This is not true in most of the formerly booming real estate markets in the U.S. My coworker just bought a condo for $500K in Boston. At 6%, his interest payments are $30K/year, or $2500/month. My friends are renting a similar place for $2200/month.
I've heard it's worse in California, eg. people paying $3500/month in mortgage payments for houses that rent for $2000 or so. The recent Businessweek article on Merced mentioned homes with $3400/month that the owners walked away from, then out-of-state speculators bought it at a foreclosure auction and are now renting it back to the original owners for $1200/month.
> The interest rate for a mortgage right now is a few % points below what the stock market has returned, on average, over the last 50 years.
First rule of finance: any truly risk-free profit opportunities will be arbitraged away as soon as large numbers of people become aware of them.
That's exactly what happened in the 1990s. People suddenly realized that the stock market, on average, returned higher rates than a 30-year mortgage, so they took out mortgages and invested it in the stock market. As a result, the stock market quadrupled between 1995 and 2000. Then they pulled it out of the stock market and back into real estate between between 2001 and 2005.
It's highly unlikely that stock market returns over the next 50 years will match those of the previous 50 years, even with the cratering of the real-estate market.
Of course we can't expect every decade to be like the 90's, but I think it is a reasonable expectation that the 200-year trend will continue barring a kurzweillian singularity or other freakish phenomena.
Why? Stock market rises tend to be linked to technological advances. We are pretty close to some significant technological breakthroughs and these will only accelerate over the next 50 years.
Consider, for example, that within 15 years, it should be cheap and practical to use solar panels for almost everything. Consider robotics and the way robots will radicalize many industries as much as industrial robots have revolutionized factories, etc.
Here it's about 3.5%-4% for a normal family house and 4%-5% for a flat.
*Interest rates are about 8%
Of course the cost of renting vs buying is different depending where you go.
A mortgage is basically borrowing money with which to make more money. Your mortgage payment on a place is generally not much more than your rent payment would be, and it's tax deductible and, over time, builds equity.
You can't save with the same commitment while paying rent because you have to pay rent.