Not everything is a purely financial decision. A home is primarily a place to live, not an investment opportunity.
Property tax isn’t voluntary and as exogenous as a landlord. (Also eminent domain, to say nothing of most peoples’ mortgages.)
> Not everything is a purely financial decision
Making the largest leveraged purchase of your life for an emotional comfort object is irrational. That doesn’t make it wrong. But it ceases to be a policy concern. (I might feel secure having a Fabergé egg in my possession, that doesn’t mean the public needs to give a shit about it.)
The reason home ownership is a public priority is various and I agree with it as a goal. But it’s a bad financial decision for many people, and there is legitimacy to questioning if we can duplicate the forced-saving and civic engagement benefits more simply.
Wants are infinite.
Home ownership is effectively enshrined as a value in most economies. The emotion is part of society’s design. Conforming to this incentive or belief is not unusually irrational,
Agree. But if that feeling of security is all it’s about, it’s still irrational. Even if it’s conditioned and thus common.
If you’re buying a home to feel good about yourself, you’re making a financially ruinous decision.
Anywhere that gives a delinquent property owner years also tends to have strong tenant protections.
This entire discussion is as it's ignoring mortgages, where the entire security argument for homeownership breaks down beyond being an emotional comfort object.
Homeownership is statistically more secure because home owners are richer. The home doesn't make a homeowner more secure, their wealth does. Remove the wealth effect and homeowners are about as precariously perched as renters. In the past decades, home-price appreciation contributed significantly to that wealth. Someone making the smae purchase today is less likely to similarly benefit. Particularly if they're conceding they're making a bad financial decision for emotional reasons.
How so? I just showed that’s not true for evictions due to non-payment, at least for the property taxes issue you raised. When it comes to mortgages vs rent, maybe they’re similar risk, but in that case, the mortgage is not riskier, so the benefits of a house seem worth it, especially considering that as long as you keep up the payments, you are highly likely to eventually get your money back with a house, and 100% guaranteed to lose all your rent.
> In the past decades, home-price appreciation contributed significantly to that wealth.
Right, home ownership has historically been a vehicle for wealth building.
> Someone making the smae purchase today is less likely to similarly benefit.
Why’s that? Are you assuming that real estate inflation might slow down, but the market won’t?
A house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return. People who paid $200k down payment on a $1M house in 2019 can sell today for $1.5M and walk away with more than double their money, or around 4x the profit that someone who invested the $200k in the stock market and got the same (incredibly good) returns.
I don’t agree that buying a house is a bad financial decision, how do you justify that claim? There is certainly a distribution of outcomes, but on average I think most people profit from buying a house… especially when you compare it to paying rent.
We’re at record price to income levels amidst a stable versus growing population. (Note: I own a home.)
> house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return
Crazy how 2006 this pitch is. (Together with the “you are highly likely to eventually get your money back with a house.” Maybe we need a housing recession, both so people can buy in and others reminded there is no free lunch.)
Jesus, that’s a bit dark. Getting your money back from the sale of something you owned isn’t a free lunch. It’s just 100% better than dropping most of your money into a hole called rent, and never owning anything, and being beholden to landlords.
If my argument is too old and hasn’t adapted to the 2024 economy, which is entirely possible, then show me what it takes to do better than buying $420k a house on a $75 income with $84k in savings. (I’m just picking the “median” numbers from the article.) A 2-bedroom apartment where I live is anywhere from $2500 to $4k, so let’s say $36k/year in rent. Rent is much higher than this in SF or NYC of course. How long do you have to rent for the interest on $84k in ETFs to cover $36k/year in rent, assuming your rent doesn’t go up?
Edit: I’m not certain that did the calculation correctly, but it looks to me like on a 5% market return it would take 69 years for an $84k investment to break even against $36k in rent.
You take the difference between rent and ownership costs, not just the down payment, leverage that (2x max), and calculate the difference. The Times has a good tool for this [1]. (It doesn’t lever. Securities-based loans are almost always cheaper than mortgages.)
The sucker in the present math is the individual, aspirational, emotionally-motivated buyer. The winner, the sellers and first-lien lenders.
> assuming your rent doesn’t go up?
I’d actually argue this is what most people pay for with homeownership. You may become a bit poorer, but your future is more certain. If you’re savvy you can use that certainty to take more risk in other parts of your life. Buying a home, for most Americans, is buying insurance. The problem is few see it that way, which is pretty great for the real estate industry.
[1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
I don’t know why it would be any other way; the landlord has to pay a mortgage or purchase price, and the rent must be higher than that. The mortgage and TCO costs of the property plus some profit for the landlord are what renters pay.
Landlord is locked in. (They also have search, turnover and collection costs.) Tenant has flexibility. Sometimes the landlord makes money, sometimes they don't. Nothing guarantees them a return. (Ask a real-estate agent about buying an investment property. The pitch almost always turns on price appreciation.)
I’m not saying buying never works for the buyer. (It looks like it might work where you are.) Just that most people buying today are transferring wealth away from themselves in exchange for emotional comfort.
The notion that leasing is pissing money away is a deeply-flawed and probably-wrong theory. It’s also somewhat uniquely American (and British) middle class, which makes me suspicious about its origins.
The thing that would stop me from buying right now isn’t the price, it’s the interest rate. Also one method for dramatically reducing TCO of a house without increasing the monthly payments by that much is to finance with a shorter term loan. It’s harder to get rent to win when financing with a 15 year loan.
And it’s way harder to get rent to win without the opportunity cost, especially when comparing apples to apples on space. I feel like you’re mostly talking about what’s possible but not what’s likely. You might be able to come out ahead renting but I think most people won’t. Most people at the edge of buying a house aren’t going to invest if they decide to rent instead. The choice doesn’t seem to play out as buy vs rent+invest, but more often just buy vs rent. When the choice is buy vs rent, and renting isn’t offset by investing, then it really is pissing money away, transferring wealth away faster than if they bought a house.
Sure. In the same way self insuring is generally a mistake, even if you're wealthy, because most of us don't have the discipline to hold that liquidity hostage continuously. The forced-saving benefit of homeownership is real. I simply ponder whether it (and the increased civic engagement ownership brings) can be replicated some other way.
So FWIW after sleeping and thinking about it, I might be coming around to what you were saying, that buying at high prices and high interest might not be a great financial decision right now. My today thinking is that this whole discussion was perhaps not really about buying vs renting, it was mostly about financing and the often obscured total cost of a loan. I guess if we were talking about paying cash for a house, the calculus vs renting is completely different. I’ve been lucky with my houses and I shouldn’t assume everyone will be as lucky. I did realize a couple of funny ways to frame things. Buying a house might let you leverage your down payment, but a loan is also bank leverage against you, since you will eventually pay back 2x-3x the loan amount. Or another way of putting it is that when I buy a house with a loan, I’m renting the money to buy the house. :P
No you don't. Property taxes are not incident on renters.
Extreme example in California
https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-ren...
Not all taxes are passed on to consumers
https://en.m.wikipedia.org/wiki/Tax_incidence
Edit: ok it looks like you're editing your comment to change what you had earlier. So I'll just leave you with a ton of reading on this exact topic https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
I edited before you replied, and just clarified. I didn’t change my point at all.
Making 4% in rent isn't great when the mortgage interest is 6%. The difference is made up out of the landlord's pocket, and they gamble on capital gains to make up the shortfall (or rising rents vs a mostly fixed mortgage expenses)
In the very long run, yes. In the medium term, as in decades, home-price appreciation has let landlords in several markets run at a loss and rely entirely on capital gains for profits.
I live in the UK. I have to pay the same rate of council tax for the property whether I own it or rent it.
However that’s completely beside the point: my council tax isn’t suddenly going to double overnight because a single person decided they can extract more money.
> Making the largest leveraged purchase of your life for an emotional comfort object is irrational
You are completely missing the point. A place to live that is truly your own is not like buying some luxury good.
I could buy your argument were it about buying a mansion vs a small family home, but the article is about people being unable to buy any home.
Yes, the housing association absolutely can tell you not to remodel your bathroom. Unless you literally own a house rather than an appartment, you really don't have a lot more rights than a renter would have.
I am speaking as a Finnish homeowner.
Firstly I am legitimately surprised that Finland has HOAs. I had always assumed they were a largely American construct (I’m British).
Secondly I was absolutely talking about owning a house rather than an apartment. I feel an apartment is a slightly different situation by virtue of being an inherently shared space.
That said, I still it baffling that someone would try to exert control over what you do with the inside of your own home.
The Finnish HOAs are a uniquely Finnish construct. They are in many ways different from the American HOAs, even though the name is the same.
> That said, I still it baffling that someone would try to exert control over what you do with the inside of your own home.
In the Finnish system, as a "homeowner" in a HOA, you actually don't own things such as... the walls inside your apartment. The HOA owns the walls. You own a piece of the HOA and the right to live inside the walls. But if you want to fix damage inside the walls, for example, you need the HOA to do that, because they own the walls.
First thing I did when I bought a house was smash a nail in the wall and hang a picture. Well I guess the second, I ripped down walls and painted first.
The direct translation would be "house company", but that sounds wrong.
I am always shocked at how many people simply don't understand this.
For example: no matter how many index funds I buy, I will still have to find a landlord who allows pets in their home if the current landlord decides to kick me out for a better tenant (whatever that means for them).
I don't have to deal with that in my own home. My home, my rules. And this is worth more to me than knowing I optimized my investment portfolio.
Human dignity has value. Shelter security has value. Knowing that you won't be moving in the next few months has value. But the value of these things cannot be measured in dollars.
One of happiest countries in the world - Switzerland, has minimal home ownership, people simply focus on more important matters in life (and rules and their actual enforcement are on next 10 levels compared to general US, yet nobody does biggest financial move in their lives based on those).
In this thread, I mostly see young folks frustrated that their easy investment chance evaporated, although it was never actually easy but people owned and desired to own radically less in the past. A bit of greed, a bit of FOMO, a bit of emotions described above. And an intense sense that a big, well-located house (not an apartment, hell no) is not everybody's right, but their basic human right enforced by some Geneva convention and UN forces. They will happily accept brutal communism with whatever else it brings just that they can get it too.
Or its one of those few topics where HN really isn't the best place to look for balanced opinions. I get it, I would maybe feel the same if I was in such situation bound with such mindset.
Its physically impossible to satisfy everybody who wants that, we don't (yet) build cities in 3D with this in mind. Such demand will literally every single time outstrip supply unless given society is in deep demographic spiral.
There used to be times when people thought about buying houses when they reached cca 40. Worked their way to it, patiently. These days, 30 year old will complain to you how world is unfair since he already doesn't have it all since he wants to retire at 50. Or how they are priced out of some great place since almost everybody wants to live there too, including boss of his boss of his boss. Working class was priced out places like Manhattan maybe 50 years ago in much higher numbers, and nobody bat an eye.
I am not sure that is the case. Or at least there is no natural law that would mandate this. And why is it less of a problem in say, India? In India, big cities see massive growth in terms of number of livable units built. They don't have the NIMBY culture of the US or the oppressive zoning restrictions, and many more people can aspire to own a flat by the time they are in the late 30s or 40s.
I think most people people would be fine if they knew they would be afford to buy in their 40s. But I don't see that happening for a lot more of the Zoomer generation.
I always wanted to build a home gym and have a workshop, I have these things now, I never could before, I'm happier now than I was before, it was something I really wanted to do with my life, rent doesn't allow you to do those things, most of the time anyway.
This kind of reductionism where everything boils down to financials is exactly how we ended up in this mess to start with. Maybe we shouldn't have structured everything around that because ... people just want a house to live in.
You can have a place to live without buying.
Your comment is malplaced.
As many others also told GGP, you cannot have a place you're certain to live in on your own terms without buying.
So yeah, someone's comment was malplaced, all right... But it wasn't the GP.
Could I make more in an index fund? Sure, probably. But I can’t make a rental into what I want it to be, you are often not even allowed to paint the walls.
I can’t plant a garden in an index fund.
Even if ownership doesn't make sense from a financial standpoint it's still somewhat essential for parents of school age children. Renters can be forced to move on short notice if the landlord declines to renew the lease, like if they're planning to sell or redevelop the property. This instability has a cost that goes beyond financial concerns.
House costs $100k
You buy house with $20k savings and $80k debt
In this example that $80k of debt is called "leverage".
Is this what you mean with your question or did you mean to ask something else?
You have to sell the house, right? So you can only cash in on that leverage when you reverse mortgage or otherwise downsize, right?
(And yes you are also correct it's possible to realize the gains without selling by taking a reverse mortgage.)
Could you explain your line of thought (or back of the envelope math)?
I guess I'm just a bit tired of the messaging that real estate is such a great financial investment. Historically it's better than a lot of options but not even close to the best investment vehicle. Houses are homes first, not money makers, and if we continue to emphasize the latter, we will never solve the housing affordability crisis.
Perhaps you're making an argument that even with leverage, most people would be better off investing in the stock market rather than real estate. And perhaps that is true. But leverage does tip the balance in favor of real estate.
Can you show the calculations you made? I would expect the result to depend a lot on the assumptions you put in, particularly regarding leverage ratio, interest rates, stock market returns, and real estate returns.
It does depend on a lot, but the majority of scenarios you’ll put into rent vs buy calculators, for various places across the country, come out in favor of renting. In expensive areas, dramatically so. When interest rates are high, even moreso.
Let's take a quick look at my current situation as an example. Right now my family spends $2650/mth renting a nice home in the Denver metro area, with an excess of $2-3k/mth that goes into market investments at ~11% annual historical average. An equivalent house would cost us $600,000. Let's ignore the currently bleak housing market (where house prices have fallen ~10% in real dollars over the last 2.5 yrs), and assume your RE returns is a historical +4% annually (past 50 years).
Equation for compound interest at a fixed rate with initial sum: P = P_o * e^ (rt) After 30 years we would have the following equity in our home: P = 600000*e^(.04*30) = 1.99 million
This is with a total monthly mortgage payment of ~$4200 (including taxes and PMI), to have 1.99m at retirement.
Now let’s compare to renting and continuing to invest the money we would have spent on the house into market index funds. Equation for previous month’s interest added to $2k/mth (use excel): P_monthly =[previous month balance]*e^(r*t)+[monthly savings] After 30 years we would have the following equity in our investment account: P_monthly =[previous month balance]*e^(0.11/12*1)+2000 (use excel) = 5.73 million
So I'm paying almost the same (2650 rent + 2k/month), but have more than 3 MILLION DOLLARS MORE at retirement.
This is to say nothing of all the other costs of a mortgage besides loan interest (essentially the cost to get you to the point of buying a home). Throw out $12k in closing costs. Throw out the 10 yrs of opportunity costs putting our savings in a secure HYSA (4.5%) rather than index funds (11%) to afford a $100k down payment. Throw out maintenance ($5-8k annually) and all the time spent maintaining the home (thousands of hours).
You would be more than 3 MILLION DOLLARS wealthier if you continued to rent. The leverage helps you, but that 7% differential in average returns makes it inconsequential. The power of compound interest - it's literally the only way average people have any dream of becoming wealthy.
Homes are terrible investments, relatively speaking. It’s not even close.
Your calculation also obscures what is the interest rate on the loan, which is the most significant component affecting the result. Sure, if you assume a high interest rate (currently baked into the $4200 number I presume), then your result will be that home ownership will look very bad. Whereas if you assume a lower interest rate, you will get a result in the other direction.
I'm not claiming that homes are great investments. And I know that renting is currently cheaper than buying a home (with current interest rates). But I am saying that your calculation isn't making a fair comparison.
It's a basic power law situation. The only real question is WHEN the 11% return will overtake the 4% return. The interest on the 4%-returning loan is a factor, but it's secondary.
If we ignore the interest rate on the loan and simply assume stock market always makes 11% and real estate market always makes 4%, then the situation becomes really simple and is in favor of real estate investing.
Suppose a person has $20k to invest and they are considering putting it as down payment on a house, or investing in the stock market. (Let's ignore future cash flows and how those are invested, just consider the initial investment of $20k.)
Stock market option: $20k with no leverage -> 11% ROI on a $20k investment
Real estate option: $20k of your own money + $80k of the bank's money -> 4% ROI on $100k investment (counting both your money and the loan) -> 20% ROI on $20k investment (counting only your own money)
20% is better than 11%, so if you could get a zero interest loan, then the real estate investment would be much better.
Now, if we assume the interest rate is not 0%, but is instead 4% (same as our expected return), then of course the situation looks bleak.
So the interest on the loan is not a "secondary" factor. It's the most important factor.
I think the main point grandparent in this thread was trying to say that it's very easy to get cheap leverage on a mortgage, and basically impossible to get cheap leverage on stock market investments, and when you put the math on the back of the napkin like this, it becomes clear that the access to leverage can make real estate investing more appealing than stock market investing.
But that's only a tiny piece of the money you will spend on the house and ignoring this will obviously lead you to a false conclusion.
Anyway, you don't have to agree with the numbers. I can link you to articles where Warren Buffet also points out the same thing, but you don't have to believe him either. Or you can Google rent vs buy calculators and do the full picture math yourself, if you're really that interested.
An 11% return will always beat a 4% return eventually, no matter what the initial conditions are. The question is just when.
No, it won't. I already gave you a very simple and easily verifiable scenario where that 4% return will beat that 11% return because of leverage. If you don't even accept that hypothetical, then you must be arguing just for the sake of arguing.
> But that's only a tiny piece of the money you will spend on the house and ignoring this will obviously lead you to a false conclusion.
That simple example was not supposed to be a realistic model of the world. I'm fine expanding the simple example step by step into a fully realistic model of the world. But there's no point going there if you refuse to accept very basic arithmetic facts in the simple example.
>if you refuse to accept very basic arithmetic facts in the simple example
I refuse to accept your assertions because they're simply incorrect. Basic power law math - a higher value exponent will always win, eventually.
>Stock market option: $20k with no leverage -> 11% ROI on a $20k investment
P = P_o * e^(r*t)
P = 20,000 * e^(0.11*t)
>Real estate option: $20k of your own money + $80k of the bank's money -> 4% ROI on $100k investment (counting both your money and the loan)
P = 100,000 * e^(0.04*t)
Set these two equations equal to each other and solve for t. This will give you the number of years the 4% return with a 100k initial investment will beat the 11% return with a 20k initial investment.
20,000 * e^(.04*t) = 100,000 * e^(0.11*t)
t = 23 years. After 40 years, the 11% return has beaten the 4% return by 3.3x
If I'm misinterpreting your "very simple and easily verifiable scenario," please let me know. But I don't think so. Your error is in this statement. I'll leave it to you to figure out why, let me know if you need help! ;P
>(counting both your money and the loan) -> 20% ROI on $20k investment (counting only your own money) 20% is better than 11%,*
I tried to do the math now (independently from your calculations) and I ended up with the number 16 as "years after which the stock market 11% return has beaten the leveraged 4% return". I think your calculation result 23 is different from 16 because it assumes the loan can be kept as "free money" instead of paying it back.
$20.000 * 1.11 ^ 16 - $20.000 ~ $86.218
$100.000 * 1.04 ^ 16 - $100.000 ~ $87.298
However, the flaw in this is that most people don't have the discipline to put excess cash they would have spent on a home into index funds and forego touching that money until retirement.
So a mortgage is a very compelling enforcement mechanism to get average people to save for retirement.
If we're being honest that's a much more powerful reason to buy a home than "leverage."
So suppose you have $100, and you believe a stock will increase by 10% in value, then borrowing $900 and buying $1000 of the stock, will leave you with $1100 if your prediction is true. When you pay off the loan, you'll be left with $200, and you will have doubled your money.
The loan thereby acts as a leverage multiplying the 10% return on investment to in this case a 100% return on investment.
Now imagine that instead of having $100, you have $50k, and instead of borrowing $900, you borrow $450k, and instead of buying stock, you buy a home with the 50k deposit and 450k mortgage. The same applies, the home appreciates 10% to 550k, but your equity increases from $50k to $100k. Again, the mortgage loan acts as a lever.
The difference is that most consumers do not have large and cheap capital available to them, say to borrow $450k to invest in the stock market. But most people do have such opportunities to invest in the real estate market with a mortgage.
Anyway, wether it's a good investment really depends on many factors. The NYT buy or rent calculator is still one of the best sources to get an intuition on what is best for your circumstance. https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
I get how that seems odd if you live in a big city, a multifamily building, etc. -- associations and their problems are ubiquitous there. But it's not the experience of most American homeowners.
Of course there are tons of people who want to buy it, but not for the price you are demanding. You are unrealistic about price.
In a way, I think this exchange illustrates very well the problems with the real estate market and housing.
The problem now is that property buying at scale for the long term is a model private funds are trying, interest rates are going up, and housing supply at the lower end of the scale is constricted because there's no profit building those houses. All of which means people who want to buy a house rather than pay a landlord are basically screwed.
Where I live, rents are often about equivalent to the mortgage + property taxes, plus a little more. In other words, in the house I live in right now, my mortgage + property tax is about $2,500/month. If I were to rent it out, I could likely get $2,600/month for it, possibly up to $3,000.
In this scenario, if you plan on living somewhere permanently, there's not a single way to do the math that it works out that renting ends up being the better choice. Not only do you pay more now, but rent nearly always goes up.
> but there doesn’t seem to be a clear financial advantage to home ownership
Just the simple fact that money paid to rent goes into a black hole whereas money paid towards a mortgage that builds equity should be a clear financial advantage to home ownership.
Opting to rent is insanely short-sighted. Like, even if I could rent the house I'm in right now for $2,000/month ($500 less than the monthly cost of buying), over the next 10+ years, rent will very likely go up over time. And again, that money is just being burnt. When you buy, eventually, you don't have a mortgage anymore.
I think the only way renting ends up working out better is if you live in some crazy place where a mortage+tax is double the monthly cost of renting.
So, in 10/yr I'm still paying $2000/mo while rents have moved to $3200/mo
edit: Seems like Germany has fixed mortgages but makes it hard to refinance.
For the Netherlands: While it differs per bank, legally you're allowed to pay up to 10% of your mortgage extra per year (some banks offer higher rates, I can do 20% for example) without extra costs. When the rate changes (due to going from fixed to variable, or variable with a large change in a year) you're allowed to pay back as much as you want, without extra costs.
If you want to pay back more/faster, the bank calculates a fee ("loss of income due to lost interest payments") that you have to pay, which is still cheaper than just doing your regular payments.
The above statement also applies if you want to refinance if, for example, your home went up in value. They can and will drop your rate but you have to pay a fine. That being said, in the past, when rate drops were really large, you could go to a different bank, have them take over your mortgage pay the fine for you just so they can get you to come to them (though I'm assuming they're no longer so keen on that).
Okay on top of all that, a down payment is 20% of the cost of a house. Buying the house is perhaps a little more like a leveraged loan. If the stock market and real-estate were to both inflate by the same amount, your investment in a house gets you 5x the return that your down payment investment makes. In the mean time, all the money you pay in rent goes down the drain, whereas all the money you pay into the house above the down payment comes back to you when you sell the house. From my point of view, a house seems like a far better investment, when you factor in the rent you lose. And historically home ownership has been the single most important wealth-building tool for the average US citizen.
It is legitimately concerning that the median house price is so high, and the trend is continuing upwards. Some of the fuss is concern over the future potential of a crashing economy, and yes that certainly will give us bigger things to worry about.
Why do you think every person should have an “right” to own property? It’s a nice utopian idea, but that’s not how a capitalist economy works.
If this was the case, then there would be more and more renters, and less and less tenants, so rent would increase, and make homeowning a better financial decision. There's a stable equilibrium there, even taking into account the various taxes involved.
In one case you can sell your property and get your money back, so you can decide to do whatever you want with it (like index fund if you so chose). And in the other it's your landlord who's either paying their mortgage with your money, or placing it in said index fund...
The cost structure of landlords is often very different than the cost structure of new homeowners. They can make a tidy profit charging rent that is significantly lower than your mortgage payment.
If you decide to move, you pay 6% in real estate fees (extortion) to sell / buy. If you rent, the house never changes hands, and hence this fee isn't paid.
Of course reality is nuanced - a friend of mine for example is building out essentially his own apartment in his garage and having his sister pay rent for his house.
I'm still not sure how best to add a "compare buying to renting" feature for the calculator, so any ideas are most welcome!
I My calculations (for Denmark) the property taxes are roughly equivalent to kapital gains tax.
Further, your claim isn't universally true. You could rent for a while, you could downsize to a smaller house, you could move to a location which hasn't experienced as dramatic price growth, or just an overall lower-priced region (i.e. Californians moving to Texas, Nevada, Montana, etc)
Some people prefer the freedom of not being stuck in one place. Super duper. That’s excellent, they prefer renting.
Trying to convince the rest of the world that it is a sound financial decision in lieu of buying a home and establishing equity is where the argument over “renting is better than buying from a financial perspective” falls apart and the absurdities start getting thrown about.
Its heavily market-dependant, but assuming rent expenses = the cost of interest, from a financial perspective they are close to equivalent. If you take the money that would be paying off the mortgage to invest, you should be in a similar financial position at the end.
1-1 compariaons are hard, though, because in practice houses are huge levered bets on a RE market, so they can have huge returns if chosen well. Those are usually the kinds of markets where rents tend to be lower than the mortgage payment, however, so things might net out more even than you'd expect at the end.
But you cannot make even this simple assumption because rent is not tax deductible but mortgage interest usually is.