Comments on: The Opportunity Cost of Home Ownership

By: suki

suki — Mon, 05 Apr 2010 23:39:51 +0000

I am curious to know if your opinion on this has changed over time or if you still feel the same way. For me, owning a home requires sacrifices that are well worth it. You are not just giving your $ away to someone for rent. You’re building equity. When/if you sell your house for something else, you’ll have put your $ into the house, and there is a return.

My mortgage+property tax sucks each month, and I live in one of the most expensive cities in the country. But I make it work.

By: Young and Frugal does it again! « Alabaxterblog’s Weblog

Young and Frugal does it again! « Alabaxterblog’s Weblog — Fri, 21 Aug 2009 17:48:02 +0000

[...] The Opportunity Cost of Home Ownership Apr.08, 2009 in Advice, Debt, Finance, House, Life, Uncategorized [...]

By: von sledge

von sledge — Fri, 03 Jul 2009 22:56:17 +0000

Good post. Too many people are like Pavlov’s dog when it comes to home ownership. Like everything else, home ownership has advantages and disadvantages. The factor that determines whether the advantages outweigh the disadvantages, or vice versa, is the price (cost). I believe housing prices will be under pressure for several more years. It will be interesting to see how the culture of home ownership holds up under relentless price compression.

By: PB

PB — Thu, 28 May 2009 16:15:14 +0000

I appreciate your candor in sharing some of the downsides of owning a house at so young an age. There are obviously other 20somethings out there who feel the same way, and those are the ones partying it up and drinking with their disposable income. I feel that overall you are making a wise decision; I think you’re just experiencing a bit of a rough patch, as it is easy to see the opportunity cost of “settling down with a mortgage” at so young an age. Give it a solid 5 years and you’ll see what you’ll be light years ahead of most of us in your personal finances.

By: Daniel

Daniel — Tue, 26 May 2009 13:05:06 +0000

Thanks all!

For reference, Matt B. is a college friend and we are the same age.

By: Matt B.

Matt B. — Thu, 21 May 2009 17:24:14 +0000

Hey Daniel, great site!
I couldn’t agree more with this post. I just purchased my first home in March (on my own since I do not have a wife yet) and it has turned out to be quite overwhelming. When I first decided to buy I had myself convinced that it was an “investment.” I purchased a foreclosure that needed some work and after endless spreadsheets and analysis I found that it was well below my determination of market value. That being said, I had no concept of the opportunity cost associated with buying a home. If someone had told me I would still be coming home from work every day and working on my house until 11pm or so every night I may well have reconsidered my decision.
When all is said and done I have a love/hate relationship with my house much the same as you. From an egoistical/irrational perspective, I love having a place to call my own and I love the idea of it appreciating in value over the years, but from a rational perspective I wish I had given more consideration to the lessons of “Rich Dad, Poor Dad” and seen it for the liability it is. If only I had been a bit smarter and given more consideration to a multi-unit property instead………

By: joej

joej — Mon, 04 May 2009 06:12:08 +0000

it’s “rationale” not “rational”

By: Lj

Lj — Sun, 03 May 2009 00:07:52 +0000

Like everything else in life & nature, there is an equilibrium here – a balance between cost and reward.
And, unfortunately, in an inflating economy, timing has alot to do with whether you percieve a good deal or a bad deal. I purchased a 3 bedroom attached home 14 years ago – I never intended to buy an attached home! – and even including HOA, insurance, and taxes, I’m paying less than an apartment. And with my own 2 car garage and only 4 immediate neighbors, I have far more privacy & security than my friend’s girlfriend, who just bought a three bedroom townhouse, with no garage, and dozens of neighbors, for more than I pay monthly.
My next-door neighbors bought at close to the peak of the boom (5+ years ago), and they could well be “upside down” on their mortgage & costs.
So, as in all things in business, whether you are happy or unhappy, making a profit or losing, is – “on the margins” – as in “profit margin.” And dozens of factors go into this balance – local tax-rates, insurance rates, quality of living of your neighborhood, proximity to work, etc.

In your case, if you don’t mind living frugally, you can accelerate your mortgage payments, by paying down (significant amounts of) your principle, you can greatly reduce your interest payments down the road.

By: Dave Johnson: Today’s Housing Bubble Post - Back To Issuing Warnings | got the info?

Sat, 02 May 2009 23:20:01 +0000

[...] up” before they are “priced out.” They still think real estate is the path to wealth, instead of somewhat of a burden that should only be undertaken under certain circumstances. Namely, when you plan to [...]

By: Political Jib.com » Dave Johnson: Today’s Housing Bubble Post - Back To Issuing Warnings

Sat, 02 May 2009 23:14:11 +0000

[...] they are “priced out.” They still think real estate is the path to wealth, instead of somewhat of a burden that should only be undertaken under certain circumstances. Namely, when you plan to [...]