My current house I paid $567,000 for it and it's worth $540,000 based on my most recent appraisal. Again, paid 1% transfer tax to buy it and if I ever sell it (I hope to God not) I will pay 1% transfer tax and 6% Realtor "tax".
Notice I didn't mention routine maintenance and fixing things that broke during the last several years?
Believe me when I say I wish I would've rented. I'd have about $200,000 more in my bank account right now.
Because you had a bad outcome.
So first w/o getting into the math numbers which I will assume are correct I will say the following.
Looking at any decision strictly by the numbers may make you come to the wrong conclusion and is a reason why it sometimes can be a mistake to look at only one angle (financial or, say, engineering) when making a decision.
For example the housing stock when renting tends to be more transient and less stable than with buying (people coming and going). Now even if you can rent a house in a stable neighborhood (rather than an apartment building) that is primarily owned and occupied by owners (as opposed to renters) you still end up with the issue of a) having to rely on someone else (the landlord) to fix things. b) not being able to make improvements to the property (because you need approval or because why put in a new kitchen to something you don't own?) and c) The neighbors may treat you differently if you are a renter (may or may not happen may or may not matter simply pointing out). You are of course also susceptible to the whims of the landlord rent wise and have the costs of moving if you need to do so.
Owning (as does owning a business rather than being an employee) also comes with certain "psychic" benefits that are hard to quantify and, most importantly, have different value to different people.
Personally (and I've rented obviously) I prefer to own because that way I can do what I want when I want even recognizing that it might cost me more to live that way. I also buy cars I never lease. I like to sell when I want to sell and not have to wait for the term to end. Other people are looking for another type of certainty (that isn't important to me) or perhaps don't have the cash flow or need the cash flow for something else. Everybody is different.
As far as your situation you bought in 2005 and in hindsight you are not happy with the decision. I've had ups and downs with real estate as well (more ups though over time).
"I paid $567,000 for it and it's worth $540,000 based on my most recent appraisal."
Doesn't mean anything until you decide to sell it though.
I have a property (investment) that I bought for about 50k, could have sold at the top for, say, 180k, is worth now perhaps 125k. Unless I want to sell none of that really matters (don't need to finance it or anything) only thing that really changes is the property tax.
"Notice I didn't mention routine maintenance and fixing things"
Once again some people may prefer to take care of this in something they own and not be bothered by it (just like some people don't want to wait for the "tech guy" to come and get the PC running). Personally there are pros and cons to each thing. If the A/C breaks in my house I would rather not have to wait for a management company to scramble a repairman to fix it. Everyone is different.
But those days are done. For the past 5 years, renting would've been much better than owning in most areas of the U.S. I don't see that changing any time soon.
Your "not a loss until you sell" is a myth. The reality is that assets have a book value and that book value should reflect reality. Assets can also be used for leverage - good luck telling the bank you're trying to borrow money from that your assets' current value "doesn't mean anything". You're arguing the "feelings" argument of investing which is vastly inferior to the mathematic reality of investing.
I am not talking primarily about "investing". I'm talking about owning a home vs. renting a home not as a way to make an investment. Consequently the "feelings" (if you want to call it that) as well as the practical aspects of ownership (such as improvements and control) are important to some people. But not all. Depends on many factors. Which is what I said in my parent comment.
You are saying "For the past 5 years, renting would've been much better than owning in most areas of the U.S."
If you incorporate a time frame into investing anything can seem like a good or bad investment. For example using a 10 year time frame or even a 3 year time frame (before the RE market tanked). Different results? I'm sure you are not unhappy about the 500,000 you did make which if you had shifted the time frame would not have happened.
I am not taking issue with what you are saying. I thought I layed out the case whereby there were other non-economic reasons that someone might make a particular decision to own vs. rent.
As far as bank value and leverage I am well aware of that. Just like I am aware that if you are in a divorce an appraisal can come into play even though you are not selling anything (one party might retain the residence and be subject to a high or low value that may or may not benefit). Also the fact that people tend to spend more money if they feel rich and that their RE (which they have no intention of selling) is more "valuable". And so on.
In many 2nd tier markets renting has gotten much more expensive over the past 5 years, though. A mortgage payment is less than rent in Minneapolis, for example. The rentals suck and it's hard to find one. Renting a nice place is surprisingly expensive, approaching Seattle costs.
