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Renting Might Make You Richer Than Buying

May 04, 2023

THE BIG SPLASH

Renting Might Make You Richer Than Buying

Ramit Sethi, a self-made millionaire and star of Netflix's "How to Get Rich," has sparked controversy by claiming that renting a home can make you wealthier than owning one.

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  • Sethi argues that homeownership is an expensive investment that shouldn't be taken lightly, and the idea that property is always a great investment has become a "religion" in the US.

  • Despite the common belief that renting is "throwing your money away," Sethi believes that people often ignore the true costs of ownership, including mortgage payments, closing costs, homeowners association fees, utilities, and maintenance.

  • Additionally, real estate has historically not offered the same returns as the stock market. Sethi encourages buyers to consider whether they'd be better off investing in the market instead of real estate.

  • According to Sethi, renting can sometimes be a better financial decision than buying, and he urges people to "run the numbers" to determine whether buying or renting and investing the difference is the best option for them.

A SCOOP OF INVENTORY

Home Inventory Remains Low

Potential homebuyers in the US are continuing to face a difficult market due to the ongoing inventory shortage, with new listings dropping by 21.3% year-on-year nationwide in April.

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  • According to a monthly report from Realtor.com, inventory growth has slowed for the second consecutive month, with new listings remaining 50.5% below pre-pandemic levels.

  • San Antonio was the only one of the 50 largest markets to see the number of newly listed homes increase compared to last April, rising by a slim 0.4%.

  • Many potential sellers are said to be sitting on the sidelines due to feeling "locked in" to their current home because of low mortgage rates, which have started to rise, averaging 6.43% as of April 27.

  • With fewer sellers, potential homebuyers have fewer options and will likely have to continue narrowing their list of must-haves to find success in today’s market.

  • However, first-time and younger buyers can still win in this market by closely watching mortgage rates, setting online alerts for new homes coming on the market, and working with agents who know the market and how best to position an offer.

A SCOOP OF LUXURY PROJECTS

Gen Z beats millennials and Gen X in home ownership game

According to a recent Redfin analysis, more members of Generation Z own homes than previous generations did at the same age, with 30% of 25-year-olds owning their home in 2022.

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  • Remote work, record-low mortgage rates and increasing rental costs have motivated some members of Gen Z to enter the housing market, with those who took advantage of low interest rates during the pandemic enjoying an advantage.

  • However, those who didn't face an "uphill battle" to enter the market, with mortgage rates currently above 6%. Nonetheless, the goal of homeownership is still achievable, according to Redfin.

  • Gen Z homeowners have also spent a similar percentage of their income on housing compared to three decades ago. A 25-year-old in 2021 spent a median of $1,013 each month on their mortgage, equating to 16% of their $74,900 median income, compared to 16% of a $69,419 median income in 1990 (adjusted for inflation).

  • The report advises Gen Z hopefuls to save for a down payment, improve their credit score and consider low-cost housing options to achieve their dreams of homeownership.

A SCOOP OF CELEBRITIES

Ed Sheeran living the high life in $36k/month Brooklyn apartment

British pop star Ed Sheeran has reportedly rented a $36,000-a-month apartment at Pierhouse in Brooklyn Heights, New York.

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  • The unit spans 3,200 square feet with four bedrooms, a private rooftop terrace with views over Manhattan and Brooklyn Bridge, and an outdoor dining area and grill.

  • The kitchen has walnut cabinets and Calacatta Tucci marble countertops, and the apartment is fully furnished with furniture from brands such as Crate & Barrel, RH, and Serena & Lily.

  • The building is a roughly 100-unit condominium, and previous buyers include celebrities Matt Damon and Amy Schumer.

  • The property was taken off the market roughly two months ago, according to StreetEasy. Sheeran, known for hits such as “Perfect” and “Shape of You,” was in New York last week testifying in a copyright infringement trial related to his song “Thinking Out Loud.”

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