To make your original scheme work (investment earnings pay for rental costs), you investments are de facto illiquid, otherwise you have no way to pay for housing without breaking from the scheme. You also need to make more from your investments than renting currently costs because over time rental prices are likely to go up and your investment return will need to increase.
You are right that property ownership is more illiquid, but supposing I had a million dollars invested making me a better than 4.5% return, why would I pay rent when I could just buy a house with that money instead? At the end of the mortgage period I'd have my original investment plus ownership of real property, while the renter would only have their investment dollars and would have to continue the investment-for-housing scheme for the rest of their life.
> First, given a neutral market,
This is a false assumption as markets are almost never neutral. It's impossible to be a market oracle, but historic trends show a general upwards movement in most well functioning economies. It's a better than chance bet that most markets are thus net positive. You are correct though that nothing guarantees this upward trend.
The New York Times calculator is pretty good, but misses the simple fact that you need to live somewhere forever and not just for the period of a mortgage. Thus any comparison should be made with how long you expect to live.
The picture is very clear, you will likely need housing longer than 10-15 years, and if that's true, then buying property nearly always wins over renting.
You are right that property ownership is more illiquid, but supposing I had a million dollars invested making me a better than 4.5% return, why would I pay rent when I could just buy a house with that money instead? At the end of the mortgage period I'd have my original investment plus ownership of real property, while the renter would only have their investment dollars and would have to continue the investment-for-housing scheme for the rest of their life.
> First, given a neutral market,
This is a false assumption as markets are almost never neutral. It's impossible to be a market oracle, but historic trends show a general upwards movement in most well functioning economies. It's a better than chance bet that most markets are thus net positive. You are correct though that nothing guarantees this upward trend.
The New York Times calculator is pretty good, but misses the simple fact that you need to live somewhere forever and not just for the period of a mortgage. Thus any comparison should be made with how long you expect to live.
The picture is very clear, you will likely need housing longer than 10-15 years, and if that's true, then buying property nearly always wins over renting.