Don’t Fall for the American Dream

The Case Against Buying a Home

“Forever renting” can bring plenty of freedom and opportunity.

OK, houses made out of money ARE a good investment!

In the developed world, especially in the United States, not considering purchasing a home at some point is akin to shooting a puppy. It’s just not done if you want to be taken seriously as an adult.

From its associations with “The American Dream” to the nonsense that renting is just “throwing money away,” selling property to individuals is big business reinforced by social propaganda. After all, who wouldn’t want to own their own home to do whatever they want?

But there are numerous benefits to never making this “investment” (which a personal home NEVER is, since you don’t have positive cash flow), ten of which I’ve highlighted below:

1. High Costs: Homeownership can come with high upfront and ongoing costs, such as the initial down payment (20%), closing costs, property taxes, insurance, maintenance, repairs, and renovations. Before purchasing any property, you should know these costs to a decimal point and have reliable predictions for future expenses. Some, such as property taxes, will be unpredictable should your home’s political jurisdiction change drastically.
2. Market Volatility: The housing market can be unpredictable and is not static, with prices fluctuating based on various factors, such as the economy, interest rates, and supply and demand. Prices surged upward during COVID-19 but plummeted during 2008–9.
3. Limited Flexibility: Owning a home can limit your flexibility as a single person or as a family, as it can be more challenging to move for job opportunities, personal reasons, or lifestyle changes. No “opting out” or “breaking your lease” exists when you own this asset. It must be dealt with accordingly, or you will face trouble when property taxes/essential maintenance eventually comes due.
4. Responsibility: Homeownership comes with responsibilities, such as maintaining the property, dealing with repairs, and adhering to local regulations and bylaws. YOU are the landlord, and what doesn’t get done by you must be done by someone else (which means $$$).
5. No Guaranteed Appreciation: While some purchase homes as investments, there is no guarantee that a home’s value will appreciate over time. An extreme example of a “good investment” that went south is anyone who purchased homes in Detroit during the 1950s — what was at one time America’s most prosperous city with spectacular home values is now anything but.
6. Opportunity Cost: The money tied up in a home could be used for other investments, such as stocks, bonds, or mutual funds, which may provide higher returns. Even worse, imagine if you’d used the down payment to improve yourself (or your partner) somehow. As Warren Buffet is fond of saying, “the best ROI is investing in yourself.”
7. Regional Disadvantages: In some regions, home ownership may be more expensive than renting, and in some cases, it may be more cost-effective to rent than buy. Unless you are prepared to plop down $200K for a million-dollar home in some areas, even $2,500/month for rent allows you the freedom to live somewhere lovely without breaking the bank.
8. Illiquid Asset: A home is a relatively illiquid asset that can take time to sell and convert into cash. This becomes readily apparent in down markets, which unfortunately do not coincide with when you’d like to move, downsize, or make other important life decisions. Sometimes, it can take YEARS to sell a home if the wrong mix of factors comes together.
9. Risk: Homeownership comes with various risks, such as property damage, natural disasters, and liability for injuries that occur on the property. If you look up what “umbrella insurance” is supposed to cover, you can immediately understand how legally precarious owning a home can be, depending on how litigious its location is.
10. Lifestyle Changes: Owning property requires a certain level of commitment and may not fit with a person’s lifestyle or plans. Do you want to paint the picket fence? Chlorinate the pool? Figure out when the heater needs to be replaced? Even if you pay somebody to do these things, you’ll still have to be on top of them!

Rent if you want, buy if you want. The decision is up to you.

A final note on renting: when someone tells you that you’re “throwing money away” by renting, they’re either trying to sell you something or invested in a sophisticated lie.

When you rent, you exchange money for a place to live that you do not accept ultimate ownership responsibility for. Just because you don’t have equity in an asset does not mean you haven’t gained value by utilizing it. If this were true, every time you drank a soda or ate food, you just “threw money away” because you “rented” the nutrients inside. It’s nonsense.

Nobody can stop you from buying a home if you’re set. Many people will commend your decision and tell you you’re “doing the right thing” because it has worked out for them. It’s just nicer to be aware of the risks and pitfalls that can occur, and you should be prepared for them.