It really is too bad folks like these can't be sued for bad advice.
Past performance does not guarantee future returns. Correlation does not equal Causation. We sentence you to write this 1 Million times on the blackboard, David Bach, and try to learn something from it. Geesh, a third grader should understand this stuff!
Renting is not the route to wealth. In fact, statistics from the Federal Reserve indicate it's a good way to stay broke. According to data collected in 2003, the average American renter's net worth amounted to less than $5,000, while homeowners were worth almost $172,000 -- making them 34 times richer.
That's but one of the many fun facts financial adviser and author David Bach offers up in his upcoming book, "The Automatic Millionaire Homeowner." When you add up all the evidence, Bach says, home ownership is as close to a financial no-brainer as you can get.
"The argument is that it's cheaper to rent. That's the whole argument, and it's simply not true," Bach said. "As long as you're alive you have to live somewhere. The question is, will you pay someone else to live there, and make that person rich, or will you pay yourself to live there and make yourself rich?"
March 13, 2006
Do you like being broke? Keep renting says author (and his mouthpiece the msm AP)
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22 comments:
I agree with the historical view, but the party is over for now. When looking back on this era 50 years from now, it will look like it was smart to rent for five years.
Stupid statistics. Try comparing median vs. average. Bill Gates is a homeowner. I am sure he and other uber-richies skew the average. 34 times does not surprise me when comparing averages.
I like how the media thinks we're all retarded and don't know a single thing about statistics. Jerks!
-Anon in Austin,TX
Over the long term it is cheaper to own than rent. During brief periods of anomolous overvaluation in the real estate markets that will result in an obvious correction, the opposite is true. The next 3-5 years will clearly represent such a period for most of the coastal urban areas. I'm sure I can provide stats to show that people who engage in mountaineering enjoy on average better health than those who don't. However, those who go climbing during blizzards probably do not have better health on average. What we have in housing valuations is a blizzard. All reasonable analysis bears this out.
Renting is not the route to wealth. In fact, statistics from the Federal Reserve indicate it's a good way to stay broke. According to data collected in 2003, the average American renter's net worth amounted to less than $5,000, while homeowners were worth almost $172,000 -- making them 34 times richer.
keith - why did you post this.......is not what this guy is saying entirely true? Sure the data is from 2003, but 2005 data shows that homeowners are now worth 184k, and renters are worth 4k......it's getting worse for us!
The other thing about this statistic is that the demographics of homeowners are different from renters in general. When I was in college, I rented. When I got my first real job afterwards, I rented. This 34 times BS does not take into consideration age differences/demographics etc. It is unfair (and retarded) to compare college kids' net worth with Bill Gates'.
What would be better is to break it up by age group or income level.
-Anon in Austin,TX
anon (and good god folks, get a user id) who said "keith - why did you post this.......is not what this guy is saying entirely true?"
Yes, I do not dispute that the stat is not true. I'll assume it is.
What any reasoned person would argue is Correlation does not equal Causation.
In addition, it makes so much more sense to rent today, say for $1000, a "$1 Million" home - or one that sold for $1 Million, where monthly payments would be $8000.
I also would agree that historically, before the bubble, it definitely was wiser to own a home.
But things have changed. I would tell everyone, in likley 90% of American cities, to rent.
Why? It's cheaper, much cheaper in some cases, than owning, and also by renting you escape the price of the asset plummeting, which it will, which it is.
What happened in the past is not relevant to today's situation, which is unique.
5 years from now, we'll be back to historic norms in regards to PE on housing. Then, it'll likley make sense to own again, and not rent.
You have to adjust your actions to the reality of the situation.
Easy. 101.
Those who drive German cars are, on average, 56 times wealthier than those who take the bus to work. Clearly, the route to financial nirvana is to buy a Benz. It's simple, people. You all need to smarten up. Ya vole, Herr Cammandant?
At every income level, homeowners have 5x - 35x the net worth of renters.
For example:
Annual Income $80k and up....the average renter is worth $87k, the average homeowner is worth $451k.
Some renters are better off than homeowners (all 47 of them appear to be members of this blog), but the vast majority are not
Easy. 101.
boy, someone just doesn't get it. I give up.
ok, one more try.
ice cream sales and shark attacks both increase during the summer
do ice cream sales cause shark attacks?
someone we know probably thinks so...
and here's another one
roulette table - red comes up 100 straight times. the odds of red on the 101st spin?
someone we know probably thinks it's a sure thing
I could never be a teacher. I'd want to slap the stupid kids.
Try Pasadena, California. I live in a 1200 sq ft apartment for $1300 a month. Same size house would cost me at least 3 times that.
I'm renting and putting that savings away into stock. As everyone moves from housing back into stocks, that should create a huge stock bubble.
anonymous makes my point exactly. Thanks. In the over 80k income level, the multiple is only about 5x, not 34x.
There still is the problem of many, many more folks who make just over 80k a year vs. those with CEO incomes. But in this study, they are all grouped together. Of course the AVERAGE is skewed. Median is the statistic that means anything here.
Easy 101
-Anon in Austin,TX
how come there are never any stats showing renters have higher net worths that homehowners....
oh....there'll be the occasional exception (and OF COURSE they all happen to be be Housing Panic readers)
that's what i thought....
In General, if you do not agree with the statistics you are a renter for life.
There is nothing wrong with renting just don't argue, cry, bitch, and complain. We know the truth hurts.
Almost every one I know renting is broke ass lazy and wishing for something for nothing.
They may say "I am waiting for the market to tank" , but even if it does they will still be bitching about the price.
The housing market has probably peaked for now, but in 10 years
you will have wished you bought that house for $1.3 mil near the Grove ( Los Angeles 90036 ). By 2016 it will cost you $2.6 or more to get in.
Have fun bitching Housing Panic Readers.
House near the Grove: Los Angeles.
When this bubble bursts that house near the
Grove will be 40 cents on the dollar.
Hancock Park and Windsor Square will also be 40 cents on the dollar.
it'd be fine if housing went up $88 thousand a year - as long as incomes went up by a proportionate amount, or rents went up to equal the new monthly ownership costs or more
but alas, incomes are flat, and rents are flat
so guess what
pop.
"Almost every one I know renting is broke ass lazy and wishing for something for nothing."
Sorry, had to respond to this lame ass... as a 29 year old renter, who by the way, missed the bubble bus because of my age, bad luck, marital situation, job situation, etc. am now quite content sitting on my cash egg, stock egg and 401K egg. The more I read, the more I realize that this cycle is cyclical. Get it? Why oh why do people insist on using the dumbest excuse around to explain why this bubble will continue up? That being, "buy now or you never will be able to..." Seriously, do you mean to tell me that my kids will never ever own a house in their 100 year lifetime? Are all the people younger than me doomed? I see the bulls as being the doom and gloomers, not the bears.
As far as my situation....I was a broke ass renter and now I am a broke ass mortgage owner :-( I even feel more broke than ever! I miss my apartment sometimes. I guess the only benefit is if I need to sell I can make a little money, even if theres a 50% drop. ( I bought pre 2003).
I guess that I'm an anomoly because I rent a nice two bedroom and have lots of cash and gold. I guess that most people can't resist the urge to spend and over indulge themselves. I can.
Dear Mr 41cadillac
for housing anywhere to be worth .40 on the dollar would mean that we are all in deap sh*t.
Interest rates would be @ around 17% our econimy would be shot. The peso would be worth more than the dollar and your 41 cadillac may start running again.
Good luck a-hole.
oops I hit the wrong key I meant economy
I believe the rent vs own thing is true, however there are other factors to consider like the fact owners tend to have higher incomes and education. Also, there is a time to buy and a time to wait. Had I bought say in September of 2005, would I now be worth an extra couple hundred thousand? Of course not. I would be upside down by $50,000 and heading for foreclosure in the next couple of years.
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