The biggest savings is often a hedge against inflation.
Take a hypothetical scenario where you could get a place with a 30 year mortgage where PI = rent for similar place at time of purchase. If you live there for 10 years and don’t refinance, you PI has remained constant for the past 10 years while rents have grown each year at approximately the rate of inflation.
Not a perfect 1:1 comp but I think you get the idea.
I think you forget that mortgages bankrupt millions each year and send people into the negatives
Of course you can lose your house if you get margin called before your lucky break
So to me investing with leverage is not an optimal way to invest, unless you have a crystal ball
Anyways I’ll let you guys cope with the high overhead fees and admin expenses associated with homeownership however you want
I still stand by my initial take - homeownership is not an optimal investment especially when there are low fee funds out there
You guys hang onto your property taxes, mortgages, appliance repairs, insurance. I will hold the VTI/VOO - see you at the retirement finish line
Mortgages don’t bankrupt people any more than index funds do, unless they 1) buy more house than they can afford 2) are trying to flip houses, not live in one.
Of course you can lose your house, but if the bank has to sell it you get most of your equity back. If you have no equity? Well that was probably the problem.
I’m a big believer in index funds and ETFs, but calculating home ownership vs renting is not an obvious answer… depends on how expensive each one is at the moment. Buying a home five years ago was a great idea. Now? Maybe renting would be better because the demand is high for houses, mortgage rates are high, and you’re not saving that much. Maybe rents are now relatively cheap - I haven’t been paying attention. I do know the calculation went the other way when I bought a house.
Well, some aspect of taxes, interest, and insurance is going to exist no matter where you live, either directly or through your rent. But i agree if your goal is to maximize retirement then minimize all those costs.
But this applies to most things… drive a used camry, shop at Aldi and Walmart, etc. If your only goal is to retire.
People usually lose their homes because of cash flow issues (loss of job, disability reduces earnings by 20%+, loss of spousal income, divorce)
I don’t think index funds have bankrupted anyone
Outside of that I agree with what you have said
Too many variables for me to make a blanket statement
My mortgage is cheaper now than my rent was 6 years ago for a smaller place, and rent was all money that I’d never see again… whereas now a third of the payment goes to equity. I was already paying for any appliances I wanted.
The house has gone up in value but the savings on the rent alone was worth it.
I don’t think I’m the only person who’s had that experience.
Oh, and it’s nice not to worry that the landlord will raise prices too much on me each year.
Well for most of the folks on an actuarial board the refrain should be…why not both?
Sure Real Estate carries the risk of foreclosure. In the past 20 years the foreclosure rate has generally been under 1%, (I think it’s been under 0.5% the past 5 year though some of that may be due to Pandemic assistance funds) it did spike from 2008 - 2012 following the big 2008 crash hitting an annual spike around 2.25%.
Real Estate isn’t a magic bullet for many of the reasons you have so eloquently detailed.
That said if you expect a stable job and plan to live in the same area for some length of time I do believe that most of the time you will be better off owning v renting but there are a lot of factors to consider.
I did not realize that the foreclosure rate was so much lower than the delinquency rate, I suppose that is a good thing
Living in the same house for an extended period of time greatly reduces your cost (transfer taxes every time you buy/sell, agent fees, title insurance, moving expenses)
The foreclosure rate is only measure.
How many are underwater on mortgage but are staying because they need a place to live?
How many put some equity in and saw it wiped out or reduced?
How many sold at a loss but weren’t bankrupt?
I think there far more people who do well with their principal residence than who do poorly, but I don’t have the statistics and do know that people can and do lose money, sometimes a lot, in real estate.
This assumption ignores the costs of ownership that is usually included in the cost of rent of the landlord.
And those increases in rents over time are at a minimum a partial reflection of such costs; and are again ignored.
Yes it’s an overly simplistic model. I fully admit that. If you’d like to add I. The cost of repairs and upkeep, go for it. It would probably make the comparison better.
The notion that Homeownership is better because more people leverage in that investment versus index funds seems about as silly as the argument that non-traded REITs are more valuable because the price doesn’t move as much (because they’re not traded…)
Man it’s been a whiiiiile since I’ve seen a fundrise ad
I wonder how they are doing
Ninja risk acknowledged, but aren’t stock margin accounts limited to 50%? I bought my first house with 3% down. I don’t think you can do that with stocks.
(I’m not sure it’s a good idea… I bought when the market was going up & got lucky, but it could’ve gone the other way. Still, I don’t think it’s fair to compare margin accounts that require 50% up front to a mortgage where paying more than 20% up front is rare, and way less than 20% is common. For better or for worse you can leverage a house way more than a stock.)
For sure. If you aren’t committed to a particular area then renting is likely better for you due to the high transaction costs. But if you’re likely to stay put for 5+ years then the transaction costs are a much smaller piece of the puzzle.
Moving expenses are the same whether you own or rent though, so you should delete that one.
Personally I lost on one home but I’ve made enough on the others to more than compensate. 
As an investment it’s really not the most convenient. The paperwork and moving/managing sweat equity you put in is probably not worth the effort. Buying stocks is much easier especially with Robinhood and such. Whether the return is better than S&P…really depends on your luck, and we all know timing is just a gamble and very much intractable.
The biggest plus about owning is the quality of life, and that you get to make the house exactly as you want it.
My place is worth 1 mil, and I intend to move to a 1.5-2mil house in 5-10 years. Living in a nice house makes me happy, and that’s all that matters.
Some people enjoy retiring early in a small/old house, and that’s fine too, just not for me. Some people just like watching the numbers in their portfolio go up, and that’s okay too. Do whatever makes you happy, not whatever gives the highest return (unless that makes you happy, but in my experience, people want more money not because it makes them happy, but because they want to be able to afford something else that makes them happy. And to many, having a dream home is exactly that, so the earliest one can do so, the better). Having a nice house is like having expensive fashion, or having expensive food, or go on expensive vacations, it’s worth it because you live your life in it.
Don’t get out much?