I'm not sure how I originally came across this article, probably from a blog I was reading the other day, but it was a must read. So once I finally got around to it, all I can say is that I've found my long lost brother!! Finally, a short but thorough explanation of the myths around home buying. I just have to comment on these points, and this post will become an eternal reference for anyone that tells me to buy a house. That way I can avoid telling them to fugg off.
Let's look at #1 and #3 together. I swear that so few people actually do the math on owning a house. I actually sat down and created a simple model, based on a rough estimate of costs for my parent's house. While it was not perfect -- no model is -- it gave (and continues to give) me a good sense of how all the pieces fit together. That is why I refuse to buy a house until the cost of owning, on a monthly basis, is within 10% of my complete rental expense. (That might be too tight a window, but I'm open to re-considering it.)
Continuing with this thought, I really don't see how so many people missed the fact that increasing home prices would lead to increased tax assessments. We can forget the fact that assessments generally occur at intervals of 2 - 3 years for most jurisdictions. (I know there's got to be a jurisdiction somewhere that assess annually but I don't know of any off of my head.) Even if you own your house outright, the taxes have to be paid every year. There's no escaping that; its a fixed. (Fixed in that its not going away, although clearly the assessment can change or be challenged. Go Larry Ellison!)
Myth #5 really pisses me off. Unfortunately, I'm going to paraphrase Robert Kiyosaki here, because this is one area where I agree with him. Your own house is a liability. Nothing more. It surely is not an investment. Now, the house may be the largest "asset" that most people own, and ever will own, but a house is not an investment. I'd be hard pressed to even count it for most purposes, once you consider the illiquidity of a house, but I guess we can let that one slide for accounting purposes. At no point, and in no way, should a house be considered an investment if YOU live in it. Its shelter. Like any other purchase, it should be evaluated based on its cost effectiveness at providing that. Now, if you have the incremental income or marginal wealth to afford the excess cost of the more expensive house, by all means, go for it. I would. But if you just need a place to live, then a house should considered purely on that merit.
Finally, myth #2. I'm not sure which myth I hate the most, but it probably is this one. The mortgage interest deduction is a DEDUCTION. Its not a credit! That means you have to spend more to increase the amount of the deduction, as the deduction is calculated by multiplying your marginal rate times the amount of the mortgage interest you paid. To put what the author said in a different way, how much money are you saving if you pay $1.00 to make $0.30 (or $0.38 even)? If you can't figure out THAT math, you deserve to be broke.
Whew! Such an emotional topic. It really shouldn't be. Either the numbers make sense or they don't, and they haven't made sense in a long time - at least since 2002 if not longer. So now, when some bonehead tells me to buy a house, I can point them here. Yay!!!
A house is to be lived in. Whatever you do in the location you call home, that's fine. But please do not confuse that structure to be an investment, or even a good deal. When the total cost annually -- principal, interest, taxes, insurance (so-called PITI), maintenance, and utilities -- is reasonably close to the cost of renting -- in my case, rent, a parking space, and utilities -- then I'll jump in with both feet, but not a moment sooner.