[conceptpad]

That's the simple logic of rent vs. buy, but as the article details, there are other considerations. Opportunity cost being one primary cost that you're not taking into account. To me the most important question is the most fundamental: "Am I a real estate investor?" - I am not, and the overwhelming majority of persons are not. And yet the moment we purchase a home, we become real estate investors. In my case the simple fact that I've only purchased one property in my entire life means that I'll do it with less education and awareness than my landlord did when he purchased the home I currently, comfortably, live in. I think my landlords own and rent more than a few properties, and they do a great job of managing them. I am not confident that I would manage this asset as well as the professionals do, and so I cannot claim that were I to buy this home from them with a mortgage, that I would gain anything. In my opinion this is the key fallacy within the argument favoring the Buy option.

[lmm]

If you intend to live in a home for the rest of your life then you're effectively short one home (or half a home if you're going to share). So I see buying your primary home as more like covering your short than making a positive investment in real estate.

[CamTin]

This is an incredible way of putting it. I'm not sure if I like what it implies, though, but I'll definitely be mulling it over. It's not a perfect analogy to securities shorting, because no one is going to lend you a house to immediately sell, so effectively all us renters would actually be naked short-sellers!

Maybe there is a business model in lending out houses so people can short the housing market? Again, not sure how that would work since houses aren't fungible in the same way that securities are.

[Simulacra]

Lending out houses.. Explain. I'm intrigued. My long term goal (we're not counting my husband here) is to buy a townhouse, live in it for a few years, then rent it out and buy a free standing house - with a backyard! Now we'll have two or more rental properties in competitive markets hopefully bringing in some income. I've been extremely lucky with the house I own now. Good tenant that I did not raise the rent on at renewal. $380 is plenty for me. She knows my goal is to protect the house, not make money off of it, so maybe I'm not the best person for an example in real estate investment.

[ElevenLathe]

The way it works with securities is:

I own a stock. You think the price will go down. To make this bet, you borrow the stock from me. You then immediately sell it at the current price. Later, if the stock is down, you can buy it back at the new (lower) price, give it back to be, and pocket the difference. If, unfortunately for you, the stock's price has actually gone up, you have to either continue to pay for the carry on the position (essentially paying me rent for my stock), or else take the hit by buying the stock at a higher price, giving it back to me, and eating the difference.

The analogy doesn't quite work with houses, because they're not fungible. I don't care which specific share of stock I get back, because they're all the same. I DO care which specific house I get back if I rent it out to you. Furthermore, I would be REALLY mad if I rented you a house and you then sold it to someone else, since that is just flatly illegal.

Still, I wonder if a lot of the structural problem with housing markets is that there is insufficient short pressure. In other words, there is an obvious way to make the bet that prices will go up (buy one), but no obvious way of making the opposite bet, unless you already have a house, and decide to sell it and begin renting, which hardly anybody does.

How can we let ordinary people short housing in their area?