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The result of decades of propaganda

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…is this:

“About 84% of the respondents…said owning makes more sense than renting, consistent with earlier surveys.”

The push for Americans to own real estate has been so systematic, so deeply embedded, so endorsed (by multiple presidents and the duplicitous NAR) that no matter what counter-evidence is presented, a majority of Americans will always believe real estate is the best investment they can make. It is an invisible script, perhaps the most sacred financial cow of all.

Real estate can be a worthwhile investment. But not nearly as often as you think.

I’ve put together a comprehensive rebuttal on my Buying a House page.

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  1. If you’re shopping for your dream house, it’s almost always a bad investment.

  2. Saving to buy a house is LAST on our list of financial goals, after fully funding an emergency fun for one year, paying off student loans, maxxing our two 401ks and Roth IRAs every year. I don’t know if we will ever end up owning property, and I’m fine with that.

    It amazed me how many people started telling us to look for a house after we got married. It’s like apartments are toxic to newlyweds or something.

    • I agree, it’s totally insane

    • Speaking of totally insane…
      One of my parent’s financial goals was to help my brother and I with a downpayment on a house. I’m not interested in buying a house anytime soon and my parents are flipping out.

      I’m worried that they will buy a house for me. Seriously. They may or may not actually be capable of buying another house… certainly not without some “creative” financing and me making the mortgage payments.

    • Not owning properly doesn’t just save property management headaches (if you own it to rent it out), it also doesn’t handcuff your ability to relocate for whatever reason. Paul Graham mentioned about how a lot of consumption are phrased as “investments” by a particular group (in this case, I presume builders and real estate agents):

      I’m not interested in purchasing a house b/c of the headaches. Many people are being owned by the house rather than the other way around in terms of actual feelings that they don’t want to admit (to avoid embarrassment or ridicule).

    • Ooops. I meant “not owning property” instead of “not owning properly”

    • Totally agree! I’ve been married a year and a half and my parents and some coworkers keep hounding me about when I’m going to buy a place. It’s like they don’t think newlyweds can live in apartments. With mortgage, insurance, property taxes and HOA fees, my monthly housing bill would be over twice as much as my current rent. It makes me sick to think how much of my monthly take home pay would go to housing.

  3. It’s no wonder. Government bends over backwards to get people to buy homes. Why? Well, who owns your mortgage? The banks. Who is Congress craven to? The banks.

  4. I’m a two-time loser in home ownership. Meanwhile, in the three months since I became a renter, my family and I have: used the pool and/or jacuzzi just steps from our apartment at least once per week, didn’t pay a dime when the A/C went kaput and I had it fixed within hours, haven’t touched a lawn mower (but made $50 after I sold the one we had) because our complex has weekly mowing/edging/lawn maintenance service, and built up an emergency fund which curiously didn’t exist when we were “homeowners”.

    The realty industry is an albatross on American society. But boy – does it know how to shove crap propaganda down our throats. I used to believe it just like that 84%.

    • And you’ve made nothing in principal, instead contributing to either the mortgage of the management company or directly to their bank accounts.

      While home ownership is only right in particular circumstances, it is ignorant to ignore the pros and cons of both sides.

    • Anyone live in Vancouver? Some of the most over-priced real estate on Earth. (google crackhouse or mansion). Owning is well over double the cost of renting in many cases. Yet everyone here thinks renters are idiots even though most of us are.

      I live in an apartment downtown so I don’t have a car (saves a few grand a year). My apartment has a gym, full-length pool, theatre (like those you see in mansions), a party room I can book, a billiard table, and a 24-h concierge. I’m not throwing my money away, I’m living a great life!

      You’d have to pay me to live in an old house.

  5. Owning your own home isn’t everything it’s cracked up to be. You can definitely make bad decisions when it comes to a mortgage. But it’s not always the wrong decision or the right one.

    At least with a mortgage – you could potentially get at least some of that money back when you sell your home. The money you pay in rent is gone forever.

    Every situation is different. I think your Buying a House Guide has a lot of solid advice to help people make the right decision.

    • I’m so glad you wrote that! I cant stand it when people say “buying a home is always a great idea” or “buying a house is the worst idea ever”

      In reality, it’s about finding the right fit for the right person. Maybe it is a great investment, but maybe it shouldnt be thought of as an investment. Maybe somebody with a family wants to buy a house for the stability or the sense of community. But buying a house for the sole reason that you think the prices will go up is kind of a crazy reason to buy a home.

      It’s like financing vs leasing a vehicle…both have merit and downfalls, its all about fit.

      There’s no black or white, just lots of shades of grey.

  6. I’m a former member of the 84% referred to above. In 2003, I bought a 3 bedroom townhome for $134K (just before the prices soared). Then, the bottom fell out, and now my home is worth less than $70K. One unit under foreclosure was short-saled at $50K! Yikes! Talk about a lousy investment.

    It was all about prestige. I wanted to say that I own MY OWN home. I used to think that my coworkers who rented were idiots. I mean, why rent if you could OWN?

    Owning has made me about $20,000 poorer, given that I’ve had to replace: carpeting, washer, dryer, oven, a/c unit, dishwasher, as well as the water heater. The kitchen was 20 years old (and looked it), so we had that remodeled as well. I nearly forgot about the accordion hurricane shutters.

    Needless to say, I look forward to renting again.

    • “my stock porfolio just went down 20%, i’m selling them all and never buying again”

      I bet that doesnt sound too logical to too many…that’s what u said about owning a home.

    • DanP: Actually pretty different…real estate’s post-inflation return has been close to 0% over the last 100+ years (see Robert Shiller), while equities have risen dramatically. I cover the details in my book.

  7. I bought my first house at 23 and never looked back. In my second now, for a good long time. No, I’d never recommend it for an investment, but for me, I wanted the grounded stability that having a house brings. You know you aren’t going anywhere if you’re not renting, and I needed that after a childhood of moving. It has its ups and downs, and it’s not for everyone.

    Seems to me the ideal of property ownership goes all the way back to our country’s roots, possibly longer. Has nothing to do with banks or government, but a deeper, more ingrained desire cultivated over generations rather than decades.

    • I bet you don’t live in NYC, though.

      There are some places where houses are relatively cheap. I assume you are in one of those places.

    • You’re right, Julie, I’m nowhere near NYC! I live outside the Chicago area where a lot of housing is pretty cheap. Rent would cost about the same as my mortgage, though renting would be cheaper, what with maintenance an’ all.

      I do not envy those who live in high cost of living areas.

  8. I’m amazed that every time a friend or family member gets married, talk about getting a house begins. Apparently the stress of planning a marriage and honeymoon just aren’t enough challenge. The only house I ever want to buy is the one I have built to my exacting specifications, die in and leave to my family for generations. I also want it to have a dedicated library room and the ability to defend against a zombie apocalypse. I refuse to buy a house that doesn’t meet these standards. Don’t judge me. There is no one who DOESN’T want that house.

  9. engaged over here, and my future mother-in-law has already started prodding us about a house. say what?! we are such happy renting campers. 1, love nyc and it’s all rentals here anyway, 2, should my love change we can leave no prob, 3, don’t want to be stuck in one place forever 🙁

    • Totally agreed, Ramit. I live out in the SF Bay Area, where a starter condo can run you $450K (not including taxes, etc.) if you don’t want to live in a neighborhood where the police stop by every other evening (those houses start at $300K).

  10. agreed completely – it is a bunch of horse sh%#*$t

    however, i do own several rental properties across the country and have done well with them. my approach is value investing, not speculative, therefore appreciation is merely icing on the cake for me. i like the parlaying effect (paying off one and using additional proceeds to pay off another and rolling the ball onward). tax benefits are also relatively significant if run as a business, which i do. finally, for a newbie, one can leverage money further. for example, with stocks you can invest at a 50% margin, with real estate, i was able to structure several 0 down low interest deals, and even in today’s horrendous economy, someone with a good FICO and respectable balance sheet/cash flow can pull off a 20% down 4-5% int rate deal.