For most people your house is one of your largest investments .
But many people also see it as a way to make money. Unlike basically everything else we buy for living, people think that the only direction the value of their house can go is up.
If you look at it like your car (it costs money, but maybe you'll get some money back), then you can't be disappointed. In the worst case, it's no different from paying rent.
Plus, unlike penny stocks, you can live in the house.
The obvious protip here: don't buy a second house unless you can afford losing money on it.
Much better off investing in the S&P 500.
Also, when you factor this in - the landlord also knows how to factor those in. So rental prices won't be far behind. There are a lot of factors in renting vs. owning, but it's not clear-cut either side - you need to always look to specific local prices.
Getting a place to live is quite different from getting one as an investment.
> the landlord also knows how to factor those in
Rents are determined by supply & demand. They are not determined by whatever the landlord pleases to charge any more than whatever the renter pleases to pay.
Not really. You need a place to live anyway, so why not get one that can also would appreciate in value? Alternatively, getting one that would depreciate can be financially ruinous. So investment consideration is always there, even if they might not be always the primary one.
> Rents are determined by supply & demand.
That's a platitude. But you are thinking of "supply and demand" to narrowly - nobody would purchase a rental property that brings in less money than it takes out, whatever demand is around. There's a price floor for rental price, and that's how much it costs to the owner to get and maintain the property. Short-term, the price can drop below it since selling house takes time, and the market may be not good. Long-term, nobody would keep such asset. People don't do it for fun, they do it for money. If selling is more profitable, they'd do that.
There are many markets where renting makes perfect financial sense.
What I'm fearful about is that the large majority of mortgage buyers don't see it as a 10x leveraged investment, nor do they understand how badly the amplified price fluctuations of a 10x leveraged investment could hit them if there was even a tiny dip in the price of their homes, let alone another housing crisis like 2007.
Granted, even if the 1.5M house falls by 30% this year, over decades it is likely it will still come out ahead, adjusted for inflation, compared to say, a savings account. But chances are, on average, it won't beat an index fund.