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Another factor I found missing from this article was the inflation of rent prices over time. Back when I did my own rent vs. buy analysis, I found mostly as the

Another factor I found missing from this article was the inflation of rent prices over time. Back when I did my own rent vs. buy analysis, I found mostly as the author did. However, the key argument in favour of buying ended up being that rent increases seem to far-exceed inflation. I could only find US trends for the period of 1940-2000 but, over that time, rents increased 5.32% per year compared to inflation of approx. 3.5% per year. What this means is that if I don't buy a house now, and trends continue, the space that I was renting last year for $1500/mo will cost approx. $5,600/mo in real dollars in 2042 (a 25-year projection) or $2,360/mo in inflation-adjusted dollars. This is just one more factor in a complex decision but it seems important to the cost-benefit analysis. I implore you to find the data and run the numbers yourself if you're trying to decide but my prior research did not paint a good picture for life-long renters. Edit: It's worth acknowledging that rent protections exist and can keep rents steady for some. However, these usually require that a tenant never moves which is an assumption the author made a good argument against.

justherefortart 8y ago
I bought my first house in 1999. It costs less for the remaining mortgage than renting a 1br apartment in my city and has for about a decade. The interest is so low now I don't even get the write off and just use the standard deduction. The house has more than doubled in "value" (based on comps) as well. I'd still have been paying the same money to rent, but it would have gone up an average of 5%/year. The down side is I have had to pay to replace the roof, hot water tank, and HVAC, but that's all been recent fixes. Not living in an apartment is also 1000x better.
Bartweiss 8y ago
This is the biggest weakness of the article, I think. Rent growth is included in the Rachel/Owen example, but it's set at 2%/year to get the 15 year equilibrium. And during the P/R discussion, that rate is implicit in the analysis of what's an acceptable P/R to buy at. But rent growth is obviously tied to housing price growth - the highest P/R markets range from 5% to 10% per year of rent increases, which is exactly what's driving renters to demand housing at high prices. On a more theoretical level, we can observe that the article uses national averages to show that housing prices track inflation. That only holds where new housing stock is built to match rising populations. More accurately housing prices track (inflation + population growth - new stock), substantially changing a lot of these conclusions.

justherefortart 8y ago

I bought my first house in 1999. It costs less for the remaining mortgage than renting a 1br apartment in my city and has for about a decade. The interest is so low now I don't even get the write off and just use the standard deduction. The house has more than doubled in "value" (based on comps) as well. I'd still have been paying the same money to rent, but it would have gone up an average of 5%/year. The down side is I have had to pay to replace the roof, hot water tank, and HVAC, but that's all been recent fixes. Not living in an apartment is also 1000x better.

Bartweiss 8y ago

This is the biggest weakness of the article, I think. Rent growth is included in the Rachel/Owen example, but it's set at 2%/year to get the 15 year equilibrium. And during the P/R discussion, that rate is implicit in the analysis of what's an acceptable P/R to buy at. But rent growth is obviously tied to housing price growth - the highest P/R markets range from 5% to 10% per year of rent increases, which is exactly what's driving renters to demand housing at high prices. On a more theoretical level, we can observe that the article uses national averages to show that housing prices track inflation. That only holds where new housing stock is built to match rising populations. More accurately housing prices track (inflation + population growth - new stock), substantially changing a lot of these conclusions.