To rent or to buy a house, some more evidence of my unpopular thesis

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I dis­cussed this topic in a pre­vi­ous post http://​blogs.msdn.com/​lu­cabol/​archive/​2004/​07/​30/​202394.aspx and I re­ceived a num­ber of emails telling me how crazy I was even spec­u­lat­ing that, at the cur­rent junc­ture, it may be more con­vinient to rent than to buy a house.

This week The Economist runs a piece where they make the same ex­act claim. House prices are so high and rents are so low all over the world that rent­ing might, in­deed, be bet­ter. Even con­sid­er­ing the low in­ter­est rate en­vi­ron­ment, it would seem that the house prices are out of step with re­al­ity, very much as eq­ui­ties where in the 90’s.

It is all a game of ex­pec­ta­tions. The harder things to es­ti­mate are the fu­ture house price gain and the in­ter­est rate/​gain you can get by in­vest­ing the dif­fer­ence be­tween rent and mort­gage pay­ments. By us­ing dif­fer­ence es­ti­mates, you get dif­fer­ence an­swers. My own opin­ion is that the prob­a­bil­i­ties weight against buy­ing an house at this time. Here is a spread­sheet to help you out: http://​blogs.msdn.com/​lu­cabol/​archive/​2004/​08/​18/​216662.aspx .

There are other con­sid­er­a­tions: I bought a house not to get killed by my wife 🙂 But I’ve been able to limit the ex­pense and I avoided in­vest­ing more money in real es­tate.

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