In San Jose, California, Matthew Richmond leads a successful pest control company in Silicon Valley, living what he considers to be the American dream. At 32 years old, he can afford to pursue his adventurous passions, easily buying motorcycles or dirt bikes with a simple check. However, one thing he hasn’t purchased is a home, despite having the means to do so. Richmond believes that the idea of owning a home as a prerequisite for achieving the American dream is a misconception.
Ramit Sethi, host of the Netflix series “How to Get Rich,” echoes this sentiment, stating that for many people, renting can actually be a better financial decision than buying. A recent study by Realtor.com revealed that in May, U.S. median rental prices dropped for the first time since the outbreak of the COVID-19 pandemic in 2020. Another study by Redfin found that buying a home is only cheaper than renting in four U.S. cities: Detroit, Philadelphia, Cleveland, and Houston. Clever Real Estate’s study identified the top 10 U.S. cities where renting may be more advantageous than buying, placing San Jose at the top of the list, followed by San Francisco, Seattle, Denver, and Los Angeles.
Sethi emphasizes the need to consider the total cost of owning a home, which includes factors such as mortgage rates, property insurance, and property taxes. He refers to these additional costs as “phantom costs” that often go unnoticed until they arise. Sethi personally adds 50% per month to the price of owning a home, taking into account maintenance expenses that may arise in the future. The analysis conducted by RentCafe using data from the U.S. Census Bureau revealed a significant increase in the number of high-income renters and millionaire renter households between 2015 and 2020.
Sethi himself admits that he could buy a home, but he still prefers renting. He finds no financial sense in purchasing a home in cities like San Francisco, New York, or Los Angeles. If Richmond were to buy a home in Silicon Valley, his housing expenses would likely double. However, Richmond is content with renting and believes it doesn’t bother him at all. Sethi concludes that leading a rich life is about being able to say yes to the things you truly want to spend money on, and for many individuals, a house may not be one of them.
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