But if you sold your house now, invested the proceeds, and then used the return on the proceeds to pay your rent, then it would not be “gone”. In fact, if the proceeds grow at 7-5%/year or the house at 3-4%/year - you would probably have more selling your house now and investing.
It’s just nice to own a house.
And, it will be passed along to our heirs, rented, not happening…
weco, only rented when we married in '62, until we could buy our first 1,000 sf ‘Young America’ home in '67… But everything was pretty cheap back then, including a couple landlords that were jerks. $13.8K for the 1st, $28K for this one…Changing times, rents here are $3K and up…
The one part often missing in all these repeated conversations we have had on this topic, for years here, is it is almost never an apples to apples comparison.
The comparison is often against a home of a size and value much larger than what one might rent. Sure, if I settle for a small(er) apartment than my current home, I have no doubt I could invest the difference and come out ahead but if I were to attempt to rent my current home (using the imputed rent value*), then there is no way renting would come out ahead for many home owners.
*Percentage of Value Method: Multiply the home’s value by a typical rental yield (e.g., 1% monthly, or 7-10% annually).
Zillow says my house is worth $627k. Using the most conservative PoVM, my rent would cost me about $44k a year. My notably very favorable mortgage payment is $2190 month, or $26k a year. Of course, that does not include utilities, repairs, etc., but I likely clear $10k in savings by owning over renting my same property - and I am building equity. Could I go a rent a place for less than $2190 a month? Sure, but then I also would not have 5000 sq ft.
I also never have to worry about my landlord raising my rent to an unaffordable level, or evicting me because they want to sell the property - which is what my father did to two of his rental properties last year because he is getting too old to take care of the properties. A third one he did a land contract allowing the renter to stay (but now they are no longer a renter but are a buyer/owner).
As is well known, I’m a curmudgeon.
I don’t want to share a wall (or floor or ceiling) with anyone and no one I know (including my kids) wants to share a wall (or floor or ceiling) with me, with one exception.
Ms. Wolf is the only person I know who will put up with me (kind of) and I’m holding on to her for dear life!
I ask her “come here, baby”
She tells me “no, no”
I ask her “drive me here”
She tells me “drive your own”
She likes to race my motor
Then slam my hood
She makes me feel good
She makes me feel good
It’s amusing that you constantly reference the unknowns of real estate value compounding while using the US stock market as an unshakeable true indicator.
By way of illustration, let’s look at someone in Japan who used this philosophy. Let’s say in 1990. They invested 10,000 in the Nikkei index at the time, and in the ensuing 35 years managed to grow their money at a compound interest rate of 1.01%. Meanwhile the average Japanese rent in 1990 was about 10,000 yen, while today it is nearly 60,000.
How would your hypothetical renter vs owner calculation have worked then?
The simple fact is that markets do not always go up, and that they often go up at different rates than other markets. Real estate is one market, stock investments are another. You happen to have been lucky enough to be in the right one at the right time (an observation you level at me for having been in Boston real estate) but it’s easily as likely that you could have been in the wrong one and would be flogging the theory that “real estate is a better investment than stocks” - because it all depends on when and where.
Stocks did not do so well during the Great Depression, as I recall, nor during the 1970’s stagnation, nor during numerous other times in history. The math only maths when you choose your starts and ends right.
The difference is that I can buy the whole stock market with an S&P 500 index fund, reducing my risk. The residential real estate investor is owning a single home and is not guaranteed a market return.
That would be like me recommending funding retirement on a single stock (i.e., DELL)
If we get to the point where we’re worrying about a Japan situation in the US, all worldwide stock markets will be down – it will be canned goods and ammunition at that point.
intercst
…and let us not forget that most Japanese housing prices have crashed as rural Japan moves to urban areas and urban areas have not grown very much more expensive as the overall population growth rate flattened and is now declining quite persuasively.
They have this concept called “akiya banks” where they list abandoned houses all across the countryside. You can buy a decent house for under $50,000 in many places.