The ‘House Poor’ Crisis: America’s Biggest Wealth Killer 

I did the same thing I will never go back to buying now investing the difference and more. Now I can retire at 45 years old if I want to. Wife and I are 33 and 32 are rent it 850 a month and we 5,500 a month while traveling 4 times in the year. We are blessed we good job as well hard work and discipline. We are very frugal with are money as well is a teamwork for sure.

how did you have 7k miscelleneous repaies in first month

Did you ever consider renting your home out instead of selling?

@@eddiemalvin no i prefer not to property taxes went of the roof as well 500 dollars a month just on property taxes alone.

​@@obama7325for us it was the deck that needed to be replaced and a leaky window.

Those stats are very misleading and leading people astray. My example is I built my house and paid it off by 35. So I had more than 20 years of no mortgage or rent and saved an absolute fortune. I've only recently decided to do some renovations (as a home owner you have say when you do it, can put it off for years). I spent about 150k renovating 2 bath rooms , repair/paint roof etc and now I'm set for the rest of my life living like a king. Imagine if I was paying rent this whole time - shudder. My house would rent for 40-50k per year, so that's $1 million I haven't had to pay in rent and also no mortgage payts. I'm light years ahead of renters.

@@whisper2441 cool story, you know another thing that's a myth in america? Your anecdote ...as some sort of MEDIAN representation of reality. Sorry, but the median american is not in an economic position in working life to homestead for 20-40 years. So in the real world of american mobility, those gains are vaporized with the moves. The stats don't lie, most transaction profits in the US are less than 200K, 77% to be exact. now, if you want to be moralistic and finger wag at people for moving around so damn much, you can do that. But you'd be showing your privilege, which has nothing to do with the facts on the ground about housing in the US, and house poverty in particular.

​@@whisper2441 I own property and hadn't rented for over a decade but decided this year to rent my main house out and check out some other lower COL states. I'm effectively renting a nicer place for free when you factor in what I'm renting my property out for and difference in taxes. I guess I'm light years ahead of people who own one home.

Seriously my coworkers are saving $100,000 for a DAY! $400 per person is the going rate and she’s out in Jersey. She snarked at me how much was my wedding I I said $10,000 and I guess we were just judging each other :( . I would not raise my daughter to think that’s ok, I pray she actually is like me when she grows up, not a slave to the makeup /trend world and not being insecure about my age and features. To be grateful we get to be older.

Absolutely this. Met so many couples who are renting but instead start off saddled with 50k plus in just wedding debt. You won't hear this critique because weddings are so inherently ingrained in culture and is acceptable to be couple poor.

@@mumuzezeit seems like people like us are so rare!!!

Yeah. I spent 10k for the wedding. I already had the money. Just buy what you can afford, meaning you have cash for it not credit. Avoid debt like the plague and you can live a decent life. I've seen family member go bankrupt due to debt and not able to pay due to cash flow issues. It only takes on mistake to loose it all if you have lots of debt.

I would completely disagree, you can pull out the equity in your home to invest, let’s say in purchasing rental property. It’s only an asset if you leverage it or sell it, period. I own seven rental properties , debt free, and all were purchased by using the equity of the home I live in.

❤

Sometimes you've got to take a chance while you're young, and have good health. You never know when that'll change. Cognitive skills go downhill too, so you're more likely to pick properly in your 30's than when you're near retirement.

Nice work!

that doesn't make house poverty prudent, that just means you took an advance on your paycheck. Hardly a genius play. If the market is so volatile that a year makes a difference between affording a stick house and not, that's a casino, not an investment.

@@GonzoT38 the alternative for us was to buy a house we couldn't grow into and we would have had to move within 3-4 years, which would've made renting more sensible, and neither of us liked renting for reasons that are our own. So we moved into a house at the top of our range at the time, and now we can stay here for decades, or forever. We love the house, great location, great neighbors. So maybe not a genius move, but an amazing outcome for us.

@@Bynming I did something very similar. It worked out great. I took the costs very seriously while it was ~55% of my gross income. But once my income went up a bunch a year or two after, it became a lot less of an issue.

Was it worth it? Do you sometimes regret not doing more with your kids when they were younger?

​@@cojut what makes you think they did not spend time with their kids?

@@cojut I don't regret at all. We would never have the net worth we have by renting. It forced us to "save money" by spending it all on the house. We spent lots of time with the kids with sports and at home etc. Last 3 years were able to do 2 Big trips as well. 26 hour drive to Orlando 52h drive to Vegas kind of massive trips.

epic, a non liquid asset has tripled in value

Yes, it works great if you buy at the absolute bottom of the worse housing crisis ever and then look at the value/sell at the peak of the greatest run up in real estate prices in 40 years. That anecdote doesn’t mirror the current housing whatsoever right now, it’d be a much different story if the price fell to a third instead of tripling.

Hello!! how do you make such monthly, I’m a born Christian and sometimes I feel so down of myself 😭 because of low finance but I still believe God

Hi that's good you have idea &share to those who deserve it that's great god bless🙏🙏

She's a licensed broker here in the states🇺🇸 and finance advisor.

After I raised up to 525k trading with her I bought a new House and a car here in the states🇺🇸🇺🇸 also paid for my son's surgery….Glory to God, shalom.

Can I also do it??? My life is facing lots of challenges lately..

I feel like a lot of first time buyers are struggling financially for the first 5-6 yrs. But if you look at people who have owned a home in a decent area for 30-40 years. They almost always have more wealth than someone who chose to rent for 40 yrs

​@abprepboy33 most people's networth increases have been in their homes lately

Something is off or you are saying it wrong. 230 million people own a home Ramit says 18.6 million feel house poor. So that’s 8.1% of homeowners…. But then you say it’s 98%. Math ain’t mathing.

It's because people buy a house they can't afford or majority of homes eat all of their income with nothing left for anything else. People don't think about anything else but buying.

⁠​⁠@@chaselesser3191 that can probably be explained by how many mortgages have been taken out since home prices and interest rates spiked. All other factors equal, if you bought before then you likely either have enough equity or a low enough interest rate to be pretty comfortable.

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Yes there are many variables at play in the real world. Variables went in your favour.

Same - my mortgage started off at $4100 a month - it is now $1536 a month and valued at over 1mil. I'm less than 2 years away from paying it off. Rent could never...

Thanks for showing off.

@@aiko3423 Is it showing off - or presenting another narrative that you could easily latch onto the same way you want to latch on to the idea that you could never afford a house so rent forever.

This is very good for you, but it's also important to realize you got lucky with historically low rates. We don't make financial decisions hoping for good luck

Diversify… T bills, CDs, Gold, Stocks, Municipal bonds, Bitcoin, etc assets speak when cash has no value

I would advise the counsel of a seasoned financial pro. It may be expensive, but as the old saying goes "You get what you pay for." "Expert solutions require Expert providers" - my mantra.

Truth is, investing with the help of a financial advisor set me up for life, retired as a millionaire at 55. I worked hard everyday as a teacher for 32 years, and my salary was over 100k annually. But if it wasn't for 2020 covid lockdown, I wouldn't have supplemented my income with stocks and alternative investments.

@@vancoker-t6z bravo! I've worked in real estate for over 25 years and have neglected a major stock portfolio, however I need a different plan now... mind if I look up the professional guiding you please?

Annette Louise Connors is the licensed advisor I use. Just google the name and you’d find necessary deets. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.

I simply wish people would run this basic calculation and see

Yet somehow the owners/landlords have all those expenses plus management and they still manage to turn a profit. Otherwise they wouldn't be landlords.

Many of them are losing money every month. Some even realize it. Others have lower expenses since they bought years ago. Some are making a profit while it's even a good deal for the renter! There are many more dynamics at play beyond "landlords definitely make a profit"

​@@roflchopter11not always true. I work in the industry. Some owners found more profit in selling buildings/ homes since rentals were not netting a profit.

@@ramitsethi This is true. I rent a ROOM in my apartment and I am "losing" money every year on this investment. The hope is that I will make money 10 years from now. It won't be enough to cover the losses due to the time value of money. 30K I paid for HVAC, water heater, drywall, and roof could have been invested. I spent all of that so my roommate can pay me 1150 a month. (Less than half of monthly fixed expenses) The Internet thinks I'm a fat cat and he's paying my mortgage.

Is house paid off😊

true. its all part of the so called American dream to own a home.

True. I owned four real estate over 14 years. That kept me tied to one city, unable to pursue better work opportunities. Now that I'm renting, if I don't like the work politics, I can pack up and go. In fact, I just accepted a new job which will pay over half a million $ per year, it also has better work life balance. I'm single, so homeownership is overrated. I would rather optimize my income and manage my finances so I can afford to be flexible and free, and not panic at the cost of renting.

All of Canada is getting there now.

Check out Millenial Revolution. I think they're based in Vancouver.

Where can I find a house in Vancouver that cost 250000 or 500000 CAD ?

"At least 50-60%". I hear even a small 3 bedroom house costs over 3 million there.

Good luck - as a fellow doctor, we aren’t the most financially savvy group. I’m doing fine but many of my colleagues don’t make wise decisions in terms of saving and investing. Invest early and often once you get your attending salary. Reading Ramit’s content will put you on a good path.

@@aas55 Great advice, thanks, doctor 🙏

Ramit advice is good for short term plans, reduce debt payts etc. It's terrible as a life long decision/plan. I can't imagine renting forever - nothing worse imo.

Choices!

Proper tax in New Jersey is ~ 2.26%. That usually equates to 80% of a monthly payment on a 5% 30 year mortgage. Yeah a 100% phantom cost checks out.

You can buy and rent it out, still rent cheaper, and let someone pay off your mortgage.

@@ClarisNdoroRealEstate my old rent is $300 more expensive per month than if I were to live in own my place (incl. all phantom costs). Plus I don't want to live with roommates anymore!

Should have stuck with your mortgage, future you would thank you for not condemning them to never ending and increasing rent. I paid house off by 35 and have lived mortgage and rent free for over 20 years. Had I chosen to rent all the way through I would have paid $1 million in rent just in last 20 years. That money has gone straight into my bank account and allowed me to retire early and wealthy.

@@whisper2441 Continuing to dump money into a house that I couldn't afford was absolutely not the right call for my financial situation.

@@whisper2441 You think your rent would have averaged over $4.1k a month since 2003?? I think your numbers are wrong or you live in a very high COL area, because that’s insane.

@@DaveDDD I’m in Australia and it’s a 5 bedroom, 2 bathroom plus rumpus room - easily $800/week minimum. I’m allowing for cpi going back 20 yrs, so rent received in 2003 and invested would be equal to today’s rent. There’s no way to make the case I would have been better off renting all this time.

@@whisper2441 oh yeah, idk about the Australian situation, but I guess good on you for buying a house in 1820 or whatever? I think the rest of us are discussing whether it’s worth entering the market in today’s economy with exploding prices, or if it’s better to build wealth in other areas and wait for the bubble to pop.

I had a friend that I no longer talk to that lives in Australia who would always whine about the housing market and have a complete "poor me" attitude, yet he's 26 and has never paid a day of rent. Why complain about the housing market when it doesn't even apply to you, dude? Had to stop talking to him because that mentality spreads like lice

@@EllieofAzeroth This is an epidemic. There are kids who havn't even started uni or are just starting uni, maybe first or 2nd year doing a commerce, law or engineering degree who are stressed about the mortgage they DONT EVEN HAVE YET ?! Can you imagine, these kids have their whole life ahead of them, can build businesses, go overseas to expand their experience, maybe build the next google or tesla, yet they are so depressed about the housing market that they are stressing about the mortgage that they will have in the future ? And what will all that stress get them, the house poor life, which apparently they all dream for?!. Seriously, Ramit needs to come to Australia, sell some tickets to a show and explain in simple terms there is a much better way, where you can invest easily, get the gains property would give you (and better) and most importantly, live your life and not to get sucked into the Australian property market blackhole that draws everyone into that singularity of a life which is to omit all the enjoyments of life simply to have that mortgage paid for the little shack 30 minutes from the city in 40 years time (yes Australia has 40 year mortgages now).

*And repair costs and taxes, which they always neglect, and probably eats away at the return. So realistically, maybe its only 5 to 6% return on average, any given year. Meanwhile, stock risk doesn't have any direct costs.

Australia turned shelter into an investment and now it’s time to pay the piper. Many people there are the very definition of what Ramit is talking about, living in houses that have appreciated into the millions yet living off the pension and struggling to afford bills because they have no liquid wealth.

@@rebeltheharem7028 in Australia its probably a negative return if its an owner occupier, cause you don't get the tax breaks (unless you sell and buy another) and you arent going to sell (unless you decide to downsize in 40 years time when you are 70 ) and after land tax, insurance, repairs and interest payments (specially now at 7+ percent) you would be lucky to get back what SPY + a sprinkling of other higher growth stocks invested in the long term would get you. With stocks in Australia, at the end of it all you know you are out for 22.5% ( marginal tax rate with the 50% capital gains discount for assets over 1 year) with houses the costs are endless. I used to own an investment property, bought it after 5 years out of uni and into a job ( bought the place in maroubra ). Felt that it was draining all my attention and sold it, invested the modest gains in ETF's for the last 15 years. Ive seen the property I had get sold a few times and the ETF's have done better with much less stress, gave me the opportunity to start a business too since I had no debt hanging over my head. The opportunity cost I would have paid, had I kept that property to maintain the mortgage would have been many times over the gains I would have had on that house. I hope people see the error of their ways here cause its draining the productivity out of the whole country. If you can afford the house, that is awesome, you SHOULD buy, but putting your entire lifes energy into paying a house off when you can't afford it is not the way to build wealth.

There are rare exceptions but a house should be bought WITH wealth, NOT to build wealth (unless you are a professional commercial landlord).

@@stevenporter863 yes I am of the mindset that someone should have a good financial basis in place before getting into a home( fully funded emergency fund, investments, good career, ect no car debt or credit card debt)

well having a fixed rate mortgage at ~4% for the next 30 years sure beats being at the mercy of a landlord increasing the rent every year...

@@MyNameIsJeff872Our rent went down this year.

Landlords can only increase rent if the market can sustain it. If they could, they of course would. But if they would get undercut by many competitors (i.e. other landlords), then it’s harder to raise rents. I like to think of this debate as either renting a home vs renting money. Both have long term costs and people should explore each option and understand its impact.

There's nothing wrong with renting. Also, not every landlord increases rent annually. Landlords go through things as well, tenants can suck just as bad.

Having everything in cash would/could make things easier but there’s still room to run the numbers to find the best outcome for an individual. If you had 1-2M lying around: you have roughly 3 choices to have a roof over your head: buy outright, get a mortgage, rent a place. Buying outright still has the opportunity cost of what you could do with the money if you invested elsewhere, could be equities, could be investing in another business, could be investing into rental real estate. If your primary goal is to own a house, one would just pick option 1 and congrats you’ve won the game of life. But if you’re looking to increase net worth, each of the 3 options could be viable depending on what the variables look like.

I will! Thank you

For anyone looking to estimate utilities for a new place, before I moved, I called the utility company and asked what the average monthly cost was for the new neighborhood. The gave me the annual cost of the previous year for a house that size in that neighborhood. No need to guess.

OUTSTANDING comment! Great research

@@kylem1078I’ve done this before but they would only share the highest and lowest monthly rates. My highest rates ended up being well above the number I was given and I am very conservative with the thermostat - I’m not sure if there was a nuance to the info (eg was it only for the current account holder and not for a full year) or what because the utility company wouldn’t share any other details.

Yes, the 4 numbers in my CSP: iwt.com/csp

And I've lived both. I chose to own (again, after selling once) because stabilized and long term residency plans just make more sense for me in a high COL area

There are lot's of opportunities!

Discuss!

There are options!

Ofc😊

Teachers dont make much mobey bur have high debts

That's just normal poor 😂

@@merc7paul he has this weird crusade against people that buy homes. He wants everyone in America to rent and never own any property. Long term, buying a house is better. Especially if you have a family.

Owning tends to work out better the longer you own. But the average American moves every ten years, so that complicates the numbers. The ‘forever home’ is something of a myth.

It probably depends on were you live, how often you move, how often "life happens" like laid off, divorce, expensive repairs, a-hole neighbors, etc.

Exactly. THANK YOU

For sure it can seem a bit nihilistic that for many, the numbers lead to not to own. But if the culture is encouraging everyone to buy no matter what because it’s the American dream, then all else being equal, it leads to housing being likely over valued.