Those arguments do make some sense when prices are as distorted as they are right now. However, if/when the prices drop back down below the long term trend again the cost of owning the home will be a lot closer to rent. At that point, a homebuyer has an opportunity to control their housing costs.
Here’s an example: I have a friend who bought a home in 1997 for $185k and subsequently refinanced – without taking any money out – when the interest rates dropped to 6%. Not counting his home improvement costs, his PITI (Principle, Interest, Taxes and Insurance) costs are about 30% less than his rent would be on that same house.
Now granted, he did put in a $15k downpayment, but the point remains – it’s now cheaper for him to stay in his 2-story house 4bd/3ba house than it is to rent a 3bd apartment of similar age and half the size. That leverage will increase as the long term trend progresses, and will jump when the mortgage is finally paid off. Prop 13 will continue to limit his property taxes to whatever the present value of $2,500/year is in perpetuity. The feds could do away with the mortgage interest exemptions and he’d still be way ahead.
Besides that, there is the opportunity to leave an inheritable estate, which would be of tremendous economic benefit to the heirs if it passes in one piece.
