Comment by eru | Hacker News Reader

Comment by eru | Hacker News Reader

Parent Full thread

For a proper comparison, you need to pay up the guy paying off the mortgage with someone who eg invests similar amounts in an index fund.

To be even more proper, you'd need to allow the stock market investor to use leverage, just like the guy with the mortgage does.

Or, if you want to avoid the mortgage/leverage complication, we can compare someone buying a house outright with someone investing the same amount in stocks, and uses the returns to pay rent.

> Around here, houses appreciate in value. Quite significantly, actually. A house can gain 100k in value in just a few years.

Total returns on eg the S&P500 over the last few decades have been pretty good, too. And it's a much more diversified and liquid investment than a single house in a single location.

For some people in some places, buying a house might be better than buying stocks, for some others it might be worse. Results also depend on taxes and jurisdiction and personal preferences. But it's not automatic that buying a house is better than renting.

An important thing to consider is not just average return, but risk factors, and worst case scenarios.

If you buy a home instead of investing, you've got a locked in, controlled rate for your housing expenses. (Yes, there's some variability with property tax and insurance). In difficult times, you can still plan very carefully around your housing costs and wait for better times.

If you rent and invest, your housing costs can be highly variable and uncontrollable over time. Your investments may not cover increases in housing costs.

A critical factor is that housing is more or less a _required_ cost of existence - just like feeding oneself. It is not something where one can necessarily "invest in other areas" instead. There are extreme cases (living out of an RV or in a tent on the side of the road), but for the most part those extremes are not representative of how someone wants to live. One can only downsize so much, and downsizing your housing investment comes with very real changes to quality of life (storage space, commute time, access to grocery stores, etc).

And are you considering the risk factors and worst case scenarios when it comes to housing?

Housing is not as liquid, and prices can also go down as well as up. Often there are large transaction costs associated with buying/selling property.

What if an event happens that is not covered by insurance? Subsistence, large-scale repairs required etc. Changes in housing regulations c.f. the fallout from Grenfell in the UK.

There are risks in both, and risks from housing can also be large. The leverage offered by banks works in your favour in good times but can work against you in bad.

> Results also depend on taxes and jurisdiction

If things were different, then the results would be different; but, being as they are, for most people in most Western jurisdictions the rules favor homeowners.

> [...] but, being as they are, for most people in most Western jurisdictions the rules favor homeowners.

Alas, no, not necessarily. There are feedback effects. The rules favouring owner-occupied housing mostly drive up the demand for that, and if you don't allow supply, then all you get is higher prices, that those would-be homeowners have to pay.

But in any case: my point is that it's down to circumstances which path is better. It's not an automatic 'home-ownership is always better'.

Reply on news.ycombinator.com