DLJ,
Everything I hypothesize on is for the typical household living in a nice part of the NCC area. Thus, I’m assuming a typical white collar professional family with one or two well employed people and a HH income of $125,000 to $200,000 (or more). I suspect you might fall into this category or soon will. In this situation the tax savings I used are entirely reasonable.
I think the 5 to 10% for peace of mind is very reasonable. If you are worrying about loss of mobility you should rent and thats why I dont think its relevant.
I went through most of what you covered regarding rent increase in my mind (including a quick and dirty discounted cash flow calculation) and used the 3% to compensate for those factors. The truth is rent will increase more than 3% per anum on a long term basis.
Last and not insignificantly, I purposefully left out appreciation. Assuming you purchase at a reasonable price relative to the cost of renting, the potential for significant appreciation with the benefits of leverage enter the equation again.
IMHO, if someone places only a 20% premium on owning vis a vis renting for whatever combination of the above reasons they probably are better off renting.
