[daviross]

If homes appreciate by 1%, the market averages 8% (taking the article as given), but rent's going up 10% yearly, I'm not sure the numbers still work out in the writer's favor. The market doesn't just have to beat real estate, it has to beat Cost of Living.

[GeneralMayhem]

Another potential problem with this analysis that weighs toward buying is that it doesn't take into account leverage. If the home appreciates 1% in the first year but you only put 10% down, then your equity has effectively increased by 10%.

On the other hand, you also have to consider that owning a home doesn't remove your ongoing housing costs. In San Francisco, the only options in my conceivable price range and preferred parts of town are condos, which come with eye-watering HOA fees. And no matter where you are, you have to pay property tax and upkeep. With Prop 13 in California, if I were to buy something similar to what I currently rent, even if I owned it outright, my monthly payments would only slightly decrease. My rent right now is covering the owner's HOA fee and property tax, but most profit they're getting (beyond appreciation) is basically tax arbitrage: the landlord has owned it long enough that their tax burden is much lower than what it would be for me.

NYTimes put out a calculator a few years back that I usually refer to (https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...). It forces you to take into account all these sources of ongoing costs on both sides. Paradoxically, in some of the most expensive metros (SF, Manhattan, etc.), renting is the better option with reasonable estimates of stock market performance, because even though the rent is much higher than the rest of the US, purchase prices are relatively even higher.

[atwebb]

It mentions leverage in the article and the other side, being that leverage allows you to get in a much larger hole than otherwise possible. With transaction costs, you are immediately underwater from an investment standpoint.

[mxschumacher]

the market returns are after transaction fees (negligible for ETFs, very significant for real estate) and maintenance - house prices might well increase, but you have to take construction/refurbishment spending into account.

The older the house, the more money you'll have to spend on upkeep - stock prices are driven by future profits, so investments required to maintain the business are already taken into account.