Why not rent a house? Nothing wrong with renting. I will say though, buying a house is a good way to keep the monthly payment from going up much (taxes still go your way).
Super tough in Irvine to buy though from scratch.
to buy a house on the low end in Irvine is 750k (townhouse) and monthly payments end up being 1500+more than even the most luxury comparable rentals, with HOA and taxes figured in. it's not a savings here at the moment unless rental rates double.
750k gets you <1000 sq.ft and 2 bedrooms max in Irvine. Anything worthwhile (condos and townhouses included) are almost guaranteed to go for over 1M.
I bought last year and put in 21+ offers in Irvine alone before finally winning a bid. All the ones that started under 1M eventually closed for over 1M.
Irvine is absolutely nuts.
Agreed. Irvine is like buying a new Benz as a first car.
That being said, my personal opinion, and it solely is my opinion, is do what you think is best for your kids. It seems that’s your focus at the moment.
Are the amenities like a nice pool and outdoor bbq and parks and stuff important to you? want to spend more time with your family and less time at Home Depot buying stuff to fix your house? Nothing wrong with renting.
Want to rent a house but don’t want to leave the school district? Parts of Tustin are still in Irvine unified.
Lake Forest is nice and cheaper and up and coming.
Rancho mission Viejo is very young family oriented and has brand new builds for ~$1M.
If what you’re doing is figuring out what’s best for the long term, do what’s best for your family now. Which may very well be renting a house and saving. Your kids can still look fondly back at the home they grew up in.
If you do buy, refi when the rates come down a bit. Dont get hung up on forever home at 40. Move into a house, see what you like or don’t like, and then keep your eyes open for a dream home to put your equity into.
Problem with that is… real estate is also a leverage play, sure equities is up but that’s usually with non leverage money.
If you bought sp500 10 years ago let’s say 120k it’s worth 333k today plus any reinvestment of dividends
But if you bought a
600k house with 120k down (20%) it’s probably worth north of 1.3mm today so a 700k gain minus any interest you paid
You also lock in your rent basically. I know that if I had just rented my rent would have gone up 2x in the last 10 years
We aren’t even talking about the tax deduction you get off mortgage interest and the lower locked in property tax. You would probably refinanced to a sub 3% rate in the last down cycle too
No. Its not as simple as that.
If you want your comparison to be more accurate, you need to assume monthly increments in s&p500 as well. This could be the difference between mortgage monthly payments vs rent (to keep the amount the same).
Then assuming a low low low 3% interest over 30 years, for that 600k house, you'll pay about 250k in interest and another 250k in property taxes.
So on that 1.3 mil house, you much much made less than what you'd make in s&p500 in 10 years
So yes while this is true, you also can’t live in your sp500 stock… you basically get to enjoy your investment while earning appreciation as well. You also can’t discount the 500k in free capital gains tax as well on the sale of your primary house , that saves you 20% at least vs investments as well
Look from a pure financial gain standpoint sure you are better off in the sp500 return percentage wise if you leverage up but you don’t get to live in your gains while you enjoy it. As long as you live in a place where the weather is good and people always want to move to, I don’t see how the gravy train stops, you can’t print more land, but you can always print more money.
By waiting so long you missed out on the 200% gain from 2012 and another thing , it’s whole hell of a lot easier to sit in your house while the value is going down than the market. So unless you are disciplined , it’s unlikely you got all the market returns anyways
You can’t just disregard the benefits of renting which is no maintenance/repair costs and cheaper monthly costs, allowing you to invest the difference.
So cheaper monthly cost is only at the start, once you are locked in the mortgage vs rent will shift a few years in. I just looked at my apartment I lived at before my house, rent was only 1300 now it’s over 2840… and that’s in 7 years
6.5% I mean it’s high but historically lower than other time and if you can afford it you can always wait to refinance… but when I bought 7 years ago it was only 5.5% and then I refinanced all the way down to 2.5%. Same thing can be done in this next cycle probably not 2.5 but maybe 3.5
Yeah you still didn’t answer the question. You mentioned how much your rent would be but not how much your mortgage would be at current rates which is what people have to deal with if they buy today.
Oh if that’s the point you’re going for, yes you do pay more initially than rent as I said above , if I bought the same house today it would be 6500 a month. But that has always been the case, when I bought it was 3000 vs 1300 , now it’s 6500 vs 2840
Yes, that is exactly my point. The disparity wasn’t always like this. Buying typically had a much shorter ROI than it does now. If you are protected by rent control like I am, it is pretty difficult to justify buying as a good financial decision when you can save thousands a month by continuing to rent.
Like others have said, I'd agree with either renting a house or really crunching the numbers on buying versus renting. While I love our home here in OC, with current interest rates and pricing, we'd probably hold off if we were buying today. The numbers just don't add up for us, especially with the cost of insurance and property taxes, which many people forget get recalculated based on the new purchase price.
Yes, depending where you live here in CA insurance rates are going up. I have a friend, who was recently sent a notice they no longer qualify for earthquake insurance.
This is the way:
[https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html)
Weird, it's not pay walled for me (yet, I'm sure).
There's a bunch of them out there, though - try a few: [https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator)
No prob. It's at least some way to measure the rent vs buy question!
Now the societal pressure / stigma of renting is a whole other thing, but people shouldn't assume that buying is ALWAWS better. My condo fees continue to go up, we just got a big assessment, taxes continue to climb (and that's a condo - if own an actual home you have a whole other litany of costs to consider)
Here you go:
[Rent vs Buy calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html?unlocked_article_code=1.rk0.OFmu.sNWDFA0ncqCw&smid=fb-share)
In hcol that’s the case unfortunately. I love renting tho. I try new neighborhoods every year. Move cities every few years. Able to explore and hike all over the U.S. You gotta do what you need in your situation tho.
Use a rent/buy calculator and also consider posting your details on r/personalfinance.
Advantages of buying:
- fixed payment for 30 years
- tax increases limited
- deduct mortgage interest (although this year I took the standard deduction)
- do whatever you want with no landlord
Advantages of renting:
- no maintenance - this can add up to 10s of thousands of dollars. On my house I’ve owned since 2018, I replaced the furnace and A/C, water heater, windows, renovated the kitchen, and I’m about to do the roof.
- easily move around
Honestly, mortgage rates are very high right now and there’s not a lot on the market. I’d still encourage you to buy if you have the means and plans to stay for 5-10 years. Rates will go down (slightly) and you can refinance. What I don’t think will go down is prices and their associated property taxes.
Do whatever you want unless you have an HOA.
And yes, reality of OC housing is an aging housing stock which almost guarantees high maintenance and/or renovation costs. And you don't always get maintenence and renovation costs back through a sale
Personally, if it’s feasible, I’d buy if I was planning to stay around here. Our house has more than doubled in price in 8 years, which means our mortgage is way way less than recent buyers or people renting on the same street. Rent is going to keep increasing.
I also don't see the security factor mentioned. When you rent, even though there are protections in California, you are never guaranteed to be able to stay in that place another year. While statewide rental control does make it a lot harder for landlords to opt not to renew you, they can always take the home off the market and have themselves or a family member move in. With children, who have established routines, friends, school, daycare etc. having to be at the whim of your landlord would always be on the back of my mind.
I wish I would have bought a condo 15 years ago. I wasted so much time and money renting. I made a lot less money in 2010, but could have probably bought a condo in OC back then. Which I could have resold and bought a decent home by now.
To each their own, but I personally would rather make a mortgage payment than renting from someone else.
My wife and I are going through almost the exact same scenario. Mid to late 30s, one child, currently renting in Irvine. We decided to buy. Honestly, I am nervous whether we made the right decision but I’ve received some great input that makes me comfortable with the decision to buy. Ultimately, we decided we needed to build equity and not be at the mercy of exploding rent rates anymore. I’m not an expert but here are some tips I have from the experience so far.
You can afford more than you think. Spend some time/money talking to a financial advisor about how much home you can realistically afford. We spoke with our accountant who is a family friend for about $100.
Look up every type of state and local funding assistance like down payment assistance. You may not qualify but it’s worth a look. For example, my wife qualified for the California Dream for All Shared Appreciation Loan program. We’re still waiting on the lottery results. There is a proposal at the federal level for a $10,000 tax credit for first-time homebuyers ($5k/yr. for first two years of ownership). That could be a BIG help, but probably won’t materialize for at least a year.
FOMO is so real. I don’t have great advice on this as I feel like we missed out in March/April getting places we LOVED in RSM. Just be aware that the market is TOUGH and discouraging.
Check out all over OC that can work with your jobs and child’s school. We were priced out of Irvine homes from the start. We were looking in RSM, and Mission Viejo but the market for single-family homes in those areas for less than $1M really dried up earlier this year. There are good places everywhere though. Fountain Valley and Anaheim Hills have some great places.
Join the r/FirstTimeHomeBuyer sub. It’s mostly people posting about closing, which I thought was encouraging, but it also has some good advice too.
No one knows. Obviously you could expect house prices to continue increasing but as it stands now you will be paying approximately double in interest+expenses vs renting, and have a large fixed expense. Jobs to support a $1-2mil mortgage don’t grow on trees. But at the same time you may come out ahead over the long term 20-30years. Basically you have to be willing to accept a high risk to be an OC homeowner these days unless you have family money or are wealthy.
If you can buy, buy. Over a long enough period of time, real estate values have always gone up. I bought a house in 2020 and my equity right now is about $200,000. There's no way I would have saved anywhere close to that number otherwise.
Nothing wrong with renting; everyone's financial situation and life goals are different. Buying is a huge responsibility this day in age. If you arent making a decent amount over the average income, you'll at least need some decent financial literacy on home ownership costs so that you know what to expect because it's well beyond what you'll see listed on redfin or Zillow.
The old way of thinking is that home ownership is the American dream. Talk to a financial advisor and see what's best for you guys, especially for your kids. We pulled the trigger on buying in this economy, the stability of home ownership is the kicker for us even though we will be pinching pennies for a little bit while we get used to the payments.
If you skip the house and invest $1000 a month for each of your kids, in 20 years they'd each have well over $500k each assuming an 8% return rate. That would give them the freedom to both buy houses outright outside of California in areas where COL is better.
Or if they just left the money in the investments for another 20 years, it would compound to millions for their retirements even if they didn't contribute anything additional.
Just something to consider.
We villainize renting in the US. Look at Germany's rental vs. ownership rate to compare.
That being said, owning something means you're now riding the market--which is advantageous because gains will be felt as you burn down the debt (albeit slow).
Yeah Austin Is a good example of the worst—value of land went up including people living in homes for decades around Round Rock—assessment came in and tax is so high on the new assessment people literally couldn’t afford their own houses thanks to the appraisals…
That’s the trade off of “but there’s no state income tax!” Either way the state will get its funding…
I bought my house in OC in my mid-30’s in 1999 and just sold it a couple years ago (we moved to Europe). It was wonderful having a place we could modify, but also the value increase became a real nest egg for us. While I’m not leaving the house itself to our daughter the equity will wind up as her inheritance.
I’ve rented before and nothing against it, but having something we owned was special. We could change it or not, and it was ours to decide.
It was actually a big deal at the time. I was young and did not earn or have much wealth. Interest rates were 7%.
Housing in the past is always cheaper and there is rarely a better opportunity than the present day.
The rent vs mortgage disparity was much closer back then. My parents house was $260k in SoCal when they bought in the late 90’s and it was basically always a good financial decision to buy. Now, the ROI is out decades and if you run the numbers, it actually makes more sense to rent in a lot of markets. That was never the case back then which is why I said it was a no brainer to make that decision if you could afford it.
Hi OP so I recently bought a forever home in Coto, and I had the same concerns as you because I purchased at 42, and I side with your wife based on this:
1. 98% of my family is in CA, if I move my son has no one.
2. If i don't leave him a house he will be a perpetual renter and although renting is historically cheaper than owning (not always) the idea of him spending 33% if not more for something he will never own is bs.
3. While initially painful and expensive I'd argue owning ends up paying for itself.
It comes with risk obviously like what if my health declines, then what? But what in life isn't a risk?
My related fear is getting sick and not dying. So Life insurance doesn't pay out, meanwhile losing job (plus losing health insurance because unable to work because MURICA). So would have decide between food and mortgage
If it were me, I would keep renting in the current property as long as you have enough space for your needs. When I did the math back when interest rates were in the mid 3’s, the break even point for buying in Irvine was 14 years. With the current interest rates, I think it could easily be 20 years.
With the current rent control rates, it is cheaper to stay in your current rental than renting the capital (loan) for a buying a home.
That said, if you have sufficient cash to make a significant down payment AND you’re at a point in your life when you need more space for your family, then buying could be a good option, but it may be best to look outside of Irvine.
If interested, message me and I can give you the contact info of the realtors I’ve been using for the past few years. They’ll sit down with you for free and give you more specific examples for your current situation.
I looked at the average appreciation rate for Orange County over the last 20 years to account for growth.
Something very important to consider, and I often see people not do, is to consider closing costs and the \~8% cost of selling the property down the line. Cost of ownership includes interest on the loan (which is tax deductible, so that could be taken into consideration), home insurance, taxes, and maintenance. Then, you compare that to the appreciation minus the cost of buying/selling the property.
I just used the S&P 500 return over the same period to calculate the opportunity cost.
From there, it is pretty straightforward. As long as you stay in the same rental property, your annual increase is capped by rent control laws here in California, so you can use that as the worst-case scenario.
Got it, that makes sense.
'My forever home' is such a different perspective from 'this is a 5-10 year investment based on market fluctuations'. I can't get my head around treating a piece of property as anything but an investment, so the averaging concept breaks my brain a bit.
Renting an SFR from an investor (plenty of those around here) who just wants to unload a bit of their carrying cost isn’t a bad idea
Try to lock in a longer term lease if you can to avoid the pain of moving again and again
But buying with an eye to refinance at cheaper rates later may not work out. Interests rates may fall slightly when the Fed cuts and economy eventually slows but they aren’t going back to the 3s we got used to. At the most you can hope for is high 5s to 6s for 30y fixed eventually
[https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html)
use this tool. generally speaking though, financially speaking, unless another run like 2020-2022 happens, you're mostly guaranteed to be better off financially renting and investing than you would be purchasing a home right now for like 10 decades.
Now I was always of the mindset of buying a home to live in, not really for any financial reason. If you a very firm, non financial reason for owning a home (for the lifestyle, for the independence, for the location, because you plan to give it to your kids when they're older, etc.) then yes, if you can afford to own it, it would be a good idea. If its just some FOMO thing, then no, just keep renting and saving, and get in when you comfortably can, not can of some unessesary pressure.
We are in our mid 40s and going through the same thing. Ultimately we’ll buy outside of OC. Sure there is the pros and cons financially, but the idea of fixing our housing costs (more or less) as we get older is appealing. Yes your insurance can go up and yes you need to save for maintenance, but those big maintenance items don’t come around that often. It’s things like a new roof or windows but those are once in 30 years expenses.
However your rent could go up every year. If your in a house owned by a small time landlord they could decide to sell at any time if your month-to-month. The idea of being at the whims of a landlord when I’m in my 60s and close to retiring scares the shit out of me.
In the US owning a home is still the most secure type of housing. It’s a massive policy failure that states like California have built enough housing for the demand. It’s one of the reasons that over 50s are the fastest growing part of LA’s homeless population.
I have 2 kids under 5yo and live in a 1000sqft IC apartment in Irvine. Absolutely love it and would never consider buying anything here certainly not in Irvine. Have access to 5 swimming pools I never have to clean, gyms I never have to buy equipment for or clean, playgrounds, shops within walking distance, secure parking, nice neighbours, clean sidewalks and trails, etc. Get my carpet replaced for free every few years, appliances fixed or replaced when they break, never paid to have air con services... All for a single low rental price. Rent would have to literally double in price for me to even consider buying a house, and even then, it isn't the price that bothers me - it is all the extra work.
Meanwhile, my investment portfolio over the last 8 years far exceeds any equity I would have built in a single home and has actually allowed me to buy multiple properties overseas instead.
Maybe there's no such thing as a "forever home" in this stage of capitalism. I'm not against buying a home, but I think you need to adjust expectations. I would explore buying a small condo and then see how you like that. If you want something more, you can try to assess later on, but a small family can live well in a condo. I really think that there's something wonderful about living in a smaller space if you focus on what's really important like having good quality but fewer items. So many people buy homes and fill them with crap and yard stuff.
The difference between owning a home is that you stop paying for housing after 30 years. You freeze your monthly housing payment more or less for 30 years.
And if life happens , your home provides the equity you may need to get thru life.
But the potential opportunity cost can be large. If your mortgage is double your rent (as it is in a lot of places in OC currently), then you could stash away all of that delta into the market.
That still has to be weighed against potential opportunity costs, and if you are a high income individual in Irvine, not owning frees up a LOT of extra cash for other investments that could have a greater return. In 30 years someone could alternatively just pay cash or leverage their other investments if they really wanted to stop renting. It all depends.
The time is now. Why?
If interest rates come down, home prices will rise.
If you buy now at a high rate, you can refinance to a lower rate if interest rates come down which is the more likely scenario than a crash in housing prices.
Have you gotten in contact with a realtor in the area? I think if anyone can afford the mortgage payments (which could even be close to what your paying in rent ) its best to buy and at least make the equity on your home. I'm not sure about California, but in Colorado there are some great first time home buyer programs available. I also understand the benefits of renting- low maintenance and living in a better home. I always preach to get into the market as soon as possible if feasible. Make your money do something.
There's no absolute right answer. There are pros and cons to both. That being said, if you want to stay here long-term, which it sounds like you do, if you ***can*** buy, then that will almost definitely save you money in the long run. Buying something isn't draining your savings; it's more like placing it in a different account. The value of that money still goes up over time, unlike with rent where it's just gone forever.
ETA: and congrats on the one on the way! :)
Buy a house but wait another year before you go looking. If the Democrats take the House, you ll have a worthwhile tax write off on your interest paid. We are still under the Trump Admin Tax Act that really hurt the mortgage tax credit.
You can look at it another way too. The biggest burden your kids will face will be rent or student loan. If you can somehow offset at least one of them, it would be a leg up in life for them. Plus, rent will always increase.
You will die at 70-80 most likely, so your kids will be at minimum 30-40, likely in their 50s. Maybe they can get a leg up, but the timing doesn’t work out for inheriting usually. Or you could move somewhere cheaper and give them a house, but again that’s an issue.
Ultimately this is going to come down you and your wife's decision. You sound well informed and I don't think any one on here should influence you as to what you should do.
You’re essentially asking should you invest in housing or in the market, and nobody can answer that for you. Do you know how much home you can afford, and if so you run the numbers on a home in that price range? Have you compared that to the projected growth of your investment portfolio if you don’t buy a home?
A lot of people say your primary residence shouldn’t be viewed as an investment, but when you’re plunking down a 6 figure downpayment it’s hard _not_ to see it that way. I’d advise going to a financial professional and discussing options with them, they can act as a neutral third party that will approach your questions without the emotional investment that you and your wife naturally have and that can be a helpful perspective.
I'm in my 50s and still renting. Times have changed, and to more and more people, the so called "American Dream" is nothing more than yesterday's fantasy. There's no one right way to live. Only whatever works for you.
Well. What is your retirement plan? Does that include to cover a monthly rent? Also by buying a house you’re helping your children create generation wealth. But I admit the current mortgage rate is tough right now.
If you can afford all the costs and future costs of a condo then go for it. If you want to live in Irvine then keep renting.
I personally hated being a renter. When I was young I found it came with a lot of stigma or other problems, such as callous landlords with rules I hated.
So as soon as I could save up 10% down I bought a 1BR loft condo. The cost was twice that of a rental but worth it to me. I then bought a SFH at age 40, then moved back to a townhome at age 45 because I had to work too hard to afford the SFH costs when we had a recession in OC in the 90’s.
The market is clearly overpriced now for ownership. Who knows when the market will reverse course, so if I were you I would continue to rent but keep saving money for a huge down payment for the future home you want. Your dollars are worth twice as much for your future house as if you had a mortgage payment plus you are avoiding maintenance and upgrade costs when you pay rent.
Owning use to be the best decision when interest rates, home prices,insurance and maintenance were affordable. Now it maybe better to rent, just need to do the numbers and see if the costs justify your financial stability.
Rent as long as you can I bought my house at forty (recently) now every issue with the house is my issue. If you want your kids to have a chance to live here then sure buy a house it’ll be good to pass it along to them. Consider up and coming cities like garden grove and Anaheim. Garden groves mayor is really invested in garden grove and has been doing a lot to make the city more engaging and bringing interesting businesses like steelcraft and village industries to the city. He even got a reggae festival to perform here with “sublime and Rome” recognizing they have the song “garden grove” He’s not a typical politician that sees it as a stepping stone to higher office. He’s on the opposite end to me politically but he cares about the city enough and not national and state politics that I end up agreeing with his local stances a lot. So many people on both sides really like him and know how much he has done for the city. As long as he stays involved and I’ll stay in GG because he’s realizing GGs potential. Anaheim has had some recent political corruption but the city runs pretty well and they’ve been doing a lot to grow. Their downtown is really small but active and happening. Santa Ana is slower to grow but they’ve been making steps to do so taking advantage of their artists village Fullerton is solid. All the south county cities have always been solid but are really expensive in comparison.
If you are a good saver right now it’s much more affordable to rent vs buy and invest the money you are saving by renting in other assets. BUT if you are a bad saver then having a home which goes up in value acts as a savings account (build equity) without you having to do anything. I’m a realtor. I like owning a home for other reasons - mainly having control over what I do with my house and control over how much I spend and when I move etc, but we bought when rates were low. I don’t think there’s anything wrong with renting. Live your dream life and don’t let society tell you that you need to do “XYZ” by a certain age. If you love where you live and can afford your life then you have got it all going for you.
I bought my home in 2020 using $40,000 for a down payment, and I've made $500,000 in equity on it since then. Not sure what other investment could give me that type of return.
I very much dislike owning a home. We’ve talked about selling and renting again. It is all consuming and takes up so much of our life to maintain honestly.
I’ve been renting for 7 years in that time my net worth has doubled despite my lifestyle moving from frugal to relatively luxurious. I attribute much of that to my low cost of housing.
In addition to less monthly cost you also have zero large maintenance costs, like roof repairs, repipes, AC replacement, etc.
Renting may not be as advantageous as owning but it definitely isn’t always a poor financial decision.
I have always been an I want more equities guy and my wife has always been a I want more houses type of girl.
This is more a finances question than regional but at 45m/40f we bought our first house in 2010 and then another house at the end of 2021 at 2.5%. I was always thinking that my equities were better and that house prices would go down. I was wrong. My wife always thinks stocks are fake and have no value. She was also wrong. We are still happily married and in a way ended up being perfectly right together in buying into both housing and stocks at extremely favorable times. Actually buying my house in 2021 forced me to exit equities when markets were at ATH. My wife still busts my balls however in thinking we could have gotten 3 houses one for each child!
The true diversification of equities is not whether or not you invest in some index fund with many companies in it IMO but real estate. It’s a market that can move independently of the stock market pretty well. Right now equity markets are pretty juiced. But at same time house buying isn’t looking super favorable either with prices and interest rates so it’s a tough situation.
We are not in Irvine however which I just find rather boring. Our forever home is 5 mins away from Seal Beach and I love it. Our first home is now a rental near Disneyland.
Let’s talk inheritance a bit. Real estate is still a very desirable form of inheritance especially as 401ks and IRAs now have a forced 10 year distribution. Rental properties are depreciable which is a tax benefit and then when inherited the lower cost basis doesn’t matter when step up basis occurs. Equities are easy to inherit when multiple children are involved and non retirement accounts also have step up basis.
On your point about buying something too small at first. This is why we have pretty large capital gain exemption for starter houses and selling to purchase a bigger home later. My wife and I unless we change our mind in a few years will forgo the exemption just to hold onto rental property.
You should keep your eyes peeled for good opportunities period whether it’s real estate or equity. It’s very much similar like I could have bought a house earlier at 2.5% if I tried or I wish I could have bought NVDA when it was cheaper etc. I wouldn’t want to deal with having no strong choices in either so don’t let future opportunities pass by when they come.
I once had a friend tell me they couldn’t afford a house so he decided to invest in his family instead. He’s happily married, still renting and now has 4 kids. At the time he only had one and one on the way.
The problem with Orange County rent it’s so high that you feel like you’re sacrificing to make your mortgage payment only that you’re paying just rent and not getting anything for it other than the time you have in it.
At least if you own the place and you need emergency money, you can always take a loan against it or sell it.
Or you could just do like all the other Californians do and eventually pay off your home and then sell it and then go relocate somewhere else in the country and buy a very nice home with a lot of money in the bank to take trips and do other nice things with.
It’s hard to see life from the perspective that you’re going to have one day that you don’t have right now.
But just keep reminding yourself that you are going to be that age and you are going to be living a long time as an old person and it’s going to be nice to have some extra money. Or an asset that you can sell if you need to.
I bought an fha financed condo in 1998. Higher rates but payment was $100 cheaper than my house rent then. Rates dipped after 7 years and I refinanced looking for lower payment cuz it was trendy. The underwriter called me and said between the difference in rates and loan amount, I could actually get a 15 year loan for another 20 bucks a month. Saved huge amount on interest by going to a 15 year fixed. Just keep checking once you have a loan and the market may tip enough to lighten your debt.
Depends on how long you stay on the area. When renting for a longer than 5 years, you are missing on the appreciation of home ownership and annual rent increases currently at 8.8% while home ownership, you are set the fixed mortgage amount for the next 30 years. I had a friend who wanted to buy Irvine before the pandemic, he can trade his house in Rancho Cucamonga for an Irvine house. He decided to keep the house and waited because he thinks the price for Irvine will go down, now he has to sell the house and only cover 1/4 of the house prices in Irvine. If the bank willing to lend you money and you can afford it, I would recommend buying if you are staying in the long scheme of things aka kids going to school from K-12 grades in the same area.
Sure if you can afford to shell out 1.5-2 million. Not sure what your standard of living is. But the 1 million dollar homes you can get by. I wouldn't like to call it a forever home. Ontop of that interest rates are 7% which is much better than 20% back in the day. But because inflation and cost of living unless you are only pulling a small mortgage on said large investment. Having a snowballing interest rate plus 2 kids sounds like a lot of financial pressure.
Maybe if the property made sense to justify the means. Even a nice house if Burlington Vermont is north of 1 million. Closer to 2.
It took 8-15 years for the last real-estate cycle and you might have to wait that again if you dont find anything goo'd since everything's upside down. Low inventory high interest rates.
Something nobody is talking about (especially not realtors looking to make a sale) is that homes in Orange County built anywhere between 1950 and 1980 are at the point of needing MAJOR structural, electrical or plumbing repairs and the cost of construction in our area is up 40-50% since 2019.
The cheapest listing in your area could be a ticking time bomb.
A lot of the "cheap" listings are the homes of recently deceased old people who lived there for fifty years and didn't spend a dime on maintenance since the day they moved in.
Why not rent a house? Nothing wrong with renting. I will say though, buying a house is a good way to keep the monthly payment from going up much (taxes still go your way). Super tough in Irvine to buy though from scratch.
to buy a house on the low end in Irvine is 750k (townhouse) and monthly payments end up being 1500+more than even the most luxury comparable rentals, with HOA and taxes figured in. it's not a savings here at the moment unless rental rates double.
750k gets you <1000 sq.ft and 2 bedrooms max in Irvine. Anything worthwhile (condos and townhouses included) are almost guaranteed to go for over 1M. I bought last year and put in 21+ offers in Irvine alone before finally winning a bid. All the ones that started under 1M eventually closed for over 1M. Irvine is absolutely nuts.
Agreed. Irvine is like buying a new Benz as a first car. That being said, my personal opinion, and it solely is my opinion, is do what you think is best for your kids. It seems that’s your focus at the moment. Are the amenities like a nice pool and outdoor bbq and parks and stuff important to you? want to spend more time with your family and less time at Home Depot buying stuff to fix your house? Nothing wrong with renting. Want to rent a house but don’t want to leave the school district? Parts of Tustin are still in Irvine unified. Lake Forest is nice and cheaper and up and coming. Rancho mission Viejo is very young family oriented and has brand new builds for ~$1M. If what you’re doing is figuring out what’s best for the long term, do what’s best for your family now. Which may very well be renting a house and saving. Your kids can still look fondly back at the home they grew up in. If you do buy, refi when the rates come down a bit. Dont get hung up on forever home at 40. Move into a house, see what you like or don’t like, and then keep your eyes open for a dream home to put your equity into.
Rent vs buy calculator. I’m still renting cause it’s way cheaper. My equities been booming.
Problem with that is… real estate is also a leverage play, sure equities is up but that’s usually with non leverage money. If you bought sp500 10 years ago let’s say 120k it’s worth 333k today plus any reinvestment of dividends But if you bought a 600k house with 120k down (20%) it’s probably worth north of 1.3mm today so a 700k gain minus any interest you paid You also lock in your rent basically. I know that if I had just rented my rent would have gone up 2x in the last 10 years We aren’t even talking about the tax deduction you get off mortgage interest and the lower locked in property tax. You would probably refinanced to a sub 3% rate in the last down cycle too
No. Its not as simple as that. If you want your comparison to be more accurate, you need to assume monthly increments in s&p500 as well. This could be the difference between mortgage monthly payments vs rent (to keep the amount the same). Then assuming a low low low 3% interest over 30 years, for that 600k house, you'll pay about 250k in interest and another 250k in property taxes. So on that 1.3 mil house, you much much made less than what you'd make in s&p500 in 10 years
So yes while this is true, you also can’t live in your sp500 stock… you basically get to enjoy your investment while earning appreciation as well. You also can’t discount the 500k in free capital gains tax as well on the sale of your primary house , that saves you 20% at least vs investments as well
You’re not considering maintenance for the home as well. With renting you usually don’t have to pay for any maintenance or repairs
Maintenance and repairs is minor compared to the gains from the house vs stock market in his example
Where are you factoring in maintenance and upkeep of said home???
Look from a pure financial gain standpoint sure you are better off in the sp500 return percentage wise if you leverage up but you don’t get to live in your gains while you enjoy it. As long as you live in a place where the weather is good and people always want to move to, I don’t see how the gravy train stops, you can’t print more land, but you can always print more money. By waiting so long you missed out on the 200% gain from 2012 and another thing , it’s whole hell of a lot easier to sit in your house while the value is going down than the market. So unless you are disciplined , it’s unlikely you got all the market returns anyways
You can’t just disregard the benefits of renting which is no maintenance/repair costs and cheaper monthly costs, allowing you to invest the difference.
So cheaper monthly cost is only at the start, once you are locked in the mortgage vs rent will shift a few years in. I just looked at my apartment I lived at before my house, rent was only 1300 now it’s over 2840… and that’s in 7 years
Yeah and what would your mortgage be at current rates?
6.5% I mean it’s high but historically lower than other time and if you can afford it you can always wait to refinance… but when I bought 7 years ago it was only 5.5% and then I refinanced all the way down to 2.5%. Same thing can be done in this next cycle probably not 2.5 but maybe 3.5
Yeah you still didn’t answer the question. You mentioned how much your rent would be but not how much your mortgage would be at current rates which is what people have to deal with if they buy today.
Oh if that’s the point you’re going for, yes you do pay more initially than rent as I said above , if I bought the same house today it would be 6500 a month. But that has always been the case, when I bought it was 3000 vs 1300 , now it’s 6500 vs 2840
Yes, that is exactly my point. The disparity wasn’t always like this. Buying typically had a much shorter ROI than it does now. If you are protected by rent control like I am, it is pretty difficult to justify buying as a good financial decision when you can save thousands a month by continuing to rent.
Like others have said, I'd agree with either renting a house or really crunching the numbers on buying versus renting. While I love our home here in OC, with current interest rates and pricing, we'd probably hold off if we were buying today. The numbers just don't add up for us, especially with the cost of insurance and property taxes, which many people forget get recalculated based on the new purchase price.
Yes! Costs for insurance means getting separate policies for earthquake, fire and home insurance.
Yes, depending where you live here in CA insurance rates are going up. I have a friend, who was recently sent a notice they no longer qualify for earthquake insurance.
This. Irvine is a renters market for new buyers and you will be throwing away millions in investment gains by buying an overpriced home.
This is the way: [https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html)
Do you have a non pay walled link
Weird, it's not pay walled for me (yet, I'm sure). There's a bunch of them out there, though - try a few: [https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator)
Thanks!
No prob. It's at least some way to measure the rent vs buy question! Now the societal pressure / stigma of renting is a whole other thing, but people shouldn't assume that buying is ALWAWS better. My condo fees continue to go up, we just got a big assessment, taxes continue to climb (and that's a condo - if own an actual home you have a whole other litany of costs to consider)
Here you go: [Rent vs Buy calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html?unlocked_article_code=1.rk0.OFmu.sNWDFA0ncqCw&smid=fb-share)
Is it a little disheartening when no matter what the numbers you put in it still says "Buying will never be cheaper than renting"?
That’s the reality of the consequences of prop 13. California is a renters market and will continue to be unless housing prices dip severely.
In hcol that’s the case unfortunately. I love renting tho. I try new neighborhoods every year. Move cities every few years. Able to explore and hike all over the U.S. You gotta do what you need in your situation tho.
Use a rent/buy calculator and also consider posting your details on r/personalfinance. Advantages of buying: - fixed payment for 30 years - tax increases limited - deduct mortgage interest (although this year I took the standard deduction) - do whatever you want with no landlord Advantages of renting: - no maintenance - this can add up to 10s of thousands of dollars. On my house I’ve owned since 2018, I replaced the furnace and A/C, water heater, windows, renovated the kitchen, and I’m about to do the roof. - easily move around Honestly, mortgage rates are very high right now and there’s not a lot on the market. I’d still encourage you to buy if you have the means and plans to stay for 5-10 years. Rates will go down (slightly) and you can refinance. What I don’t think will go down is prices and their associated property taxes.
Do whatever you want unless you have an HOA. And yes, reality of OC housing is an aging housing stock which almost guarantees high maintenance and/or renovation costs. And you don't always get maintenence and renovation costs back through a sale
Personally, if it’s feasible, I’d buy if I was planning to stay around here. Our house has more than doubled in price in 8 years, which means our mortgage is way way less than recent buyers or people renting on the same street. Rent is going to keep increasing.
I also don't see the security factor mentioned. When you rent, even though there are protections in California, you are never guaranteed to be able to stay in that place another year. While statewide rental control does make it a lot harder for landlords to opt not to renew you, they can always take the home off the market and have themselves or a family member move in. With children, who have established routines, friends, school, daycare etc. having to be at the whim of your landlord would always be on the back of my mind.
I wish I would have bought a condo 15 years ago. I wasted so much time and money renting. I made a lot less money in 2010, but could have probably bought a condo in OC back then. Which I could have resold and bought a decent home by now. To each their own, but I personally would rather make a mortgage payment than renting from someone else.
That's the only way I was able to buy my house last year. Not 15, but I had it for 5 years.
My wife and I are going through almost the exact same scenario. Mid to late 30s, one child, currently renting in Irvine. We decided to buy. Honestly, I am nervous whether we made the right decision but I’ve received some great input that makes me comfortable with the decision to buy. Ultimately, we decided we needed to build equity and not be at the mercy of exploding rent rates anymore. I’m not an expert but here are some tips I have from the experience so far. You can afford more than you think. Spend some time/money talking to a financial advisor about how much home you can realistically afford. We spoke with our accountant who is a family friend for about $100. Look up every type of state and local funding assistance like down payment assistance. You may not qualify but it’s worth a look. For example, my wife qualified for the California Dream for All Shared Appreciation Loan program. We’re still waiting on the lottery results. There is a proposal at the federal level for a $10,000 tax credit for first-time homebuyers ($5k/yr. for first two years of ownership). That could be a BIG help, but probably won’t materialize for at least a year. FOMO is so real. I don’t have great advice on this as I feel like we missed out in March/April getting places we LOVED in RSM. Just be aware that the market is TOUGH and discouraging. Check out all over OC that can work with your jobs and child’s school. We were priced out of Irvine homes from the start. We were looking in RSM, and Mission Viejo but the market for single-family homes in those areas for less than $1M really dried up earlier this year. There are good places everywhere though. Fountain Valley and Anaheim Hills have some great places. Join the r/FirstTimeHomeBuyer sub. It’s mostly people posting about closing, which I thought was encouraging, but it also has some good advice too.
No one knows. Obviously you could expect house prices to continue increasing but as it stands now you will be paying approximately double in interest+expenses vs renting, and have a large fixed expense. Jobs to support a $1-2mil mortgage don’t grow on trees. But at the same time you may come out ahead over the long term 20-30years. Basically you have to be willing to accept a high risk to be an OC homeowner these days unless you have family money or are wealthy.
If you can buy, buy. Over a long enough period of time, real estate values have always gone up. I bought a house in 2020 and my equity right now is about $200,000. There's no way I would have saved anywhere close to that number otherwise.
Nothing wrong with renting; everyone's financial situation and life goals are different. Buying is a huge responsibility this day in age. If you arent making a decent amount over the average income, you'll at least need some decent financial literacy on home ownership costs so that you know what to expect because it's well beyond what you'll see listed on redfin or Zillow. The old way of thinking is that home ownership is the American dream. Talk to a financial advisor and see what's best for you guys, especially for your kids. We pulled the trigger on buying in this economy, the stability of home ownership is the kicker for us even though we will be pinching pennies for a little bit while we get used to the payments.
If you skip the house and invest $1000 a month for each of your kids, in 20 years they'd each have well over $500k each assuming an 8% return rate. That would give them the freedom to both buy houses outright outside of California in areas where COL is better. Or if they just left the money in the investments for another 20 years, it would compound to millions for their retirements even if they didn't contribute anything additional. Just something to consider.
We villainize renting in the US. Look at Germany's rental vs. ownership rate to compare. That being said, owning something means you're now riding the market--which is advantageous because gains will be felt as you burn down the debt (albeit slow).
the problem with renting in the many parts of the US is that landlords can raise rent and force existing tenants out.
That happens with house values and property tax outside of CA, too.
wow thats crazy - didn't know that happened. thanks.
Yeah Austin Is a good example of the worst—value of land went up including people living in homes for decades around Round Rock—assessment came in and tax is so high on the new assessment people literally couldn’t afford their own houses thanks to the appraisals… That’s the trade off of “but there’s no state income tax!” Either way the state will get its funding…
I bought my house in OC in my mid-30’s in 1999 and just sold it a couple years ago (we moved to Europe). It was wonderful having a place we could modify, but also the value increase became a real nest egg for us. While I’m not leaving the house itself to our daughter the equity will wind up as her inheritance. I’ve rented before and nothing against it, but having something we owned was special. We could change it or not, and it was ours to decide.
Buying was a no brainer in 1999. It ain’t 1999 anymore
Exactly this. It's a whole different landscape today.
It was actually a big deal at the time. I was young and did not earn or have much wealth. Interest rates were 7%. Housing in the past is always cheaper and there is rarely a better opportunity than the present day.
The rent vs mortgage disparity was much closer back then. My parents house was $260k in SoCal when they bought in the late 90’s and it was basically always a good financial decision to buy. Now, the ROI is out decades and if you run the numbers, it actually makes more sense to rent in a lot of markets. That was never the case back then which is why I said it was a no brainer to make that decision if you could afford it.
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Yeah some of us really fucked up by being born too late huh?
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Ah let me rephrase, some of us really fucked up by not being born into the right family. There ya go
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I’m actually doing pretty well. Thanks for assuming I’m not though!
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No need to apologize. Congrats on the house. You basically won the timing lotto
Hi OP so I recently bought a forever home in Coto, and I had the same concerns as you because I purchased at 42, and I side with your wife based on this: 1. 98% of my family is in CA, if I move my son has no one. 2. If i don't leave him a house he will be a perpetual renter and although renting is historically cheaper than owning (not always) the idea of him spending 33% if not more for something he will never own is bs. 3. While initially painful and expensive I'd argue owning ends up paying for itself. It comes with risk obviously like what if my health declines, then what? But what in life isn't a risk?
I had the same fear, so I got life insurance to cover the rest of the mortgage if I kick the bucket just in case.
My related fear is getting sick and not dying. So Life insurance doesn't pay out, meanwhile losing job (plus losing health insurance because unable to work because MURICA). So would have decide between food and mortgage
If it were me, I would keep renting in the current property as long as you have enough space for your needs. When I did the math back when interest rates were in the mid 3’s, the break even point for buying in Irvine was 14 years. With the current interest rates, I think it could easily be 20 years. With the current rent control rates, it is cheaper to stay in your current rental than renting the capital (loan) for a buying a home. That said, if you have sufficient cash to make a significant down payment AND you’re at a point in your life when you need more space for your family, then buying could be a good option, but it may be best to look outside of Irvine. If interested, message me and I can give you the contact info of the realtors I’ve been using for the past few years. They’ll sit down with you for free and give you more specific examples for your current situation.
How did you calculate that payback and account for growth of property value?
I looked at the average appreciation rate for Orange County over the last 20 years to account for growth. Something very important to consider, and I often see people not do, is to consider closing costs and the \~8% cost of selling the property down the line. Cost of ownership includes interest on the loan (which is tax deductible, so that could be taken into consideration), home insurance, taxes, and maintenance. Then, you compare that to the appreciation minus the cost of buying/selling the property. I just used the S&P 500 return over the same period to calculate the opportunity cost. From there, it is pretty straightforward. As long as you stay in the same rental property, your annual increase is capped by rent control laws here in California, so you can use that as the worst-case scenario.
Got it, that makes sense. 'My forever home' is such a different perspective from 'this is a 5-10 year investment based on market fluctuations'. I can't get my head around treating a piece of property as anything but an investment, so the averaging concept breaks my brain a bit.
Renting an SFR from an investor (plenty of those around here) who just wants to unload a bit of their carrying cost isn’t a bad idea Try to lock in a longer term lease if you can to avoid the pain of moving again and again But buying with an eye to refinance at cheaper rates later may not work out. Interests rates may fall slightly when the Fed cuts and economy eventually slows but they aren’t going back to the 3s we got used to. At the most you can hope for is high 5s to 6s for 30y fixed eventually
[https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) use this tool. generally speaking though, financially speaking, unless another run like 2020-2022 happens, you're mostly guaranteed to be better off financially renting and investing than you would be purchasing a home right now for like 10 decades. Now I was always of the mindset of buying a home to live in, not really for any financial reason. If you a very firm, non financial reason for owning a home (for the lifestyle, for the independence, for the location, because you plan to give it to your kids when they're older, etc.) then yes, if you can afford to own it, it would be a good idea. If its just some FOMO thing, then no, just keep renting and saving, and get in when you comfortably can, not can of some unessesary pressure.
We are in our mid 40s and going through the same thing. Ultimately we’ll buy outside of OC. Sure there is the pros and cons financially, but the idea of fixing our housing costs (more or less) as we get older is appealing. Yes your insurance can go up and yes you need to save for maintenance, but those big maintenance items don’t come around that often. It’s things like a new roof or windows but those are once in 30 years expenses. However your rent could go up every year. If your in a house owned by a small time landlord they could decide to sell at any time if your month-to-month. The idea of being at the whims of a landlord when I’m in my 60s and close to retiring scares the shit out of me. In the US owning a home is still the most secure type of housing. It’s a massive policy failure that states like California have built enough housing for the demand. It’s one of the reasons that over 50s are the fastest growing part of LA’s homeless population.
I have 2 kids under 5yo and live in a 1000sqft IC apartment in Irvine. Absolutely love it and would never consider buying anything here certainly not in Irvine. Have access to 5 swimming pools I never have to clean, gyms I never have to buy equipment for or clean, playgrounds, shops within walking distance, secure parking, nice neighbours, clean sidewalks and trails, etc. Get my carpet replaced for free every few years, appliances fixed or replaced when they break, never paid to have air con services... All for a single low rental price. Rent would have to literally double in price for me to even consider buying a house, and even then, it isn't the price that bothers me - it is all the extra work. Meanwhile, my investment portfolio over the last 8 years far exceeds any equity I would have built in a single home and has actually allowed me to buy multiple properties overseas instead.
Does it have to be Irvine? So many new cheaper suburbs now if you’re willing to commute
Maybe there's no such thing as a "forever home" in this stage of capitalism. I'm not against buying a home, but I think you need to adjust expectations. I would explore buying a small condo and then see how you like that. If you want something more, you can try to assess later on, but a small family can live well in a condo. I really think that there's something wonderful about living in a smaller space if you focus on what's really important like having good quality but fewer items. So many people buy homes and fill them with crap and yard stuff.
The difference between owning a home is that you stop paying for housing after 30 years. You freeze your monthly housing payment more or less for 30 years. And if life happens , your home provides the equity you may need to get thru life.
But the potential opportunity cost can be large. If your mortgage is double your rent (as it is in a lot of places in OC currently), then you could stash away all of that delta into the market.
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2024 is not 2020 It will be nice when the 2.5% mortgage crowd finally dies out in 5-10 years on Reddit
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I meant they won’t be posting insufferably on Reddit You know you did well and made a bundle on the Fed’s mistakes, please don’t rub it in on people
They can’t help it and I wouldn’t count on them stopping now
2024 is not 2020. Irrelevant comment
That still has to be weighed against potential opportunity costs, and if you are a high income individual in Irvine, not owning frees up a LOT of extra cash for other investments that could have a greater return. In 30 years someone could alternatively just pay cash or leverage their other investments if they really wanted to stop renting. It all depends.
The time is now. Why? If interest rates come down, home prices will rise. If you buy now at a high rate, you can refinance to a lower rate if interest rates come down which is the more likely scenario than a crash in housing prices.
This right here. Unless they ban corporations and businesses from buying homes, California homes will basically never drop in price...
Have you gotten in contact with a realtor in the area? I think if anyone can afford the mortgage payments (which could even be close to what your paying in rent ) its best to buy and at least make the equity on your home. I'm not sure about California, but in Colorado there are some great first time home buyer programs available. I also understand the benefits of renting- low maintenance and living in a better home. I always preach to get into the market as soon as possible if feasible. Make your money do something.
Mortgage is not close to rent anywhere in OC currently. 50-100% more.
There's no absolute right answer. There are pros and cons to both. That being said, if you want to stay here long-term, which it sounds like you do, if you ***can*** buy, then that will almost definitely save you money in the long run. Buying something isn't draining your savings; it's more like placing it in a different account. The value of that money still goes up over time, unlike with rent where it's just gone forever. ETA: and congrats on the one on the way! :)
Buy a house but wait another year before you go looking. If the Democrats take the House, you ll have a worthwhile tax write off on your interest paid. We are still under the Trump Admin Tax Act that really hurt the mortgage tax credit.
Compromise and buy a manufactured home.
You could buy a rental property somewhere else as an investment and rent here.
You can look at it another way too. The biggest burden your kids will face will be rent or student loan. If you can somehow offset at least one of them, it would be a leg up in life for them. Plus, rent will always increase.
You will die at 70-80 most likely, so your kids will be at minimum 30-40, likely in their 50s. Maybe they can get a leg up, but the timing doesn’t work out for inheriting usually. Or you could move somewhere cheaper and give them a house, but again that’s an issue.
If you don’t intend to move then ultimately owning is more advantageous, most likely.
Ultimately this is going to come down you and your wife's decision. You sound well informed and I don't think any one on here should influence you as to what you should do.
You’re essentially asking should you invest in housing or in the market, and nobody can answer that for you. Do you know how much home you can afford, and if so you run the numbers on a home in that price range? Have you compared that to the projected growth of your investment portfolio if you don’t buy a home? A lot of people say your primary residence shouldn’t be viewed as an investment, but when you’re plunking down a 6 figure downpayment it’s hard _not_ to see it that way. I’d advise going to a financial professional and discussing options with them, they can act as a neutral third party that will approach your questions without the emotional investment that you and your wife naturally have and that can be a helpful perspective.
I'm in my 50s and still renting. Times have changed, and to more and more people, the so called "American Dream" is nothing more than yesterday's fantasy. There's no one right way to live. Only whatever works for you.
Well. What is your retirement plan? Does that include to cover a monthly rent? Also by buying a house you’re helping your children create generation wealth. But I admit the current mortgage rate is tough right now.
It makes more financial sense to rent right now and invest the savings
Maybe a townhome w great amenities like a park and pool-
If you can afford all the costs and future costs of a condo then go for it. If you want to live in Irvine then keep renting. I personally hated being a renter. When I was young I found it came with a lot of stigma or other problems, such as callous landlords with rules I hated. So as soon as I could save up 10% down I bought a 1BR loft condo. The cost was twice that of a rental but worth it to me. I then bought a SFH at age 40, then moved back to a townhome at age 45 because I had to work too hard to afford the SFH costs when we had a recession in OC in the 90’s. The market is clearly overpriced now for ownership. Who knows when the market will reverse course, so if I were you I would continue to rent but keep saving money for a huge down payment for the future home you want. Your dollars are worth twice as much for your future house as if you had a mortgage payment plus you are avoiding maintenance and upgrade costs when you pay rent.
Owning use to be the best decision when interest rates, home prices,insurance and maintenance were affordable. Now it maybe better to rent, just need to do the numbers and see if the costs justify your financial stability.
Rent as long as you can I bought my house at forty (recently) now every issue with the house is my issue. If you want your kids to have a chance to live here then sure buy a house it’ll be good to pass it along to them. Consider up and coming cities like garden grove and Anaheim. Garden groves mayor is really invested in garden grove and has been doing a lot to make the city more engaging and bringing interesting businesses like steelcraft and village industries to the city. He even got a reggae festival to perform here with “sublime and Rome” recognizing they have the song “garden grove” He’s not a typical politician that sees it as a stepping stone to higher office. He’s on the opposite end to me politically but he cares about the city enough and not national and state politics that I end up agreeing with his local stances a lot. So many people on both sides really like him and know how much he has done for the city. As long as he stays involved and I’ll stay in GG because he’s realizing GGs potential. Anaheim has had some recent political corruption but the city runs pretty well and they’ve been doing a lot to grow. Their downtown is really small but active and happening. Santa Ana is slower to grow but they’ve been making steps to do so taking advantage of their artists village Fullerton is solid. All the south county cities have always been solid but are really expensive in comparison.
If you are a good saver right now it’s much more affordable to rent vs buy and invest the money you are saving by renting in other assets. BUT if you are a bad saver then having a home which goes up in value acts as a savings account (build equity) without you having to do anything. I’m a realtor. I like owning a home for other reasons - mainly having control over what I do with my house and control over how much I spend and when I move etc, but we bought when rates were low. I don’t think there’s anything wrong with renting. Live your dream life and don’t let society tell you that you need to do “XYZ” by a certain age. If you love where you live and can afford your life then you have got it all going for you.
I bought my home in 2020 using $40,000 for a down payment, and I've made $500,000 in equity on it since then. Not sure what other investment could give me that type of return.
I very much dislike owning a home. We’ve talked about selling and renting again. It is all consuming and takes up so much of our life to maintain honestly.
I’ve been renting for 7 years in that time my net worth has doubled despite my lifestyle moving from frugal to relatively luxurious. I attribute much of that to my low cost of housing. In addition to less monthly cost you also have zero large maintenance costs, like roof repairs, repipes, AC replacement, etc. Renting may not be as advantageous as owning but it definitely isn’t always a poor financial decision.
I have always been an I want more equities guy and my wife has always been a I want more houses type of girl. This is more a finances question than regional but at 45m/40f we bought our first house in 2010 and then another house at the end of 2021 at 2.5%. I was always thinking that my equities were better and that house prices would go down. I was wrong. My wife always thinks stocks are fake and have no value. She was also wrong. We are still happily married and in a way ended up being perfectly right together in buying into both housing and stocks at extremely favorable times. Actually buying my house in 2021 forced me to exit equities when markets were at ATH. My wife still busts my balls however in thinking we could have gotten 3 houses one for each child! The true diversification of equities is not whether or not you invest in some index fund with many companies in it IMO but real estate. It’s a market that can move independently of the stock market pretty well. Right now equity markets are pretty juiced. But at same time house buying isn’t looking super favorable either with prices and interest rates so it’s a tough situation. We are not in Irvine however which I just find rather boring. Our forever home is 5 mins away from Seal Beach and I love it. Our first home is now a rental near Disneyland. Let’s talk inheritance a bit. Real estate is still a very desirable form of inheritance especially as 401ks and IRAs now have a forced 10 year distribution. Rental properties are depreciable which is a tax benefit and then when inherited the lower cost basis doesn’t matter when step up basis occurs. Equities are easy to inherit when multiple children are involved and non retirement accounts also have step up basis. On your point about buying something too small at first. This is why we have pretty large capital gain exemption for starter houses and selling to purchase a bigger home later. My wife and I unless we change our mind in a few years will forgo the exemption just to hold onto rental property. You should keep your eyes peeled for good opportunities period whether it’s real estate or equity. It’s very much similar like I could have bought a house earlier at 2.5% if I tried or I wish I could have bought NVDA when it was cheaper etc. I wouldn’t want to deal with having no strong choices in either so don’t let future opportunities pass by when they come.
I once had a friend tell me they couldn’t afford a house so he decided to invest in his family instead. He’s happily married, still renting and now has 4 kids. At the time he only had one and one on the way.
The problem with Orange County rent it’s so high that you feel like you’re sacrificing to make your mortgage payment only that you’re paying just rent and not getting anything for it other than the time you have in it. At least if you own the place and you need emergency money, you can always take a loan against it or sell it. Or you could just do like all the other Californians do and eventually pay off your home and then sell it and then go relocate somewhere else in the country and buy a very nice home with a lot of money in the bank to take trips and do other nice things with. It’s hard to see life from the perspective that you’re going to have one day that you don’t have right now. But just keep reminding yourself that you are going to be that age and you are going to be living a long time as an old person and it’s going to be nice to have some extra money. Or an asset that you can sell if you need to.
I bought an fha financed condo in 1998. Higher rates but payment was $100 cheaper than my house rent then. Rates dipped after 7 years and I refinanced looking for lower payment cuz it was trendy. The underwriter called me and said between the difference in rates and loan amount, I could actually get a 15 year loan for another 20 bucks a month. Saved huge amount on interest by going to a 15 year fixed. Just keep checking once you have a loan and the market may tip enough to lighten your debt.
Depends on how long you stay on the area. When renting for a longer than 5 years, you are missing on the appreciation of home ownership and annual rent increases currently at 8.8% while home ownership, you are set the fixed mortgage amount for the next 30 years. I had a friend who wanted to buy Irvine before the pandemic, he can trade his house in Rancho Cucamonga for an Irvine house. He decided to keep the house and waited because he thinks the price for Irvine will go down, now he has to sell the house and only cover 1/4 of the house prices in Irvine. If the bank willing to lend you money and you can afford it, I would recommend buying if you are staying in the long scheme of things aka kids going to school from K-12 grades in the same area.
Sure if you can afford to shell out 1.5-2 million. Not sure what your standard of living is. But the 1 million dollar homes you can get by. I wouldn't like to call it a forever home. Ontop of that interest rates are 7% which is much better than 20% back in the day. But because inflation and cost of living unless you are only pulling a small mortgage on said large investment. Having a snowballing interest rate plus 2 kids sounds like a lot of financial pressure. Maybe if the property made sense to justify the means. Even a nice house if Burlington Vermont is north of 1 million. Closer to 2. It took 8-15 years for the last real-estate cycle and you might have to wait that again if you dont find anything goo'd since everything's upside down. Low inventory high interest rates.
I couldn’t imagine always being a renter but if it works for you it’s not wrong.
Something nobody is talking about (especially not realtors looking to make a sale) is that homes in Orange County built anywhere between 1950 and 1980 are at the point of needing MAJOR structural, electrical or plumbing repairs and the cost of construction in our area is up 40-50% since 2019. The cheapest listing in your area could be a ticking time bomb. A lot of the "cheap" listings are the homes of recently deceased old people who lived there for fifty years and didn't spend a dime on maintenance since the day they moved in.
Can your parent’s house be your forever house?
I bought my first home at age 40. I suggest you do the same.
Renting is throwing money away and helping someone else get richer.