It's pretty obvious that it's usually cheaper to rent to buy. Also with the way things have been going it's become very apparent that rents haven't gone up at the same rate as homes. It's also true that renting typically has always been cheaper than buying. So if you wanted to say live closer you could usually rent a place cheaper than it would cost you to buy. This is probably even more true if you have been renting say for 10 years. The amount paid might definitely be lower than owning in this market.
So my friend who rents in our neighborhood has rented here for about 15 years. She's gotten a great deal on a rental since she's lived there so long. But now owning in our neighborhood and surrounding areas have gotten beyond their reach. Because they've waited so long it's gone up way faster than rent. And their income hasn't gone up by the same percentage. If you had to ask I would say that prices have 3x but their rental hasn't gone up by that much nor has their income.
So the question should they keep staying here? She said that she's starting to realize how they don't fit into the neighborhood anymore. The lifestyle that most people affording living here is substantially more than average. I agree it's not normal, it's not like most of the US. It's a very priviledged, affluent area. It's not how most people live.
What brought this on? The fact I mentioned that a bunch of our friends are on vacation for the week of Thanksgiving. They've pulled their kids out of the week and they are vacationing somewhere. Some are going somewhere warm, others are visiting family. She said most average people need the income of working the full week and I agree that's normal life.
But at the same time it's part of affording the area. That if you can afford to buy $1m home you probably have the type of job that affords you the privilege of taking a week off and vacation. I didn't know what to say because we visit hawaii 2-3x/year. But our trips to hawaii are cheaper than most since I know when to buy my tickets. I know how to work the system. We also don't pay usually for hotels/rental cars and eating out isn't as pricey as someone going for the equivalent amount of time.
Our expense is paying for airfare but like this Christmas the kiddos and I are using miles and DH is traveling for $549 roundtrip at christmas which is an outrageous deal. So total for family of 4? $549. Not what people usually pay for hawaii at Christmas for a family of four. This summer? I think we did miles again and DH came for $400 roundtrip which is again a great deal because of covid. Hotel? I think we paid $1000 for a couple days on another island and I did spend a lot on eating out the month with my parents so $1500. But a month in hawaii for $3000 for a family of 4? Again not possible for most people. But would I come to hawaii if I weren't seeing my family? No I would not. So it's not exactly a fair comparison. I also watch airfares constantly and have updates can tell you when the price hits $149 or $199 one day per person. Sometimes I buy and sometimes I use miles.
But that being said, typically DH and I can afford our neighborhood. Yes we live somewhat modestly but for the most part we probably make now what most people make in our neighborhood. Before we were making a lot more than most of the people we live near. Now we are average. So I feel normal.
But I get what my friend is saying. They are barely affording their rental and no way can they afford to buy. But their kids are in 6th and 1st grade and they are becoming more established. But it's also becoming evident that they can't "keep up with the Joneses" which you don't want to do but it's hard to not notice. To realize that you don't go to Mexico, Hawaii, Europe or Caribbean for vacation. That every holiday you don't travel for a week and think nothing of it. That you can't and don't drive high end cars. That thrift shopping isn't the norm.
So how do you deal with it? I didn't know what to say. I wouldn't live somewhere I couldn't afford. I would look at moving to be honest where I think I fit in and we are the average income if not higher than average. Where we could own our house and still afford everything like everyone else. Meaning the 1 week vacation we take a year is similar to others. That the car we drive is similar.
I know that we don't seem like our neighbors (the minivan and legacy) stick out like a sore thumb. But it's by choice not because we couldn't if we didn't want to. So I think that makes a huge difference. Affording a nicer lifestyle but choosing not too I don't feel the comparison or jealousy. But I think when you know there is a difference it's harder to overcome. To know that you are comparing your lifestyle with their. I can't help but think that it would be easier to live somewhere that you can afford everything everyone else can.
So should someone rent where they can afford to buy? Or is it okay to rent where you know you can never buy?
November 24th, 2021 at 11:18 am 1637752719
1. The quality of the schools if you have children. If the educational opportunities are much better, then I might stay
2. Everyone’s debt tolerance is different. No one knows who has money saved for retirement and college and who has thousands in credit card debt. Lifestyle doesn’t tell you that.
3. Whether lavish vacations is a goal. Not traveling can be a choice. Some families camp nearby, and make wonderful memories. Some drag kids all over the world while screaming at each other.
4. I am a fan of buying because I believe it builds wealth. To me, renting is building someone else’s wealth, and unless you plan to move frequently, I believe it makes sense to scrimp for a deposit and buy within your means. It provides some stability to housing costs, and if you do it early enough, leaves you with much smaller housing costs in retirement.
November 24th, 2021 at 11:37 am 1637753839
It so much easier to buy a house in the US then Aust so if we could buy we would but the house would fit us, our budget and personality...keep up the jonses is not something that we look at we are about recycling things and we don't need the latest things we replace it when we need to....so it is a personal choice...but also here in aust...renting is so much more than a morg at the momement
November 24th, 2021 at 04:41 pm 1637772084
It sounds like your friend is feeling poor (when she probably isn't) and that will rub off on her kids. You're in a position where buying an older car is a choice (a smart one) - she is in a position where it's a limitation. That fact changes our attitude. I think they should relocate so that "barely affording" doesn't describe them.
I often have a story: When my DS2 was about 8 we gifted him with an MP3 player that could hold about 50 songs. It was new technology for him and he thought it was cool. Then a neighborhood boy who had also received one for Christmas told DS2 that our family must be poor because his device could only hold 50 songs and not the hundreds (maybe it was even thousands) that the premier brand could. It upset DS2 and I had to have a conversation with a child about priorities and how our neighbors prioritized different things than us. Ironically, I would guess that our income is higher than that neighbor. I can only imagine the situations that your friend's kids could face if they do actually feel poor.
November 24th, 2021 at 05:00 pm 1637773230
November 24th, 2021 at 09:21 pm 1637788902
But if that's the case I totally agree about not trying to live where they can't afford. I think further out schools are just as good. But it's hard when I want to point out she isn't poor she's actually doing well (so it seems) but people do make a lot more or they have a lot of help that she doesn't have.
I know my friend we have in commmon is traveling for a week to mexico. But her parents are paying, and the guy's parents pay for 2 weeks skiing christmas in colorado annually, trip to mexico annually and hawaii in spring. They don't make bones it's all paid for by the parents. 100% ski passes, clothes for kids, gear, hotel, flights, etc. So yes they can go on nicer vacations.
I get it. But people have different backgrounds and different jobs. But not realizing they are doing well enough to live in a nice neighborhood is hard. I like to travel so I get it. we spend too much on traveling. But it's because we cut back on other things.
December 7th, 2021 at 08:02 pm 1638907340
As a former educator, I'd say get into an area where the schools are top notch. I know we often think the American dream is to buy, but if renting is the only way to go, then I'd say it until the kids finish school. With the craziness in today's world, one wants to know their kids are getting a good education and they are safe, even if you have to sacrifice some things.