[hsitz]

> "General rule of thumb: rent if strongly believe you'll be in a place for less than three years, and consider buying if staying longer."

This is a valid rule of thumb only because transaction costs are generally much higher when buying a home than when renting. Typically 6% of the cost is siphoned off by brokers (3% to each side) and the fees people pay to take out a mortgage loan are significant. Fees you pay to start a lease generally amount to only a small fraction of these.

[aidenn0]

It's also valid because the real-returns of investments typically exceed the gains on housing[1] and you tie up a minimum of 20% of the value of your home when you buy.

1: This gets complicated because (at least in the US) most people don't leverage their investments at a 5:1 ratio, but do leverage their home value by that much.

[blaser-waffle]

> real-returns of investments typically exceed the gains on housing[1]

In markets where people want to live. Owning a couple acres around the far-flung suburbs of Seattle or DC will net you some good money.

No one is buying housing in Gary, Indiana. Floods have annihilated many towns around the Mississippi River, and there is plenty of real estate in Detroit and New Orleans that sure as hell ain't gonna exceed the S&P 500 anytime soon.

[aidenn0]

I think you read my comment backwards? I was trying to say that you get more reliable returns if you invest your down payment in a diversified fund than if you use it to purchase a house.

As far as "markets where people want to live" goes: yes, in any market, you can outperform the average if you can predict the future better than other investors. Some of the places around the Mississippi River probably used to be considered good investments; now they aren't. If this whole full-time remote thing catches on, it's possible that the bay-area will drop in prices. It's also possible that only part-time remote catches on, and interviews resume in person so people want to stay in the Bay Area. Heck, it's unlikely, but possible, that Cupertino or Saratoga decides to rezone large swaths of the town for more density and the increase in supply drops prices.

[Johnny555]

A good rule of thumb for selling costs is around 10% of the selling price. And when buying, factor it around 3% just for closing costs (or more if you're paying points), but then add-in more for funding reserves.