[actuary]

This is an excellent question. First, note that you will always need a place to live. If you rent, you have no option but to pay market rents forever. Another way to put this, in the language of finance, is that you are "short" housing. Purchasing a home covers this short position - a homeowner must pay their mortgage, but need not be exposed to market fluctuations in the cost of housing. In this sense, the purchase of a first home is a risk reduction technique.

Second, market forces keep the cost of owning a home below the cost of renting a home (in most markets).

Third, there are substantial legal and financial benefits to owning at least your primary residence. Home sales are usually free of all capital gains tax; mortgage interest and property tax are tax deductible; and homestead exemptions exist in many states in the case of bankruptcy.

Finally, there are only so many other places to put your money. It is difficult for an employee of a corporation making in the low six figures (i.e. for a typical reader of this website) to shelter more than around $30,000 of earnings a year from taxation. Because of the advantages listed above, once you max out your retirement accounts and have an emergency fund set up, there is often no better investment than the purchase of a primary home. Also note that paying down your mortgage early is equivalent to investing your money in a savings account that earns a rate of interest equal to the rate of interest on the note (at this point, this rate is much higher than the rate you can earn in a savings account). This is on top of all of the other benefits.

[YokoZar]

This cannot be right. Buying a house surely increases your risk, because the price of your house now affects a majority of your wealth. If you didn't spend all that money taking on debt to purchase a home, you could have your assets spread across a far less risky portfolio.

That's not even counting all the risk you expose yourself to by being locked into a particular house in a particular neighborhood, such as not being able to switch jobs due to the expense of relocation.

[nknighthb]

You're thinking about this as purely a financial investment, but that's not all it is. It's a solution to another problem entirely: One way or another, you must have shelter.

By paying for it with a mortgage, you get shelter and a valuable asset at a set cost, and, once the mortgage is paid off, that cost drops to taxes, maintenance, and insurance.

Paying rent, you get only temporary shelter, for which you must pay whatever the market price is, forever. Your rent is unlikely to fall, can rise dramatically, and you don't come out the other end with an asset, that money is just gone. You didn't put it in a diverse portfolio.