[pspencer]

Some reasons I think people like housing as investment: They can use relatively safe leverage to increase the return on equity by three or four times. There are large tax incentives. There is the time value of money aspect where you pay off a fixed amount over 15 to 30 years. Also, housing is a hard asset unlike stocks or bonds.

[munificent]

Also, housing is effectively a "free" investment.

You must have a place to live and you are going to be paying for that. Why not own it so that your payments actually accrue capital while you're at it?

[jdashg]

Building equity has opportunity cost. There's little financial incentive to pay off a mortgage unless the ROI elsewhere is less than the mortgage rate.

[frockington1]

I think this a piece that a lot of people miss. Last year I was spending about 1.8k a month in rent. Now I pay 1.9k for a mortgage of which 300 (and increasing) goes directly into home equity. Once home equity comes into the equation it becomes pretty basic math

[refurb]

Yes, but what about property taxes, maintenance, transaction costs (6% to sell!) and opportunity cost of your down payment.

I've run the number in the past and in some markets it's clearly cheaper to own than rent (typically where there is slow but steady increases in prices - mid-west US). For other markets, you need 3-5% asset price increases just to break even with renting after 10 years (bay area).

[aianus]

My landlord was definitely losing money (on a cash flow basis) renting to me in Toronto -- rent did not cover mortgage interest + condo fees + property tax.

He was just gambling on real estate appreciation and using me to cover most of his carrying costs; I would rather gamble on stocks.

[chii]

usually investment expenditures can be tax deducted, so your landlord is also using this expense as a way to lower his tax rate. It's effectively transferring income tax into capital gains tax (which presumably is lower and more efficient).

By making the rent slightly lower, the landlord is sure to get a renter to cover most of the costs. But if the economic situation declines (or interest rates rises), he can just bump up the rent to cover the increase.