

An asset is something that puts money in your pocket. A liability is something that takes money out your pocket. It's as simple as that. You do the math.

Apr. 24 2014 10:55 AM
Caitlin

The big flaw in this article is that it's not like people are choosing to put all their money in a house over putting all their money in stocks. You're choosing between putting your money in buying a house (which you can generally get some money back from) or renting, which has a ZERO return on investment. If you're planning on living somewhere for 5-10 years it generally makes sense to buy, and there are plenty of websites around the internet that will calculate this for you.

Apr. 24 2014 10:45 AM

Not if you are in a rent stabilized apartment.

Maintenance fees would be more than our rent. Despite living in a preWWI building that has not been kept up, we and most of the other rent stabilized tenants maintain our apartments better than most of the non-rent stabilized tenants. We even pitch in money to have our lobby painted when the landlords neglect to do so. Its because we do consider our apartments our homes.

We deal with leaky pipes and bad wiring and the constraint of only being able to run one air conditioner at at time. On the other hand, the building was built so solidly that we don't hear our neighbors no matter how loud and even when there have been fires in our building they don't spread because the walls are cement.

Apr. 24 2014 10:29 AM

The real value is as an asset from which to borrow against, so it's worth it only if the asset is put to use in some way.

That said, NJ homeowners (should I say mortgage-holders?) along NJT's Raritan Valley Line were set to benefit from a very lucky payday if the ARC Tunnel, which would have reduced the 50-70 minute NYC commutes by 20-30 minutes, hadn't been cancelled by Christie!

Apr. 24 2014 10:06 AM

NO! It is too risky and burdensome. Just before adopting our daughter in 2006 we moved to Huntington, NY and bought a home. We quickly realized the costs outweighed the pros. It took a while, but we finally sold in 2010, after losing our shirts due to the housing market. When you add up all the maintenance and emotional burden we have decided not to own again. We currently rent in Forest Hills. The freedom of debt and upkeep is exhilarating.

Apr. 24 2014 08:07 AM

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