And if there is a significant enough difference in what'd you be paying to own vs rent. There are definitely some housing markets where this is true. But in other places, where the renting/owning differential is neutral or runs the other way, you end up paying a very large price for convenience, given that your rent payments are paying somebody else's mortgage.
Jerusalem's response to Matt's point about the advantage of being able to buy with leverage not available to ordinary people outside of mortgages seems like it was misunderstood by Jerusalem. You kept going back to HELOCs, but the point is the financial upside is significantly magnified when you can invest a loan.
I'd suggest in the future maybe pausing the conversation to align on the mechanic being discussed or perhaps going deeper on it (since perhaps listeners may also not understand it).
In this case, I think the advantage of leverage is extremely critical and perhaps the most important, so breezing past it by discussing HELOCs seemed like a missed opportunity.
FWIW I generally agree more with Jerusalem here. I'm sharing the above with the hope of bolstering our shared position!
Say you buy an apartment for $X, which means a down payment of X * 20%.
Over the next thirteen years the apartment triples, to a value of $3x
So (roughly) when you sell it at 3x, the bank gets .8x back, .2x returns your down payment, and your profit is 2x -> which is ten times the amount you put down.
That is the leverage. (Along the way you do pay some interest, but also some principal, and also you have a place to live in NYC for 13 years. Pretty sweet deal!)
It's likely what you're seeing is the "considerable variation across different metropolitan areas" which averages out to ~7% annual for the marginal buyer vs 10% from stocks.
I'll agree it is not a free lunch, and I DON'T think it should be primarily a financial asset. The idea is that you do want to own that home and you can wait out downturns in the market - or worst case, just stay there indefinitely. (This presumes some financial cushion and not buying while the market is too hot.)
I treat the financial gain as an option, an upside that you might be able to cash out if things happen to go well. TBH I had told people I would stay in that apartment until I died, but at some point it became too tempting to sell.
Note that if there are downturns, it is nicer to have a home you live in than a portfolio of stocks that are just worth less than what you paid.
Choosing the right period can be tricky. Notably there was also a stock market crash in that time and the stock market has done far better 2013-2026 than 2003-2013.
There's a good graphic(Figure 2) in the Fed analysis that clarifies that if anything the time period understates stock market returns vs recent trends
If Schwab let me take out margin on my portfolio up to 90% LTV at a 6% interest rate I might be less interested in homeownership as an asset class. Sadly they’ll only go up to 50% at 11%…
Home ownership is a big pain but it pays off if you can pay off your mortgage before retiring. Having no monthly rent/mortgage payment allows me to actually live on Social Security. With mortgage payments or rent of around $2800 around here, my $3660 SS payment would not be enough to live on. Owning a home, and paying it off, enabled my retirement.
This right here. We're retired and many of my friends are too. Those of us with paid off mortgages are sitting pretty; the person who with a mortgage, is not. Also what's the matter with wanting a place where you have total control (within the law) of your environment? I can plant whatever I want in my garden, paint walls whatever color I desire etc. Hell, I could paint the outside hot pink and nobody could stop me (not that i'm doing that).
Just to add some supporting data to your anecdote, EIG had this interesting article on post-COVID housing affordability. Check out the last figure. 37% of renters 65+ are rent burdened (makes sense, declining lifecycle earnings with escalating ground rents) compared to 28% of 25-34 year old renters and 19% of 65+ new homeowners.
strong agreement here. For the average person if they don't own their home AND have it paid off when they retire they will be in a very bad position.
And this type of general advice is for the average person. Yes there are individuals with unique situations that might end up better off if there is a large differential between the cost of renting and the cost of owning AND they invest the difference well
But again that's not most people.
Buy a house, and make sure it's paid off before you retire
Buying a home in a large city or in densely populated areas like the coasts might be overrated, but buying and owning a home in the rest of the US offers significant advantages over renting. I think this is an extremely geographic argument. In most of the towns/cities around me, if you want to rent your not going to find an apartment or home even half as nice as a moderately priced home.
There are huge advantages in the densely populated coasts as well, because housing scarcity means buying locks in your housing cost while rent goes up every year for most people in cities. Additionally, landlords have basically no incentive to upgrade rentals as long as they have a tenant, because the tenant is stuck with the ever-rising rent even without upgrades.
This probably is dependent on which area we are talking about but in densely populated places isn’t the scarcity what prices out buyers and forces them into looking for a rental? The rents might go up but it’s still cheaper than buying a home.
It's one of the many ways that being rich is cheaper than being poor- owning a home in the dense coastal cities is a huge upfront cost that gets relatively cheaper over time. I bought my house 3 years ago and my mortgage payment is already lower than the rents for houses equivalent to mine in my city.
Enjoyed the discussion, but the part I would frame differently:
OWNING a home is generally a great plan for many reasons, including the obvious "having a place to live" aspect. The practical question is about how much debt you should take on for that, and I do think a lot of people overextend themselves and that's bad (like your example of people barely owning the home and not being able to afford furnishings.)
In this sense it is quite similar to college. A college education is generally a great plan, but if you add enough debt you can make it a bad plan.
And as a heretical follow-up: I think the 30-year self-amortizing mortgage is a bad product that keeps people trapped in debt service to the lenders. You want to be knocking down WAY more principal every month. But this is a collective action problem because people keep taking out the biggest principle loan they can get without thinking about the total debt payments.
I used to have this fantasy about being an econ journalist for a day so i could do a story where I interviewed a bunch of economists who were always advising people that home ownership is irrational and it's better to rent, and ask them "great, so how is renting working out for you personally?" which would be a gotcha question because they all owned their homes. Then I would say something smart about revealed preferences.
I am one such house rich, cash poor person. I own a house in the San Diego area and, as a consequence of that decision, do not have any additional room in the household budget to "even have stuff". We have a dining room, but it's empty because I can't afford any furniture to put in it. My pregnant partner and I generally eat at our home office desks or over the kitchen sink like heathens. So, to Jerusalem's point, I literally don't have a table to eat at but have somehow justified being a Slow Boring subscriber since its inception. Take note Matt, we exist.
I also feel like you glossed right over a main reason for owning a home. I chose to buy where I bought for guaranteed access to the superior public school system here. Should you choose to have children, schools are a big part of deciding where to live. The home ownership return function probably needs to account for not having to pay private school tuition in order to provide your kids with a high quality education, or account for the cost of a subpar public school education (perhaps in lower lifetime earnings of your offspring) if that's your situation.
Yes, you can rent in places with good schools. But's it's structurally much harder to do (public schools tend to show higher test scores and better performance ratings in areas with higher rates of owner-occupied housing, local zoning restrictions tend to be much more restrictive in places with good schools, unit turnover is much lower, etc.) and even if you manage it, you may be displaced and forced to move away at any time. Should be part of the discussion IMO.
I think in theory, renting vs owning should just be a consumption preference and it would indeed be better to get back to the home market of the 1950s or present day Houston where owning a home isn't considered anything other than a stability purchase.
In our reality where NIMBYs have successfully throttled housing supply for decades, if you can get into the housing market, you should. It's going to be a while before YIMBYism has enough sway to bring about the world described above, and as long as houses are scarce assets, they will appreciate quickly and you can make a much bigger investment because of the leverage from the mortgage than you can as a normal person for basically any other asset class.
In short, I would prefer to live in the world Jerusalem describes, but in reality, her dad is probably right and she should buy a condo.
The thing that keeps getting left out of the debate about owning is that it creates terrible incentives. Like, if we think about the alternatives being between buying a house and renting and stashing what would have been the down payment and any excess funds into an S&P index funds, we want the house to appreciate at least as much as the S&P. And... in reality, what that means is that my 2000 SF mid-century home would need to be worth a lot more not just in nominal but in real terms when I'm ready to flip it in thirty years. And that in turn means that, even if I do nothing with it, I would be counting on some young professional paying a whole lot more in real terms for a 2000 SF midcentury house in 30 years. And that's... bad? We probably want housing to not get more expensive with time, or at least for the stock to improve, the way we do with like cars or televisions or microwaves. But if that happens, it would point to my house being cheaper in 30 years.
So the incentive on my end is to oppose building any new housing where I live, so that the land my house is on becomes an even more premium asset. And that's... bad?
Even if the structure itself depreciates this could still be good in theory if the amenity value of the land outpaces it by becoming a nicer place to live (although you’re right that in the U.S. this typically has been through local capture of zoning).
That assumes there is a big difference between renting and the mortgage. In some places and at sometimes there is, I've also seen in pretty small
But even if that's the case investments can go up and down, but the house will still provide me a place to live. That makes it very risk free for something really important providing me a place to live
Also, as the pod notes people can be NYBMS's just as easily when renting, they still don't want the neighborhood to change
That’s not an assumption, it’s a reality. Renting is substantially cheaper than buying an equivalent property, especially taking into account that you have to put a down payment on a house. And yes, investments can go up and down. But an investment is a savings vehicle, and, in the long run, a basic stock portfolio invariably appreciates.
And yes, people can still be NIMBYs without a financial incentive to push prices higher. But renting does mean that when a municipality does a good thing by building more housing, thereby allowing the price of housing to fall, it doesn’t simultaneously damage the investment portfolio of people who are counting on their house becoming increasingly unaffordable to fund their retirement.
That’s also not a reason to buy. If you took what would have been your down payment and stuck it into an index fund, it more than pays for rental costs when you retire.
In that case you were paying a whole lot more than you would’ve paid for the same property if you’d rented. Not just because of the bigger mortgage, but also because there’s less security and so a higher interest rate.
I've questioned why I own instead of rent bc it's so expensive and there's always something that needs money and attention, and for certain periods is quite stressful. But I know all my neighbors and have a strong sense of community, even as a remote worker. Ownership anchors me to a place and its people, for better or worse.
There is so much in this that feels like it is from another dimension, that’s how different the mindset is from mine.
This for example:
“Jerusalem Demsas: No. Do you really love it? Like, does it, does the stress of, like, something might break and then have to deal with that? Doesn’t bug you?”
What? For me. I love fixing things. But even if I didn’t (and sometimes I don’t because I wanna do other things) you can just hire someone to fix things.
I don’t see how it’s any different if you own a house and something breaks and you call a plumber to repair it versus you rent a house and something breaks and you call your landlord who calls a plumber to repair it. The rent is going to have to be priced such to accommodate maintenance of the property. Just like your budget for your house is going to have to be set to accommodate maintenance to the property.
In other words, there is no universe in which you get out of having to fix things.
I own a Gilded Age mansion I’m restoring and maintaining (10k sq feet, 6 bedrooms, 7 bathrooms, and an elevator) and I also own a sailboat so I’m well acquainted with constantly having to fix things. 😂
“Second is the belief is that people severely underrate the benefits of mobility in maintaining financial security. Owning a home makes it much harder to leave your region if you need to. When you lose your job — or just want a new one — homeownership acts as a drag.”
This is another example where my mindset seems to be quite different. I find this sentiment incomprehensible because one of my highest values is deep rootedness. I’m a 4th generation Detroiter raising a 5th generation kid in the city. Leaving the region for merely “a job” would’ve had enormous costs. I would’ve lost my family’s and extended family’s enormous social network. I would’ve lost the assistance of grandparents in helping with children. I would’ve lost my own personal social network.
Admittedly, my entire family going back all the generations has never had “jobs”. They’ve all been entrepreneurs and business owners. You can’t exactly lose a job in the traditional sense when your job has always been just building a successful business.
I’m so glad you guys touched on so many of the important issues in this conversation. I 100% agree that home ownership should not be the only path to wealth building. I do want to add a little to the discussion of savings incentives and 401(k)s. To protect the building of wealth the home purchase has to be replaced by a separate, non-retirement savings plan. Home ownership increases wealth in part because of leverage (small down payment to control the appreciation of a large asset) and partly because a mortgage is basically forced savings. An equivalent non-house option would have to be after-tax (not a 401k) and have some required or highly incentivized plan of regular payments. So the person who believes a house doesn’t make sense should put an amount equal to a principal payment into an index fund (or whatever) in order to build “equity”. Using a 401(k) for this purpose is kind of “double dipping”, since retirement savings already has a future purpose, and is intended to be depleted at some point.
Loved the episode but there’s several points they missed:
1) Ownership’s main strength is solving the principal-agent problem.
2) Considering the benefits of ownership, how much more should we be willing to pay over rental costs for the same property. In San Francisco, mortgage costs are usually double the rental price. Is owning still worth it at that level of premium?
After this version of the podcast (meaning Jerusalem/Matt) has been around for like a year, I’d love to see a poll about whether listeners tend to agree with one more than the other and if there’s a gendered split.
(And yes, I’m aware that this show is like Pardon the Interruption, where the hosts probably stake out more contrary positions than the ones they actually completely hold.)
Renting is great *IF* you simultaneously are socking money away in tax advantaged accounts (401k, IRA, etc).
And if there is a significant enough difference in what'd you be paying to own vs rent. There are definitely some housing markets where this is true. But in other places, where the renting/owning differential is neutral or runs the other way, you end up paying a very large price for convenience, given that your rent payments are paying somebody else's mortgage.
I love y'all's debates!!
Jerusalem's response to Matt's point about the advantage of being able to buy with leverage not available to ordinary people outside of mortgages seems like it was misunderstood by Jerusalem. You kept going back to HELOCs, but the point is the financial upside is significantly magnified when you can invest a loan.
I'd suggest in the future maybe pausing the conversation to align on the mechanic being discussed or perhaps going deeper on it (since perhaps listeners may also not understand it).
In this case, I think the advantage of leverage is extremely critical and perhaps the most important, so breezing past it by discussing HELOCs seemed like a missed opportunity.
FWIW I generally agree more with Jerusalem here. I'm sharing the above with the hope of bolstering our shared position!
The leverage of mortgages doesn't change the savings picture. Stocks are a better savings vehicle even compared to buying a home with leverage.
The leverage is this (true story for me):
Say you buy an apartment for $X, which means a down payment of X * 20%.
Over the next thirteen years the apartment triples, to a value of $3x
So (roughly) when you sell it at 3x, the bank gets .8x back, .2x returns your down payment, and your profit is 2x -> which is ten times the amount you put down.
That is the leverage. (Along the way you do pay some interest, but also some principal, and also you have a place to live in NYC for 13 years. Pretty sweet deal!)
Congrats, that is great! It is not what happens on average unfortunately.
Per https://www.clevelandfed.org/publications/economic-commentary/2021/ec-202122-evaluating-homeownership-as-the-solution-to-wealth-inequality: "During this period [2003-2013], housing shows no advantage in return over either of the market portfolios containing equities". The housing metric they use includes leverage.
It's likely what you're seeing is the "considerable variation across different metropolitan areas" which averages out to ~7% annual for the marginal buyer vs 10% from stocks.
I'll agree it is not a free lunch, and I DON'T think it should be primarily a financial asset. The idea is that you do want to own that home and you can wait out downturns in the market - or worst case, just stay there indefinitely. (This presumes some financial cushion and not buying while the market is too hot.)
I treat the financial gain as an option, an upside that you might be able to cash out if things happen to go well. TBH I had told people I would stay in that apartment until I died, but at some point it became too tempting to sell.
Note that if there are downturns, it is nicer to have a home you live in than a portfolio of stocks that are just worth less than what you paid.
That seems like a bad period to evaluate that metric on, given that it encompasses a historic housing bust.
agreed, extend that till today and I bet the numbers look different
Choosing the right period can be tricky. Notably there was also a stock market crash in that time and the stock market has done far better 2013-2026 than 2003-2013.
There's a good graphic(Figure 2) in the Fed analysis that clarifies that if anything the time period understates stock market returns vs recent trends
If Schwab let me take out margin on my portfolio up to 90% LTV at a 6% interest rate I might be less interested in homeownership as an asset class. Sadly they’ll only go up to 50% at 11%…
Sorry sir. WSB is that way ->
Home ownership is a big pain but it pays off if you can pay off your mortgage before retiring. Having no monthly rent/mortgage payment allows me to actually live on Social Security. With mortgage payments or rent of around $2800 around here, my $3660 SS payment would not be enough to live on. Owning a home, and paying it off, enabled my retirement.
This right here. We're retired and many of my friends are too. Those of us with paid off mortgages are sitting pretty; the person who with a mortgage, is not. Also what's the matter with wanting a place where you have total control (within the law) of your environment? I can plant whatever I want in my garden, paint walls whatever color I desire etc. Hell, I could paint the outside hot pink and nobody could stop me (not that i'm doing that).
Nothing, which is why Jerusalem took pains to say she wasn't arguing against it as a consumption good.
Just to add some supporting data to your anecdote, EIG had this interesting article on post-COVID housing affordability. Check out the last figure. 37% of renters 65+ are rent burdened (makes sense, declining lifecycle earnings with escalating ground rents) compared to 28% of 25-34 year old renters and 19% of 65+ new homeowners.
Link: https://eig.org/how-the-housing-market-split-in-two/
strong agreement here. For the average person if they don't own their home AND have it paid off when they retire they will be in a very bad position.
And this type of general advice is for the average person. Yes there are individuals with unique situations that might end up better off if there is a large differential between the cost of renting and the cost of owning AND they invest the difference well
But again that's not most people.
Buy a house, and make sure it's paid off before you retire
Buying a home in a large city or in densely populated areas like the coasts might be overrated, but buying and owning a home in the rest of the US offers significant advantages over renting. I think this is an extremely geographic argument. In most of the towns/cities around me, if you want to rent your not going to find an apartment or home even half as nice as a moderately priced home.
There are huge advantages in the densely populated coasts as well, because housing scarcity means buying locks in your housing cost while rent goes up every year for most people in cities. Additionally, landlords have basically no incentive to upgrade rentals as long as they have a tenant, because the tenant is stuck with the ever-rising rent even without upgrades.
This probably is dependent on which area we are talking about but in densely populated places isn’t the scarcity what prices out buyers and forces them into looking for a rental? The rents might go up but it’s still cheaper than buying a home.
It's one of the many ways that being rich is cheaper than being poor- owning a home in the dense coastal cities is a huge upfront cost that gets relatively cheaper over time. I bought my house 3 years ago and my mortgage payment is already lower than the rents for houses equivalent to mine in my city.
Ah that makes sense. I’m so happy I became a homeowner before the pandemic prices shot up around us and have never came down.
Enjoyed the discussion, but the part I would frame differently:
OWNING a home is generally a great plan for many reasons, including the obvious "having a place to live" aspect. The practical question is about how much debt you should take on for that, and I do think a lot of people overextend themselves and that's bad (like your example of people barely owning the home and not being able to afford furnishings.)
In this sense it is quite similar to college. A college education is generally a great plan, but if you add enough debt you can make it a bad plan.
And as a heretical follow-up: I think the 30-year self-amortizing mortgage is a bad product that keeps people trapped in debt service to the lenders. You want to be knocking down WAY more principal every month. But this is a collective action problem because people keep taking out the biggest principle loan they can get without thinking about the total debt payments.
I agree that's optimal, but not going to be feasible for a lot of people
I used to have this fantasy about being an econ journalist for a day so i could do a story where I interviewed a bunch of economists who were always advising people that home ownership is irrational and it's better to rent, and ask them "great, so how is renting working out for you personally?" which would be a gotcha question because they all owned their homes. Then I would say something smart about revealed preferences.
Maybe they own their homes as consumption goods! Or because their wives made them do it!! (sry to stereotype)
I am one such house rich, cash poor person. I own a house in the San Diego area and, as a consequence of that decision, do not have any additional room in the household budget to "even have stuff". We have a dining room, but it's empty because I can't afford any furniture to put in it. My pregnant partner and I generally eat at our home office desks or over the kitchen sink like heathens. So, to Jerusalem's point, I literally don't have a table to eat at but have somehow justified being a Slow Boring subscriber since its inception. Take note Matt, we exist.
I also feel like you glossed right over a main reason for owning a home. I chose to buy where I bought for guaranteed access to the superior public school system here. Should you choose to have children, schools are a big part of deciding where to live. The home ownership return function probably needs to account for not having to pay private school tuition in order to provide your kids with a high quality education, or account for the cost of a subpar public school education (perhaps in lower lifetime earnings of your offspring) if that's your situation.
Yes, you can rent in places with good schools. But's it's structurally much harder to do (public schools tend to show higher test scores and better performance ratings in areas with higher rates of owner-occupied housing, local zoning restrictions tend to be much more restrictive in places with good schools, unit turnover is much lower, etc.) and even if you manage it, you may be displaced and forced to move away at any time. Should be part of the discussion IMO.
I think in theory, renting vs owning should just be a consumption preference and it would indeed be better to get back to the home market of the 1950s or present day Houston where owning a home isn't considered anything other than a stability purchase.
In our reality where NIMBYs have successfully throttled housing supply for decades, if you can get into the housing market, you should. It's going to be a while before YIMBYism has enough sway to bring about the world described above, and as long as houses are scarce assets, they will appreciate quickly and you can make a much bigger investment because of the leverage from the mortgage than you can as a normal person for basically any other asset class.
In short, I would prefer to live in the world Jerusalem describes, but in reality, her dad is probably right and she should buy a condo.
The thing that keeps getting left out of the debate about owning is that it creates terrible incentives. Like, if we think about the alternatives being between buying a house and renting and stashing what would have been the down payment and any excess funds into an S&P index funds, we want the house to appreciate at least as much as the S&P. And... in reality, what that means is that my 2000 SF mid-century home would need to be worth a lot more not just in nominal but in real terms when I'm ready to flip it in thirty years. And that in turn means that, even if I do nothing with it, I would be counting on some young professional paying a whole lot more in real terms for a 2000 SF midcentury house in 30 years. And that's... bad? We probably want housing to not get more expensive with time, or at least for the stock to improve, the way we do with like cars or televisions or microwaves. But if that happens, it would point to my house being cheaper in 30 years.
So the incentive on my end is to oppose building any new housing where I live, so that the land my house is on becomes an even more premium asset. And that's... bad?
Even if the structure itself depreciates this could still be good in theory if the amenity value of the land outpaces it by becoming a nicer place to live (although you’re right that in the U.S. this typically has been through local capture of zoning).
That assumes there is a big difference between renting and the mortgage. In some places and at sometimes there is, I've also seen in pretty small
But even if that's the case investments can go up and down, but the house will still provide me a place to live. That makes it very risk free for something really important providing me a place to live
Also, as the pod notes people can be NYBMS's just as easily when renting, they still don't want the neighborhood to change
That’s not an assumption, it’s a reality. Renting is substantially cheaper than buying an equivalent property, especially taking into account that you have to put a down payment on a house. And yes, investments can go up and down. But an investment is a savings vehicle, and, in the long run, a basic stock portfolio invariably appreciates.
And yes, people can still be NIMBYs without a financial incentive to push prices higher. But renting does mean that when a municipality does a good thing by building more housing, thereby allowing the price of housing to fall, it doesn’t simultaneously damage the investment portfolio of people who are counting on their house becoming increasingly unaffordable to fund their retirement.
Sorry when more thought
The purpose of the home in retirement is to live in not to fund it
That is the purpose People should be buying the home
Because you can't realize the gains unless you move. And then you just need to buy another home
Possible exceptions, of course, would be. If you're moving from a really high priced market to a low priced mark
Or selling to go into a retirement home
That’s also not a reason to buy. If you took what would have been your down payment and stuck it into an index fund, it more than pays for rental costs when you retire.
I've definitely seen a number of situations where the difference between renting and mortgages is very minimal
But it does greatly depend on the market and also the time
When we first started looking at homes.In around two thousand seven, there was a huge premium between buying and renting
So we continue to rent
When we bought in 2010 the cost for rent and the cost for mortgage was pretty comparable.Maybe we paid another one or two hundred dollars a month
You had to put money down. You don’t have to put 20% of the purchase price down to rent. And if you rent, you have that 20% to invest in other assets.
Very few people are putting twenty percent down
I think we put down five percent. It might have even been three point five percent
In that case you were paying a whole lot more than you would’ve paid for the same property if you’d rented. Not just because of the bigger mortgage, but also because there’s less security and so a higher interest rate.
I've questioned why I own instead of rent bc it's so expensive and there's always something that needs money and attention, and for certain periods is quite stressful. But I know all my neighbors and have a strong sense of community, even as a remote worker. Ownership anchors me to a place and its people, for better or worse.
Can we please get a subscription level at which our individual feed for the podcast has the ads cut out?
There is so much in this that feels like it is from another dimension, that’s how different the mindset is from mine.
This for example:
“Jerusalem Demsas: No. Do you really love it? Like, does it, does the stress of, like, something might break and then have to deal with that? Doesn’t bug you?”
What? For me. I love fixing things. But even if I didn’t (and sometimes I don’t because I wanna do other things) you can just hire someone to fix things.
I don’t see how it’s any different if you own a house and something breaks and you call a plumber to repair it versus you rent a house and something breaks and you call your landlord who calls a plumber to repair it. The rent is going to have to be priced such to accommodate maintenance of the property. Just like your budget for your house is going to have to be set to accommodate maintenance to the property.
In other words, there is no universe in which you get out of having to fix things.
I own a Gilded Age mansion I’m restoring and maintaining (10k sq feet, 6 bedrooms, 7 bathrooms, and an elevator) and I also own a sailboat so I’m well acquainted with constantly having to fix things. 😂
“Second is the belief is that people severely underrate the benefits of mobility in maintaining financial security. Owning a home makes it much harder to leave your region if you need to. When you lose your job — or just want a new one — homeownership acts as a drag.”
This is another example where my mindset seems to be quite different. I find this sentiment incomprehensible because one of my highest values is deep rootedness. I’m a 4th generation Detroiter raising a 5th generation kid in the city. Leaving the region for merely “a job” would’ve had enormous costs. I would’ve lost my family’s and extended family’s enormous social network. I would’ve lost the assistance of grandparents in helping with children. I would’ve lost my own personal social network.
Admittedly, my entire family going back all the generations has never had “jobs”. They’ve all been entrepreneurs and business owners. You can’t exactly lose a job in the traditional sense when your job has always been just building a successful business.
I’m so glad you guys touched on so many of the important issues in this conversation. I 100% agree that home ownership should not be the only path to wealth building. I do want to add a little to the discussion of savings incentives and 401(k)s. To protect the building of wealth the home purchase has to be replaced by a separate, non-retirement savings plan. Home ownership increases wealth in part because of leverage (small down payment to control the appreciation of a large asset) and partly because a mortgage is basically forced savings. An equivalent non-house option would have to be after-tax (not a 401k) and have some required or highly incentivized plan of regular payments. So the person who believes a house doesn’t make sense should put an amount equal to a principal payment into an index fund (or whatever) in order to build “equity”. Using a 401(k) for this purpose is kind of “double dipping”, since retirement savings already has a future purpose, and is intended to be depleted at some point.
That assumes there is a difference between the rent and mortgage. Sometimes it's true but not always
Seriously can we use an LLM or something to, like, take out, like, the constant, like, likes?
Loved the episode but there’s several points they missed:
1) Ownership’s main strength is solving the principal-agent problem.
2) Considering the benefits of ownership, how much more should we be willing to pay over rental costs for the same property. In San Francisco, mortgage costs are usually double the rental price. Is owning still worth it at that level of premium?
After this version of the podcast (meaning Jerusalem/Matt) has been around for like a year, I’d love to see a poll about whether listeners tend to agree with one more than the other and if there’s a gendered split.
(And yes, I’m aware that this show is like Pardon the Interruption, where the hosts probably stake out more contrary positions than the ones they actually completely hold.)
secretly I agree more with Matt but I think Jerusalem makes better points, and I'm not sure how I should feel about that!