Comment by TheAmazingRace
2 days ago
This is a detail conveniently left out by home owners justifying their purchase, especially if they overpaid and have a higher interest rate on their mortgage on top of it. With a mortgage, the amount you pay is the expected floor you'll encounter, whereas with rent, the amount you pay is the maximum you'll deal with, at least for the duration of the lease agreement.
Renting honestly can be a better deal, especially if you have the discipline to stick excess money in the market consistently. In fact, your returns are likely better than just using a house as a forced savings account. In my neck of the woods, we have seen rental inversion too.
> This is a detail conveniently left out by home owners justifying their purchase
I mean you can phrase it this way. Or you can phrase it as homeowners are willing to play a premium for stability / forced savings. (And to be less generous, homeowners may be getting cheaper access to capital than otherwise available to a renter; espsecially as the homeowner locks in ~2% interest rate while a margin loan has increase to 10+% [1]).
However, for markets with low construction and strong demand I'm pretty sure home ownership comes out ahead. Like look at housing prices in the bay area historically vs current rents. That said, you need a handicap'd rental market for renting to be worse so the general situation is it's better _iff_ you invest the difference.
[1]: https://www.schwab.com/margin/margin-rates-and-requirements
I will say, one huge advantage for home ownership over renting is when you are in a dual income household and have kids. Your lifestyle isn't going to be as compatible with moving around constantly trying to find a good deal (like I'm able to as a single person). And if you do plan to stay put for 10 years or so, you will most definitely come out ahead. But you really need to be in the right mindset and phase of your life for this to truly make sense. I often times see others not really ready to settle down rush and buy a home, only to end up regretting the decision a few years down the line, sometimes even sooner.
I will also note, that the notion of having access to a cheap line of credit, like a HELOC, can be a fantastic tool when used correctly. But... I'm also seeing folks abuse this to keep up with the Joneses. And when times get tough, they won't be able to pivot and might end up defaulting and then losing their home in the process.
The overall state of the economy will still need another major shakedown before those elements of society get their wake-up call. It sorta started happening with Liberation Day, but we bounced back rather quickly... so who knows when that would happen.