I find this logic shortsighted and I don't think the right chapter of math is being applied. You need the probability theory not calculus.
Yes, renting is often better than owning on average. However, as any good poker player knows, having a positive strategy on average is nothing unless you control the standard deviation. You need to have reserves deep enough and to be able to play long enough for your average to consistently manifest itself.
In lifetime investment choices the human lifespan is the major limitation. You won't be able to live long enough to absorb multiple economical collapses and surges — which indeed had always been profitable in the end, just not necessarily for you. You draw your card and you play your hand. In such circumstances a strategy with less gains but also less variability is usually preferable.
A good analogy is insurance: having insurance is always worse on average than not having one, otherwise insurance companies won't exist. Buying insurance for something small, some loss you can absorb yourself, like your phone or bicycle, is in most cases a bad idea. However, buying insurance for your house or your health is usually a good deal. You pay money to tap into reserves that are bigger than yours, you get slightly negative mean expectation with near-zero variance. Even the insurance companies themselves do it when they judge their reserves are not deep enough for a given contract — and resell parts of it to other companies to spread the load.
I understand probability theories but I don't see how this applies here. I don't see either how the insurance concept applies for housing? There is a healthy rental market that will always exist, Are you arguing that you might get priced out and therefore you should buy (even if overpriced) to avoid that potential issue?
Both housing and stocks will go down during an economical collapse. They are both correlated. You can actually make a point that housing being a highly leveraged asset is way worse during a downturn than being long on stocks.
Stocks, deposits and currencies can all crash to zero while your primary residence never goes below the value of housing your spouse and kids (which is pretty damn high as far as I'm concerned). Some rental market will exist almost always but that's not necessarily true for your job and your savings.
My parents lived through times like this and so will my descendants eventually. The probability of this happening to my generation is low but non-negligeable so I find it necessary to hedge against.
your house is never truly yours. What happens if you stop paying taxes and HOA for example? You can never fully hedge against everything, live with it.
There are no certainty in life and thinking that a house is yours forever is an illusion.
Nothing is certain of course, but I estimate the probability of someone taking your house to be significantly lower than the probability of someone taking your savings and stocks. Therefore I prefer to have at least one permanent residence at all times.
I base my estimation of probabilities on the crises I either saw myself or know well from the past. To add to the picture, the majority of stocks I've bought prior to 2022 are frozen with a chance of me never seeing them again. I'm rather glad that at the time I've had enough alternative assets to be able to relocate my family to another country and provide consistent quality of life throughout the whole process.
So yes, I can't fully hedge against everything but I see no reason not to hedge against the things I can.
Yes, renting is often better than owning on average. However, as any good poker player knows, having a positive strategy on average is nothing unless you control the standard deviation. You need to have reserves deep enough and to be able to play long enough for your average to consistently manifest itself.
In lifetime investment choices the human lifespan is the major limitation. You won't be able to live long enough to absorb multiple economical collapses and surges — which indeed had always been profitable in the end, just not necessarily for you. You draw your card and you play your hand. In such circumstances a strategy with less gains but also less variability is usually preferable.
A good analogy is insurance: having insurance is always worse on average than not having one, otherwise insurance companies won't exist. Buying insurance for something small, some loss you can absorb yourself, like your phone or bicycle, is in most cases a bad idea. However, buying insurance for your house or your health is usually a good deal. You pay money to tap into reserves that are bigger than yours, you get slightly negative mean expectation with near-zero variance. Even the insurance companies themselves do it when they judge their reserves are not deep enough for a given contract — and resell parts of it to other companies to spread the load.