It's the same as saying you don't NEED to go to college. No, you don't. You don't need much of anything... But if you did go to college - whether through correlation or causation - statistically you are much better off.
So if college and housing get out of reach for most people - then maybe they will be worse off.
Who knows? Maybe it is all correlation and no causation.
[citation needed]
Per the The Credit Suisse Global Investment Returns Yearbook 2018, the global return for real estate from 1900 to 2017 was 1.3%, while stocks returns 5.2%:
* https://www.credit-suisse.com/media/assets/corporate/docs/ab...
Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video:
* https://www.youtube.com/watch?v=KAMeI4uHAFE
He rents:
* https://www.speakers.ca/2013/10/preet-banerjee-sold-his-hous...
If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start:
* https://www.youtube.com/watch?v=q9Golcxjpi8
* https://www.youtube.com/watch?v=Uwl3-jBNEd4
Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision though:
You also have to factor in that it's a hedge against inflation on rent, and that part of your rent payment is going to principal, and that your mortgage interest is tax deductible.
If you think the average return for the S&P 500 unleveraged beats owning a PRIMARY RESIDENCE on 5:1 leverage, when your marginal tax rate is 45%, and interest rates are 2.7% on a 30-year fixed... I guess time will tell, but it is INCREDIBLY unlikely.
Leveraging in stocks:
it's not the purchase of the home that made you better off financially, but the ability to purchase a home.
If you had that ability, investing in another asset at the same leverage level (such as shares) would net you even more financial income (obviously, its higher risk).
This sounds like Reddit "live in your Mom's basement to save on rent" type financial advice. It doesn't work if you have to use that money to pay rent. Rents tend to be about the same or more than a mortgage. If you happen to live in an area where rents are considerably lower than a mortgage than this is an outside possibility, but this also depends on your rents not skyrocketing over the course of 30 years. One of the great things about 30 year fixed loans is that they allow you to ride out market insanity.
This is the dirty little secret of these housing bubbles. It's mostly the poor who get seriously burned, because people with money have mortgages. They don't have to find a way to pay a rent that increased 40% this year. In fact many of the people are the landlords who are enjoying a massive windfall thanks to the housing crisis. They have an incentive to make sure it continues.
For instance, after paying off a mortgage entirely, my housing costs will be effectively repairs, property tax and utilities. That's a tiny fraction of rent. Meanwhile over 25 years property prices have more than tripled so it's likely the renter's rent would have gone from $1500/month to $4500/month or so. If you have $7000/month for both cost of living and savings then putting $5500/month into whatever assets you choose now that your home is paid off is going to generate much better returns than putting $2500/month into whatever asset you choose after paying off your inflated rent.
Alternatively, you can buy the home purely as an investment rather than a place to live. In this case, you have rental costs either way but you don't just make the capital gains on the home you also make rental income from renting it out. Typically rental income can be around 6% of property value. If you add that to the 7.5% returns to property YoY since 2001 you get 13.5% returns. You will have some expenses to deduct from that so your net returns might end up around 11%. That's still demolishing the stock market returns.
no, if you paid off the mortgage, then the cost of your "rent" is just the cost of the capital sitting in the house (plus those maintenance costs you mentioned).
There's no such thing as free living. it is possible that rent is more expensive - but over time, this ought to normalize, as expensive rent will incentivize build-to-rent and arbitrage the difference to make a profit.
At most the portion of the rent I get from my capital is the difference between deploying the capital in the market and the return to housing. Since housing has historically beat the market that suggests a zero or negative rent for investing in housing.
this is not true unless you only start counting from the past 10-20 years, and only include regions that _did_ beat the market, rather than globally.
Owning a home isn't just an investment, it's QoL.
Renting is shit, and raising kids in rented space is shit too. If someone moderately cares about their QoL and isn't enamoured with the idea of popping kids not having their own place won't help with deciding to make kids.
But so what? Nothing in your comment is relevant to inflation calculations.
What wisdom does this argument lead us to - basic hygene and human right are superfluous?
The argument put forward previously was 'people were starting families without X, therefore people not having X isn't a problem', where X was a house.
I was trying to demonstrate that no matter what you substitute for X, even something extreme like basic human rights, people were still starting families, therefore either we should not be concerned about anything, or the argument is flawed.
Also many people were rendered homeless or pushed into poverty by the current housing crisis, and I am sure those folks find the argument proposed above offensive and inflammatory.