I assume you mean adjusted for inflation here? Even then that hasn't been true.

The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house. So the returns from that downpayment you instead invested need to make up for the monthly loss in rent, plus the lack of an asset at the end of the process.

It's not a small difference either. My current mortgage is $1250/month for a single family home. 13 years ago when I was renting the rates started at $1600/month for a tiny studio apartment unless you were willing to commute an hour each way. Rents have gone up in the meantime. You need to be making some baller returns on your downpayment if you're going to beat that.

This comparison isn't entirely fair because the rental unit also included maintenance and groundskeeping. In my house I have to do all that work myself or hire someone. However, in the rental unit I had to pay for the utilities. This is a problem because the landlord will never replace something like an AC unit or a refrigerator with anything but the absolute cheapest and most expensive to run model. In my house when I replace it I have the option of buying the high efficiency model and enjoying the cost savings over the life of the unit. Plus when something breaks in my home I just fix it or go out immediately and hire someone to fix it. In the apartment you have to contact the landlord who then sits on it for two weeks before contacting his maintenance guy who only comes by once every couple of weeks to look at it and then order the part so maybe he can fix it on his next visit. In the meantime I'm freezing my ass off with no heat for all of January. I don't miss renting at all.

That statement is very location specific.[1] In SF, it's cheaper to rent than to buy (on a monthly basis) and because of rent control, it's often cheaper to rent versus buy over your lifetime.

In SF, it costs ~$1,000 to rent what would cost $600,000 to buy. In Cleveland, it cost ~$1,000 to rent what would cost $100,000 to buy.

Obviously very different outcomes if you rent versus buy in each city.

https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...

These and other reasons contribute to why rental costs and TCO for residential properties are not in lock-step.

So the real answer is (unsurprisingly) "it depends". Sometimes you are better off financially to rent, sometimes to buy - very dependent on location, dwelling needs, frequency of moving, etc. In the USA the balance is often tipped towards buying by tax incentives, which are politically if not economically popular.

I used the numbers from here: https://economics.harvard.edu/files/economics/files/ms28533....

Specifically in section IIIA

"The stylized fact from the studies on long-run housing capital appreciation is that over long horizons, house prices only grow a little faster than the consumer price index"

> The problem with renting is that you're still paying the mortgage, only in the renting case you're also paying the middleman who then pays the mortgage. This is why rent per month is higher than mortgage per month for the same house. So the returns from that downpayment you instead invested need to make up for the monthly loss in rent, plus the lack of an asset at the end of the process.

Right, but the down payment ends up compounding to greater than the value of the entire home at the end of the 30 years and the difference is significant enough to cover (rent - mortgage)

> This comparison isn't entirely fair because the rental unit also included maintenance and groundskeeping. In my house I have to do all that work myself or hire someone. However, in the rental unit I had to pay for the utilities. This is a problem because the landlord will never replace something like an AC unit or a refrigerator with anything but the absolute cheapest and most expensive to run model. In my house when I replace it I have the option of buying the high efficiency model and enjoying the cost savings over the life of the unit. Plus when something breaks in my home I just fix it or go out immediately and hire someone to fix it. In the apartment you have to contact the landlord who then sits on it for two weeks before contacting his maintenance guy who only comes by once every couple of weeks to look at it and then order the part so maybe he can fix it on his next visit. In the meantime I'm freezing my ass off with no heat for all of January. I don't miss renting at all.

I completely agree. The thing I actually really wanted to buy a house because I want a grand piano and to not have to worry about moving it. Sadly at least from my own calculations I just can't justify it.

Perhaps I should take your idea and use it myself =D

To cherry-pick in the other direction, if you could either buy or rent starting in 1980 or so, in 30 years you'd see ~7x return (no inflation adjustment). There are homes you could buy in 1980 that would exceed that, but not very many places, and it's tricky to know what those are without hindsight. (Investing is pretty easy in hindsight, in general.)

To the extent that the stock market is modeled by an exponential curve, it has deviations from that curve on the order of your entire working lifespan.

Discussions about the utility of the stock market for retirement revolve around you investing in it continuously. In that chart, even though a point investment in 1960 may not turn out well, the money someone is putting in every year will start to do pretty well in the 1980s. The analysis around buying in a bit every year is different, but in the previous paragraphs, I'm talking about a point-in-time investment of a particular sum, so we can just follow the chart across. If you can finagle a rent that is significant lower than a mortgage, then you can also include in your model putting that difference into the market. (Though, for that to be "valid", note you actually have to, you know, do that.) But while rents and mortgages tend to be close to each other for various reasons, at different times and places they trade off which is more expensive, so that's not an assumption you're justified with in the general case.

So if you've got a mortgage cheaper than rent in 1960, you're going to pretty handily beat the guy investing in 1960 for quite a span of time. If you can get rent cheaper than a mortgage in 1980, and invest the difference over time as well, you're going to handily beat the guy buying the house.

What about if you buy a house, say, right now? Well... that's the million dollar question, isn't it?

[1]: https://www.macrotrends.net/1319/dow-jones-100-year-historic...

It's not that simple of course, because there are many other concerns like property taxes, insurance, maintenance, renovations/upgrades, furnishings, etc... But the idea that you have to lock away a massive down payment into a non compounding asset isn't necessarily true.

In my calculations I found a home to be slightly more expensive than renting when taking everything into account. But it's a huge lifestyle upgrade for some people, myself included.

Would the difference between rent vs buy be enough to draw down at what is considered a safe rate of 4% to pay for some place to stay - ie if you could save $1000/month by renting instead of having a paid off house would you be able to have an extra $300,000 (12000/.04)?

Of course, this is varies a bit depending on the numbers involved.