Home Ownership Bad for Your Health
Perhaps those who feel desperate to own a home will take a pause after reading this article from Portfolio. “Homeownership is overrated and… it carries a downside as well as an upside,” they write, based on a study of health and happiness and home ownership among women. I find little evidence that homeowners are happier…
Perhaps those who feel desperate to own a home will take a pause after reading this article from Portfolio. “Homeownership is overrated and… it carries a downside as well as an upside,” they write, based on a study of health and happiness and home ownership among women.
I find little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions (i.e., affect) and affect at home. Several factors might be at work: homeowners derive more pain (but no more joy) from both their home and their neighborhood. They are also more likely to be 12 pounds heavier, report lower health status and poorer sleep quality. They tend to spend less time on active leisure or with friends. The average homeowner reports less joy from love and relationships. She is also less likely to consider herself to enjoy being with people…
The great satisfaction from ownership, they say, comes when property values increase. Now that that’s less likely, and in many cases values are decreasing, why buy at all, when you can rent and be happy? “In fact, if Americans could be persuaded that rent payments aren’t ‘wasted money’ and that owning often makes less financial sense than renting, I think the rate of homeownership might, happily, drop substantially.”
Homeownership Makes You Fat and Unhappy [Portfolio]
Photo by TheTruthAbout.
For the people making broad generalizations about retirement — the point is that if you are thinking of your house as an investment you need to treat it like an investment.
Bob Marvin bought his house in the ’70s, I gather. That was a good investment (stocks would have been good too then). If you had done my calculation then, you would have seen that owners were being paid good money to take on the risk of ownership.
But if you buy now in the prime neighborhoods, you are paying double fair value. Tax breaks are nice, but they are far too small to affect the basic math. If you pay double rental value, you are never going to catch up to the renter who invests in almost anything else. The point is that this is an awful investment: the anticipated returns are negative as far as you can see.
If you are incapable of saving and/or investing except by having a mortgage, it might make sense to pay something for the privilege of having someone force you to save a little bit. But most employers will create a tax sheltered forced savings plan for you (they call it a 401(k)) for free. You don’t need to give up 20 years of appreciation for that.
Dang, wish I had more time to comment today. Evenhanded view of rent vs. own, BUT
*as Benson says, real estate in places like SF and NY will just keep on going up, up, up, up!
*if your housing costs aren’t fixed at retirement (either through owning or rent control or living in a place where prices never increase) you are screwed.
*rent money is gone forever, you’re not “investing” it.
*when you sell in one of these markets like NY or SF you make a ****load of money.
Bxgrl,
Because you don’t take pronouncements well is your issue but not a reason to name call. Although I can see that you don’t mind pronouncing.
“I know quite a few people in NYC who are that age and rent. And do just fine. On the other hand there are plenty of elderly people getting thrown out of their homes”
Do you have the statistics for your pronouncement? I lived and worked in Brooklyn all of my life and can see the hell that many elderly are put through when they get evicted. You are delusional if you think that every elderly person in this city is as fortunate as your father. Far too many are not. You even stated as much.
“Nobody made renting a cause for questioning the brains, the lifestyle, or the finances of anyone before.”
I know that I didn’t. But it is done on Brownstoner almost everyday.
“My parents never owned a home- my father didn’t want it. The majority of his generation and generations before them lived in rentals- NYC was a city of rentals.”
My mother did own. Good choice financially for her and suited her lifestyle. When government programs making purchasing homes easier became widely available post WWII, many of these renters became owners and whole new neighborhoods were built to accomodate them which is why home ownership increased steadily both in NYC and outside of it. This trend may change.
“at 85, had my dad needed to move, there would have been a hell of a lot of people there to help. You should have so many when you hit 80.”
We should both be as lucky as your dad, my aunt and other elderly who have a network of family and friends to help them with their needs.
parkedslope & benson: I agree that it is nicer to live close in, with good transit, etc. But that is the beauty of the rental/buy comparison. The benefits of the neighborhood are all picked up in the rents, aren’t they?
For the “zoned land” meme to justify bubble prices, you need not just a premium for better location, but an ever-growing premium compared to rents and the competition. That isn’t going to happen. Brooklyn Heights will always be more expensive than Bay Ridge, but there is a limit to how big the gap can get.
When it gets too big, the market increases supply: DUMBO/Furman St/110 Livingston/Hotel St George/Mason Mints/etc, for all their industrial wasteland aspects, have effectively doubled the size of Brooklyn Heights; Cobble Hill and Carroll Gardens have swallowed half of Gowanus/Red Hook; Park Slope is at least twice as big as it was in 1990; the Flatbush Avenue color bar fell to a combination of diminished racism and price increases; “gentrifiers” live in places they wouldn’t have dreamed of a few years ago.
Parkedslope — I wasn’t advocating pushing people out. Just stating the reality: that if the financial incentives are big enough, they’ll get pushed out. My parents were. That’s been the history of NYC as long as I can remember. Do you think it is going to stop?
As long as owner occupants are willing to pay 2x the rental value, someone is going to see an opportunity to double their money by buying rentals and kicking people out. It doesn’t really matter whether I like it. The only thing that will stop it, absent a political movement and legal change that I would welcome but see no sign of, is when rental values and ownership prices converge.
After taxes of course, but capital gains taxes are so low and so easy to avoid that they don’t make much difference — certainly saving 15% taxes 30 years from now isn’t a reason to pay double today.
bxgrl is back — and she’s as nasty as ever!
“have you actually met anyone who was paying the same rent as they later do as a mortgage payment?”
Yeah–me, almost identical, to the penny and they stayed that way for 25 years, until my mortgage was paid off, while rents skyrocketed.
Of course conditions were very different in the early ’70s and both rents and house prices were far lower. However, incomes were much lower too and, I did have to put 40% down.
In any event, having relatively low housing costs makes my retirement far more comfortable. Were it not for those low costs I probably would still be working and certainly couldn’t have retired at age 56. I hope some younger homeowners will be able to say something similar in 2038.
“Sure there are wealthy 80 year olds who can afford to pay high rents and many of them own second homes elsewhere. However, in this city they are not in the majority”
Well, first of all I have to ask- how do you know? Do you actually have the statistics on that?
secondly- I don’t do well with overall pronouncements like “Even worse, I bet that at that age, you’d be hard pressed to round up enough friends to help move you out of your rental when your landlord kicks you out.”
My parents never owned a home- my father didn’t want it. The majority of his generation and generations before them lived in rentals- NYC was a city of rentals. Nobody made renting a cause for questioning the brains, the lifestyle, or the finances of anyone before. And I’ll tell you what- at 85, had my dad needed to move, there would have been a hell of a lot of people there to help. You should have so many when you hit 80.
Bxgrl,
What’s with the name calling?
Sure there are wealthy 80 year olds who can afford to pay high rents and many of them own second homes elsewhere. However, in this city they are not in the majority. I have an elderly aunt who could no longer afford her rent who now lives with my mother in North Carolina. My aunt never had any children but at least she has family members willing to help her out but there are too many elderly people in this city who have children and other family members who don’t give them the support that they need. I work with them everyday! Unfortunately, my aunt was never in a position to have ever purchased a home but if she had, she would have had more options.
Dittoburg,
I was not implying that a mortgage-free home was expense free but a mortgage free home at 80 gives you options that not having that home doesn’t. See below.
Benson,
My mother sold her brownstone in 2005 because at 68, it was too much for her to handle. She lives quite comfortably now because of it. She chose to purchase a townhouse-style condo in a planned community and she loves it. Your father is fortunate that he can sell his home if he chooses too. He may not get what he would have gotten a year or two ago but the fact that he owned a home and now has incredible equity is a blessing that many elderly do not have.
My father is 85 and owns a 3 family home, all paid up. I would MUCH prefer that he sell his house, put the money in a CD, and move into a nice rental apartment. Believe me, it is no picnic for an 85 year-old guy to get a call from a tenant at 2 in the morning telling them that the bathroom is flooding. In the past,my father was a handy guy, and he took this as part of his “job” to earn extra income. At 85, however, it is really a drag.
Finance guy: point taken, but I still think my analysis is right. As you point out, the city has done a remarkable job of creating “new land”. I think, however, that this process is hitting some headwinds. The tranportation system is not keeping up with growth, and I doubt that folks will want to go further out. Obviously, I’m gazing into the crystal ball on this, so I might be wrong. Comes down to a gut-call, which is always involved when trying to predict future appreciation.
Good discussion.