Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, “100 percent of the time it was better to rent, rather than own.”
That’s right: 100 percent.
I don’t know who Arzaga’s clients are, but I don’t agree with this statement. Many thousands of people have mortgage payments of $400 to $1200 mo (PI only). Yes … even in CA.
The article states he lives in a 5000 sf home in San Ramon. I’m from that area and can competently attest that it used to be a “hick town.” Back in the day, it had a church, graveyard and a handful of small biz. It must be another mcmansion-laden suburban megalopolis by now, lol.
The average USA homeowner doesn’t live in one of those.
McBride crunched the numbers in a pre-bubble era (2004) for a home purchased at $200,000 by a buyer in the 27 percent marginal tax bracket. Factoring in a 30-year mortgage, $1,200 in annual home insurance, closing costs of $5,500 and maintenance costs of $100 a month, along with property taxes, he calculated that it would take a selling price, 10 years later, of $395,404 just to break even. His conclusion gave Arzaga’s view credence: “Homeownership may not be the moneymaker you think it is.”
He’s probably factoring in a 2% (of assessed value) or higher property tax (as with most states or CA subdivisions with MR). In addition, he doesn’t appear to be factoring in the effect of taking the MID.
Hands down, owning makes a LOT more sense, esp for a family with pets … or horses or other large animals. In most markets, it’s cheaper than renting …. of course, NOT if one will live in nothing less than a 5000 sf “mcmansion.”
