$79,100 was the median home price in 1990.
$374,900 was the median in 2020.
A 373.9% return over the last 30 years.
But let’s compare that to stocks.
The Dow’s average
1990-2,679
2020-26,890
Return-903%
The NASDAQ
1990-409
2020-10,200
Return-2,393%
The S&P 500
1990-334
2020-3,217
Return-863%
A general buy in the three biggest measurements for stocks would all heavily out perform buying a home.
Plus, buying a home has some challenges.
An average interest rate of 3.4%.
An average property tax rate of 1.1% yearly.
Maintenance costs which average 2.5% total.
If someone bought a home for $374,900 in 2020 on a 30 year loan with a plan to sell in 2050, the sale would probably look something like this.
The home would sell for 1.4 million if the 374% average held like it did from 1990 to 2050.
Sounds good, but yearly fees would be.
Mortgage-$12,466
Interest $12,746
Property taxes-$4,123
Maintenance-$9,300
A cost of around $38,600 a year.
A total cost of 1.1 million over 30 years and that’s not factoring in inflation likely increasing maintenance.
Meaning a 30 year return from 2020 to 2050 all said and done isn’t that high, where it’ll be under 100%.
This makes owning a home seem like a dumb idea, but there’s an important reality to remember.
No person can live in a stock.
Berkshire Hathaway stock holders get discounts on Sees Candy & Nebraska Furniture Mart.
Carnival Cruises offers discounts on travel.
Kimberly Clarke gives gift boxes to share holders.
A lot of companies offer perks, but none of them give a place to live.
People have to live somewhere and there’s no evidence I can find anywhere renting is actually cheaper.
The average US apartment rent is $1,124 as of writing this.
That sounds much cheaper over owning, but that’s due to most rent being apartments and very small locations.
When renting, people are paying for the mortgage, maintenance & taxes all embedded.
Plus, the average profit margin on landlords is reported at 13% currently, which is in the rent also.
This means if someone wants to rent a house for a year, be it Montauk beach front property or a house on the outskirts of Monticello, NY, they’ll likely pay more over what their neighbor did buying it.
Big negative is also never getting $1 back of the money rented, where at least owning a home can provide some return.
This makes a case that someone would be better off financially renting a place for $2,000 a month over buying a property and spending $3,000 a month, but a big problem with that.
Why not eat a burger over a steak?
Go to Florida instead of Hawaii?
Go on PornHub instead of OnlyFans?
There are countless options in life which are cheaper, but don’t provide the same quality.
Any person can rent a worse location over buying a nice one, save money and have a massive stock nest egg.
It’s just common sense.
That’s ultimately why I think owning a home is normally a pretty solid investment.
Renting=Paying money and getting nothing on move out day.
Buying=Paying money and getting something if not a lot on selling day.
Which chances are in most neighborhoods, the house for rent and the house for sale will likely end up costing the same anyway.
And renting obviously has a place.
Areas like Manhattan are building heavy and costs don’t work for buying apartments.
Younger people move often and it makes sense to rent versus commit and buy.
People need a place to live cheaper when saving for a down payment.
Renting versus buying is complex and a lot of instances exist renting might be better, but if someone were looking at neighboring houses in the same area, the one for sale is probably a better bet over the rental.