[spoonie]

You’re forgetting about the opportunity cost of locking up all of that capital in an asset that has a high carrying cost (maintenance, taxes). The initial downpayment could have been used for other investments, so you have to compare how much you could have earned if you’d invested and rented instead of bought the house.

https://youtu.be/NZR_vMTLfIk

[chrisseaton]

> an asset that has a high carrying cost (maintenance, taxes)

I don't know who you think ends up paying for maintenance and taxes in a rented property - it's the renter, through their rent.

[dragonwriter]

> I don't know who you think ends up paying for maintenance and taxes in a rented property - it's the renter, through their rent.

Equally correctly, the landlord pays them, and landlords that can't at market rents on top of any purchase financing that they are still paying go out of the landlord business.

Most precisely, where, as is usually the case, neither supply nor demand are either haveperfectly elastic or inelastic, the costs are effectively split between renters and landlords in some ratio; the market rents are higher but the financial profits are lower than they would be if the costs involved were not a factor.

[spoonie]

I didn’t say renters dont pay.

What I’m saying is that you don’t (usually) get to buy a house for $0 down. So it’s never a choice of $2000/mo for rent vs $1000/mo for mortgage. It’s more like $20k cash + $2000/mo for rent vs $20k equity + $1000/mo mortgage. Over long enough time horizons the monthly payments don’t matter and it’s a question of which investment appreciates more.

[wahern]

Unless you're already wealthy, it's difficult if not impossible to have access to a large investment that provides 5x (or more!) leverage. A home is a leveraged investment and security rolled into one.

Even if your mortgage interest is greater than property value appreciation you could conditionally still come out ahead as compared to the available alternatives.

Diversity, leverage, better appreciation: if you're not already wealthy you can really only pick 1 (maybe 2) out of the 3.

And this ignores the value of having stable monthly living expenses, something not otherwise possible without rent control. You can of course buy cheap land, but such places are typically remote from employment opportunities and, while possible, that approach is just another form of speculation--people will readily share stories about living in the country and telecommuting to a high paying job (successful speculation), but few would ever discuss how they ended up stuck in a cycle of minimum wage employment (unsuccessful speculation).

[ThrustVectoring]

>Unless you're already wealthy, it's difficult if not impossible to have access to a large investment that provides 5x (or more!) leverage.

That's wrong - the futures market is easily available if you have $10k, and offers rock-bottom costs for embedded leverage due to arbitrageurs. It varies based on the contract in question, but the two-year treasury futures contract offers roughly 400x leverage. Generally they offer you as much leverage as you can handle before overnight price moves will eventually wipe you out, so you definitely want to use less than they're offering.

[wahern]

Fair enough. That's what I get for trying to make a pithy point.

But what's your exposure? Home mortgages are almost always non-recourse loans, limiting your losses to your initial down payment.

I don't think speculation in the futures market is a very good justification to the argument that home ownership is in general a poor investment--IME the conventional thinking in economic circles. I stand by my larger point that home ownership is a categorically sub-par investment only for those already with substantial wealth.