Everything is going to be just fine

Turns out that 2013 is the first year since 2005 that the percentage of 18-34 year olds living at home has declined.  This actually is GREAT news when you think about it.  When you look at the chart, you see that the percentage of that age group starts growing in 2005, several years before the recession actually began.  2005 is the year that homes started getting too expensive for people in that age group, creating the logical conclusion for those folks to move back home in order to save up for a downpayment.

So what does this mean?  Well, we can look at two factors that most likely matter:

1. The unemployment rate for this age group is dropping, allowing people to afford to move out

2. More people in this age group are getting married! And married people can’t live at home with their parents.  I mean, they can but that’s just weird.

With people beginning to move out of their parents’ basements or the apartments above the garage (I’m looking at you Kirk Cameron), we’re brought to the age old discussion of renting vs buying.  Right now this is an interesting discussion for me in particular, as I may or may not be moving to a Northern California city at some point in the next three or four months.

Or Argentina.  Argentina looks nice.

Or Argentina. Argentina looks nice.

We’ve spoken about renting vs buying before but I’ve started to get slightly annoyed with some people lately.  I won’t name names, mostly because they’re not online people, but in general, they don’t get the concept.  Here’s what I typically hear from them:

“Houses aren’t great investments because your money would be better off in the stock market.  The housing market went up like crazy before but you missed out on the recovery.  Besides, in the long run houses only appreciate at 1% a year, adjusted for inflation.  So why bother buying a house?”

Nope, nuh uh, no.  See, my problem here isn’t the whole housing appreciation thing.  I get that.  That number, however, is based off of housing appreciation from 1890 to 2011, adjusted for inflation.  That’s a pretty serious long term timeline there.  Longer than I will likely be alive but that’s beside the point.  The point here is that the alternative to buying is not investing that money in the stock market.  It’s renting.  And renting is the WORST.  There is 0% return on renting.  In fact, you’re just a consumer there, paying for someone else’s lunch.  I’m tired of people comparing buying to investing.  When you buy a house and your mortgage is comparable to what your rent would have been, you’re always going to come out ahead.

And with that, I think I’m officially in the market for a house, depending on where it is.  Preferably one with a gold leafed Eucalyptus tree in the backyard.

5 thoughts on “Everything is going to be just fine

  1. At some point… Yes. I want a house for my accumulation of animals and at some point children. But when you own, you own EVERYTHING. Including all the problems that come with ownership. Taxes, leaky roof, appliances… Renting is almost like a fee to not worry about all the BS that comes in full force with ownership. It’s debatable.

    • I mean, I totally get it. But I look at it this way: If I’m purchasing a home the right way, then my total monthly payment will include property taxes, insurance, and PMI (if that’s involved). If I can get that to equal or even just be a little bit above my renting price, I’m winning. After you take into account the mortgage tax deduction, there are actually huge savings to buying a house. As long as you’re going within your budget and keeping the rest of your money working the right way, I wouldn’t really worry about the roof, plumbing, etc.

  2. I heard that you should try to save 1% of your home’s value each year to save for repairs.

    In some areas, home prices vs rents can get pretty off kilter to make the decision to go one way or another pretty obvious. I live in a college town that has a lot of students living in off-campus housing, driving up the price of rents. I’ve worked out the math and all of the monthly payments combined, plus saving for repairs for a place of similar size to what I’m renting would be about 80% of what I’m currently paying for rent. I just need to build up some savings for a down payment and rebuild my credit score so somebody will actually loan me the money.

    • I’ve heard that too actually. Especially when you do a lot of work yourself (which I would) then that amount can make a tremendous amount of sense and is right in the budget wheelhouse.

      Location also does definitely matter. If we’re in Sacramento, buying trumps renting in 90% of the city.

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