$4960 per square foot. What a deal! At least you could go to Harrod’s regularly.
Does Renting Make Sense?
The Get Rich Slowly blog today has a post questioning the conventional wisdom about home ownership that’s worth a read. As I think about some of the major urban challenges this country faces, it’s clear that the “rootedness” that home-ownership fosters has some significant downsides to weigh against the benefits.
In many major cities (Detroit comes to mind) if people were less financially tied to their homes, moving to a place where they are better suited to the economic environment becomes more feasible. Of course, this would benefit some cities to the detriment of others, but why should “place” be the primary concern over people?
GRS looks at the pros and cons of home ownership and, at the very least, provides a much murkier picture than your local Realtor might about the decision:
The housing industry is huge, and it spends a lot of time propagating certain myths about homeownership, myths like:
- If you rent, you’re throwing your money away.
- Owning your home is a forced savings plan.
- Home ownership is a path to wealth.
My own research shows that over the long term, housing prices (and gold prices) barely outpace inflation. In fact, since 1926, home prices (and gold prices) have returned about one percent above the inflation rate. That’s hardly a good investment. (Stocks have averaged about 6.8% above inflation!)
There’s no question that buying a house makes sense for some folks, but mainly for non-financial reasons. Owning a home gives you stability (you’re not at the mercy of a landlord) and freedom (you can do what you want with the place). But financially, it’s not usually the best bet. (It’s true that you build equity, but you do so at a very high cost.)
I guess the question is whether rational economic thinking like this can overcome the emotional power of the American Dream.
