Most people are wrong about one thing about buying a home, it has an opportunity cost than renting when all things are equal. Don’t believe me? Let’s do some math. Let’s assume it’s a 500K house with 20% down and the rest on mortgage at 7% fixed for 30 years. Regardless filing status either have to give up standard deduction or give up itemization on mortgage interests paid. Even for year one when interest is at its peak interest is around 27K paid, married filing jointly standard deduction is around 32K in 2026. Interests only get smaller from there. In later years of the mortgage the interest amount will be most likely be declining based on the payment schedule while standard deduction amounts typically go up a small percentage every year especially when inflation is significant and sometimes go up by around 100% like the jump from 2017 to 2018 though its due to eliminating personal and dependent exemptions. Anyway, point being, consider mortgage interest tax savings as a non-factor for most people who don’t have millions of reasons to get a tax expert to help them do legal “tax avoidance.” People will then say well I don’t have to pay rent.
Okay, let’s do some arithmetic there too. You don’t have rent but you have property tax at about 10k a year, house repair maintenance charges at about 3k a year, home insurance at 2k a year, monthly expenses like lawn and trash bills at about 1k a year, potential special tax assessments that we won’t tally here and probably have to pay much more for utilities than living in a modest apartment which we won’t calculate for simplicity sake. You are probably looking at 15k at minimum to maintain a home that yields zero investment returns. Sure, the house may appreciate in 30 years, let’s say on average 3X return on original price paid during this period which probably will take you close to retirement. You also paid around 550k in interest plus probably origination fees and likely other fees totaling near 600k. Yes you probably can get maybe 500k in exclusion for primary residence filing jointly and may be some states don’t even have state income tax and capital gains tax, at the federal level though, you are likely still on the hook for taxes on the gain and possibly have to pay NIIT tax.
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Why renting is better than buying a home every time, anywhere in the world.
For simplicity sake let’s say your 1.5 million gain on selling your primary residence generated 1 million in taxable gains that come out to be around 300k in taxes. It costed you 900k to generate about 1.5 million in gain which means your net gain is about 600k when tangible costs are considered. 600k may be a lot of money, but if you actually put the 100k down payment into S&P 500 for 30 years at 10%, it will grow to close to 2 million. Never mind the potential employer contributions and real tax benefits from putting it into a 401(k) with employer contributions and nevermind on putting 2k in monthly mortgage payment into the S&P 500 for 30 years which will generate about 4.5 million plus real tax benefits and employer contributions via 401(k). Which combined is likely worth 10 million or more over 30 years. Bottomline is, all the prorated monthly expense alone from owning a house could pay rent.
The opportunity, non-financial side of owning a home like security and peace of mind can also turn into burden, not flexible to life changes like moving for a job, bad neighbors, criminalization of the neighborhood and you can’t do a thing about it unless you want to be called a racist, neighbor remodeling for a whole year and much more. Psst, did I tell you, millennials and whatever species come after that don’t shop and dine in restaurants the same way anymore nevermind on their appetite on owning an expensive home as that’s a boomer thing to do in their mind which they will probably avoid at all cost since they probably don’t even want children nor marriage anymore. The boomers rather consume everything before they go to another dimension than leaving these youngies any as typical of the most entitled, richest and selfish generation the world had ever seen. I couldn’t care less about the politics, all I’m saying is don’t let your incompetency ruin your life pretending to be ignorant.