I would also argue that earning equity in a home beats paying rent, even if you also pay PMI. Even the small amount earned during the initial payments. You get nothing back out of rent.
It depends. The house I live in has only gone up in price 3X over thirty years. This is a sluggish housing market. The stock market over that period has gone up WAY more than that over the same period. So a person on my block would have been wiser to have not accumulated equity – rented for less and taken the money and instead have invested it in the market.
The opposite was true if you lived in coastal California where house appreciation actually beat the stock market.
There are few ‘easy answers’ to any of this – just a lot of ‘maybes’ and ‘it depends’.
I lived in an area that after the mortgage crisis homes valued at 700,000 were selling for 450,000. :shock: It’s better today after 7 long years, but it’s not back. If you bought your house in that area for 700K in ’05 I doubt you would get over 600K for it today. That’s a long time to wait if you need the money. Bottom line is that real estate is an investment like anything else. It can go up and down. If you can’t afford to wait (say you have to move for a job), you might be SOL.
And you never know when you might have to move. As a kid my family did that three times in six years all of them NOT an option.
I read somewhere that houses in Las Vegas – nice houses too – lost more than 60% of their pre-bubble valuations after 2008. Most are now at or above those prices but only if the homeowner maintained them through the period. Tough to do and justify maintaining the place when unemployment was going to 15% and houses all around you were 50% underwater. The house there that were foreclosed and badly maintained many are still way underwater. Miami was even worse but has rebounded faster. But the mold houses there are still almost worthless.
Twin Cities had it rough but nothing like the Sunbelt did.
I refuse to look at a house as an ‘investment’. They are places you live that cost money that some day you might [but are not certain to] get some of that cost back out. The biggest reason to buy is so you can do what you want when you live there but with association covenants that isn’t even the case.
I am not 100% sure I would buy a house if I were young today – I would very carefully weigh all the pluses and minuses and individual circumstances of where I lived and where I might want to go next. There are more minuses today than when I first bought 35 years ago. Fewer pluses too.