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Comment by hugh3 | Hacker News Reader

Given a market that is in any way sensible, shouldn't buying wind up cheaper than renting over the long run? Landlords don't buy investment property out of the goodness of their heart, they buy investment property because they think that the money they make in rent, plus the capital gain on the property, minus the various maintenance costs etc, should be sufficient to compensate them for tying up hundreds of thousands of dollars in the asset.

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Not necessarily, because there are some effective costs that a homeowner pays that a landlord does not. First, the loss of the ability to move easily. Second, the landlord probably has economies of scale on things like time and money spent on maintenance.

Some markets (Texas?) are sensible in exactly that way. California is not.

Who says the market is sensible? There's a lot of noise out there. Someone buying property not only has to guess that an area will go up in value, but they also have to factor in:

1) inflation rates (higher inflation is much better)

2) tax changes (e.g. the passage of prop 13 in California helped investment property owners greatly)

Well I'd never say the market was sensible at any given place and time, but I think it tends to fluctuate back and forth somewhere around the vicinity of "sensible". If you decide that renting is going to be cheaper than buying for the rest of your life then you're gambling on the assumption that the market stays on one particular side of "sensible" for decades.

You can always switch from renting to buying, it's much harder to go the other way.

How's that? Sell house, sign lease, you're done. Only a problem if you're underwater and I'd strongly advise against buying for anyone in a position where winding up underwater is a strong possibility (ie anyone with less than, say, a 20% deposit).

Even if you aren't underwater, it still sucks to lose a quarter of your down payment because the value of your home dropped 5% in a year.

Also, you lose 6% total from real estate commissions; consequently, it is much harder to move between owned homes and rented ones.

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