[erikbern]

I don't really buy this argument that you can rent and pay $1000/month, or you can buy an equivalent home and pay $1000/month, but now you can deduct interest rate and build equity.

Landlords can also deduct their interest expenses and so they benefit from leverage too (meaning they don't want to build up equity).

In a reasonably efficient market, this means that the equivalent cost of homeownership would be higher than rent, to offset these things (the rate at which you're paying down the principal, and the deductability of interest rate expenses). This is obviously a very simplified argument, and there's a lot of other factors going into this.

[Izkata]

> I don't really buy this argument that you can rent and pay $1000/month, or you can buy an equivalent home and pay $1000/month, but now you can deduct interest rate and build equity.

Back in 2013 I was renting an apartment for $1600/month, but my dad made me do the math and I ended up buying a condo about 10 minutes walk away, larger and far higher quality everything and the mortgage was only around $800/month. Even with the monthly assessment fee (for the management company to handle the property and facilities) it was lower than what I was renting for. Just had to get over the down-payment hump.

[fnordpiglet]

I don’t think this is right. An efficient market the costs are equal. I think you meant this - if you fully load the economic story the cost of ownership and renting should be equal. It’s true though that markets are rarely ideally priced. The ideal price is a mean reversion target but can randomly diverge due to a ton of other idiosyncratic factors. In fact housing prices and rents are rarely in balance. They just tend towards each other.