One thing that drives me a little bit nuts is when people like Patrick point out the 1.36% (or thereabouts) annual increase in real estate prices and come to the conclusion that, ergo, purchasing a house is a generally a bad investment (or, even worse, it’s corollary that it’s better to be in the stock market). This conclusion ignores two important facts: (1) You can borrow money to buy the house, therefore the return on real estate should reflect the ability to use leverage (that is, the return on your equity), and (2) if you get a fixed-rate loan, your “rent” will never increase and you hold an explicit option to put the mortgage back to the financial institution and re-finance at a lower rate if one should become available. Anyone who ignores these two issues simply cannot be taken seriously, in my opinion.
I would argue that at least 50% of the time (assuming normal swings in the real estate market) a person will be financially better off in the long term by purchasing as opposed to renting (assuming that they can comfortably afford the mortgage, of course). Although clearly we’re not in one of those 50% chunks of time right now in SD.
