Renting is also a better deal for a lot of people (no building maintenance, no special assessments, flexibility to move around more, etc). The idea that home ownership is a good investment is a crapshoot at best and a myth at worst. It works out well for some people, but they may have done even better renting and investing in equities. I say this as a homeowner who (perhaps irrationally) likes the idea of owning a home.
The context of my reply was putting life dreams on hold, which for many people means children and family. While renting might have strict financial advantages (although not in any of the popular metros in the last 20 years), having peace of mind of not having to move and your kids being in the same school is worth quite a bit.
And the federal US government does quite a bit of wealth transfer to homeowners, which comes from non homeowners obviously, so renting being better than buying is only true for certain circumstances.
It all comes down to what you value—there are millions of families renting in US cities, who obviously did not feel they needed to put their dreams on hold.
Although property values have gone up quite a bit in desirable neighborhoods, it's not at all uniform. Condos in particular have had a bad ~5 years, even in good neighborhoods in big cities.
The challenge is separating the two oft intertwined thoughts of what's financially optimal, and what is lifestyle desirable.
We often use an argument in one area to justify a poor choice in another. It's fine to make a financially suboptimal choice to rent/buy (as is the case) to acquire a desirable lifestyle. Just as it's financially optimal to walk everywhere, but in reality we want to drive a car (and maybe a fancy one at that). It's when we start to say "This home is an investment, so I'll buy a $EXPENSIVE home"... that simply burdens us with high expenses relative to the lifestyle gains and we've actually done the opposite of good investing, for little lifestyle gained over a moderate home.
I'd argue renting is best for those who aren't looking to stay in a place longer than 5 years. If you're sticking to the community for 10+ years, its evident to purchase a home/condo.
I dunno. I bought my house in 2018 for 400k and now it's being appraised at 550k and I'm planning to sell and buy a house elsewhere with my girlfriend.
Pretty lucky for sure, but even if the increase wasn't this dramatic it would have still been better than renting...
Btw this a fallacy/bad accounting that many home owners fall into.
Most say $550K sale price minus $400K purchase price == $150K profit.
But you need to remove: Taxes, maintenance, cost of your time (if you value that at all), realtors fees, HOA, bank fees/insurance, home insurance, depreciation on purchases you only had because of home ownership (tools, lawn mower etc).
Once you remove those it's hard for home ownership to make financial sense relative to investing in the stock market + renting.
However, and this is discussed in another thread, homeownership is a lifestyle choice, and we should be ok with making financially suboptimal choices for the sake of a quality life. We just need to keep clear it's an expense for a purpose, not an investment for financial gain. If we overspend on house liability it's no different than overspending on cars or food or travel.
You're double counting the down payment and equity payment. It doesn't count against the profit of the simple $150k number unless you lower the mortgage balance which would increase the $150k to $214k.
Another way to look at it is that even with your numbers, a 40k investment was turned into 1.25k monthly dividend vs. -2k month or so in rent (rough number based on house price).
It makes a lot of financial sense when it's leveraged. That fictional 150k profit was on 5-20% down of the purchase price, plus the payments made until sale. If you live in it for 2 years you avoid capital gains taxes, and if you go the other route of renting it out you deduct expenses.
