If you need the flexibility, then yeah, sure.

But if you have no plans to move or don't think you'll ever need to move, in the long term, owning is always going to win.

Rent money just goes into a black hole. Mortgage payments build equity until you pay it off, at that point the asset is 100% yours and you're no longer making payments. Sure, you're paying for maintenance, but the maintenance costs will be less than what you were paying before.

Also, rent always goes up, sometimes faster than inflation. A fixed mortgage doesn't. When I bought my house at the end of 2015 for $330K, Zillow estimated the rental value at $1,800/month, and my mortgage was $1,500/month. Now, cash value is estimated $560K and the rental value is estimated to be $2,700/month.

If I chose to rent 7 years ago, I'd be spending $1,200 more per month right now. Another couple years, and I could be spending double.

I don't know the general stats of this at all. But of the people I personally know, their mortgage payments tend to be on par with what renting a comparable house would cost.

The financial advantage to buying vs renting isn't a smaller monthly bill, it's that you're building equity if you're buying.

Sorry I break the bad news - As a homeowner, this is not an advantage of owning a home. Houses are MASSIVE money sinks. The cost of rent is MUCH more predictable.

This is not necessarily true. In Los Angeles, for example, the price-to-rent ratio is about 38, i.e. if you pay $1000 / month in rent for a place, buying a comparable place would cost you about $450,000 (38 * 12 * 1000). There are a lot of people who could afford to pay $12,000 / year for housing, but could not afford the down payment on a $450,000 mortgage.

For that matter, the interest payments alone mean that renting is cheaper than buying -- 3% interest on a $450,000 loan alone is already $13,500 / year, and that's before taking into account that you also have to pay property taxes (another $3,500 / year), maintenance (probably another couple thousand a year), and principle on the mortgage (about another $9,000 / year).

In less inflated housing markets, it is generally true that the cost of rent is similar to the cost of a mortgage, but that is definitely not true in all markets.

It's cheaper to rent than to buy in many markets and if you own you have to factor in maintenance, property taxes, and insurance. It's definitely not as black and white as you're making it out to be.

This may very well be true for your scenario, so I'm not addressing that. I just want to poke at the myth that owning is always cheaper than renting. The real answer is: it depends on a lot of things.

There are costs associated with achieving a purchase (and later, a sale), there are costs associated with paying rent for extra cash (ie the mortgage), there are property taxes, and there are both time and money costs in maintenance work (that is obligatory for owners, a savings if you are renting).

If you move more often than once every 5 years, the math probably works out for it being cheaper to rent than to own. Committing to 5+ years decreases your flexibility to do things like: take higher-paying work, let go of real maintenance needs, move out of a bad neighborhood, etc.

in a perfectly efficient market, renting and home ownership costs exactly the same - not cheaper nor more expensive.

However, most home owners living in their home pay a premium for it, because they both want to secure their bid when they buy, and they are likely buying on more than just financial implications (like the location is great for their kids, etc). Therefore, a home owner is actually more likely to have a higher cost of capital over all - both the deposit and the mortgage added together, even if the mortgage interest by itself may be lower than renting.

Think of it this way - if renting was more expensive than the total cost of ownership, then an investor would borrow the capital needed for buying, and then rent it out and arbitrage the difference risk free. It is this mechanism that keeps the rent and the price of ownership at approx. equal.

In recent times, the price of ownership has grown due to the pandemic, and high availability of credit. Rent will follow, if it hasn't already, as landlords will not just eat the loss.

Yep, this is forgotten in many discussions comparing rent and mortgage. Only the interest portion of your mortgage matters for the sake of comparing expenses. The principal portion is money going from one of your pockets to the other and does not represent an expense.

Actually, the renter is better off from a purely financial point of view. Even if the house is owned free and clear, property taxes and maintenance will still need to be paid. The renter's rent covers all that.

Sure, but it drives up the mortgage cost (both because the principal is higher and because interest rates are higher with lower downpayment), so the rent being higher than the actual landlord's mortgage doesn't mean that it is higher than your mortgage for an equivalent property purchased at the same time.

> Extra expenses should remain with the owner, since it is their asset.

Whethe it should or not, those costs can be a reason to prefer renting over ownership even with a slight premium of rent over mortgage cost.

Utilities will generally cost a bit more. But the real killers with home ownership tend to be large expenses that come due all at once. Roof needs to be replaced, AC unit needs to be replaced, major appliance replacement, foundation problems, any number of expensive things can and will come up.

Unless your rental is rent-controlled, this is only true in the very short term. Most rents go up over time.

The payments on a fixed-rate mortgage do not go up. So the monthly real cost of the mortgage goes down over time. (This is even before taking equity into account.)

Renting for a long time is like having a mortgage that you refinance to a higher payment every couple few years.

This might be true if one could get as cheap and deep leverage on alternative investments as a house mortgage.

That's not 'generally' true, unless youre cherry picking data or buying expensive houses. If that was true, then landlords wouldn't be renting their property out. The standard landlord advice (from any real estate book) is to charge more for rent than your mortgage costs to cover unexpected repairs. Also, several deductions for tax, maintenance, repairs, insurance, etc exist making it even cheaper. https://www.nolo.com/legal-encyclopedia/top-ten-tax-deductio...

I agree with you that owning a home is expensive and I caution friends from buying a home if they're not sure they want to live there for 5-15 years. The hidden costs are insane. Renting has a mostly stable price without the massive emergency spikes of making roof or foundation repairs.

You need to compare both numbers, because that equity doesn't do much to help you make your payments.

this varies a lot locale to locale. in some places the rent is very close to the monthly mortgage payment. in some places, the mortgage is much higher.

https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

if you're damn sure you want to live somewhere long enough to pay off a 15 year mortgage, then yeah, odds are it's better than renting. most people can't be 100% sure of that, so to make it a fair calculation you also have to include the costs of buying and selling. in theory, you should also have to price in the risk of having so much money concentrated in a single asset, but it seems to be a matter of policy that housing prices are never allowed to go down.

The same can be said of mortgage interest. The fair comparison to the renter with no savings is the homeowner owing the full value of the house to the bank, and the fair comparison to a mortgage-less homeowner is a renter with investments and savings equal to the price of the house they're in.

Better arguments for your position might be

1. Mortgage rates are lower than rental prices in many places,

2. Paying off a mortgage is "enforced savings". People leasing property mostly spend the difference instead of investing it.

3. Some kind of projection of house and rental prices rising more quickly than the market.

Why do you say this is typical? It depends on what you rent, of course. If you rent a house that was purchased a long time ago, it can be less. But a lot of rentals are in apartment complexes, and are newer and more expensive per square foot than equivalent purchases. I also think typically rental units are smaller than houses for most people, so I wonder whether you're really comparing apples to apples. Consider that for any given house, rent must cover the owner's mortgage, so it cannot be less than the purchase costs.

> if you're renting you have an extra $X/mo to invest in the stock market.

People usually use the down payment as the capital opportunity cost that you can invest as an alternative to buying a house. My question is this: statistically, how many people actually do it and make better returns than buying a house? It's one thing to talk about it being possible, and another to actually do it. I don't know how to consistently make better returns investing than I've made on my houses, and I'm not sure I have the energy to stay on top of it every month. Note your suggestion to invest instead of rent involves monthly adjustments of your investments.

it is possible to make a guess at the monetary value of these advantages, by comparing the difference between the cost of renting vs cost of owning (including cost of capital). Of course, the value of owning is different between different people (some might prefer renting due to the flexibility of moving at a moments' notice for example).

And in fact, if it turns out that owning is lower cost in total (even taking into account the cost of capital), then it would make a lot of sense to buy! And in some areas, this is definitely true.