[vikingerik]

Yes, this is broadly correct. The free market will (roughly) arbitrage out any differences between owning and renting. The hidden factor is that whatever money you have in house equity represents opportunity cost that it isn't in investments. If you have 400k in a house and the stock market returns 6% over inflation, then the opportunity cost is 2k per month in interest, which is comparable to what you'd pay in rent.

There are tax advantages that favor owning (in the US), for a primary resident and not an arbitrageur - mortgage interest and capital gains when you sell are not taxed, while capital gains in a non-retirement account are.

You can gain by appreciation and leverage, of course - but you can just as easily not, you don't know if your city is going to be the next high-flying Austin or Boulder, or run-down Detroit. My own house has been flat in estimated value for four years in an area that I thought would continue to rise.

[ThrustVectoring]

There's significant personal financial benefits to renting, too, in that many local areas are dominated by one firm or industry as a major employer, so your employment prospects can be highly correlated with the local housing market. You do not want your investments to be correlated with your employment if at all reasonable. Detroit in particular was hard hit by this in the '08 financial crisis, iirc - the automotive industry had huge layoffs and a simultaneous residential real estate market collapse, and many newly laid-off workers were underwater on their home and practically unable to sell to move for better job prospects.

[smithza]

This is something that is hard for people to factor in when decision making. Optimism will blind us from considering such a tragedy since not only was there buy-in on the home, there was buy-in on the future trajectory of the company you decided to work for.

[steveBK123]

The liquidity problem with homeownership as well is that it's a lump sum.

If you own $400k of stocks, you can sell any increment of dollars you want over time. You can take profit, you can take money out to cover needs, etc.

With a house, sure you can "take out home equity" but its just a loan against your home you have to eventually sell to cover or pay back.

It's like having a $400k position in your companies stock that you can only sell all at once with a 10% round trip transaction fee.

[carlosjobim]

> With a house, sure you can "take out home equity" but its just a loan against your home you have to eventually sell to cover or pay back.

Do you expect to be able to take out a loan on your house and not have to pay it back? Want to have your cake and eat it too, literally?

[rwmj]

But the same argument applies to landlords too. Why are they willingly losing money?

[kridsdale1]

I’m a landlord. I’m losing money because the Seattle market went to shit and nobody will buy this place.

I bought for $850k in 2017. Selling now asking $899k and no-one’s buying. Think of my ARR with inflation and opportunity cost here. I sold Facebook shares to get this. I have made zero return from rents overall. I’d likely have earned $1M if I hadn’t sold those shares.

[cma]

That's pretty contingent. If you had Snapchat shares instead you'd be ahead.

[philipallstar]

Even selling up and putting the money into the S&P500 would've done a lot better than that[0], so I think it's a reasonable claim.

[0] https://investment-estimator.com/s&p-500-calculator says $850k in 2017 would be $2.8M by 2026.

[markdown]

Can I ask why you're selling?

Do you happen to be a young person looking to move for better prospects (economic migrant)?

[jandrewrogers]

A landlord is unlikely to have the same cost basis as someone buying on a new mortgage. I know many landlords that own their rentals outright. The ability to make a profit renting for less than you'd pay in interest charges alone changes the financial calculation.

That said, landlords don't always have a choice to not lose money. These are investments, there is inherent risk.

[kccqzy]

A lot of small mom-and-pop landlords are certainly losing money. Especially when they buy properties as their own residence but later converted to a rental. The majority of the Bay Area housing market has basically zero properties that would make a landlord profitable; you only need to compare the market value of a house against the market rent.

And this is really no different from the majority of stock pickers or day traders. They just lose money.

[materielle]

I get what you’re saying, but the housing market is actually a really subtle issue in my opinion.

Just one example, owning a home protects you against price shocks. As others have pointed out, this can sometimes be a bad thing, because when prices decrease you are also leveraged.

But it’s pretty important to a lot of middle class people that they are protected against forced relocation due to 5x housing price increases.

Of course, there’s other reasons to not own a home.

My point is that localized housing markets have all sorts of factors that are perfectly explainable by economic theory but aren’t just “Econ 101, run the supply and demand” curve.