Here's Simon Johnson at Baseline Scenario putting it more succinctly than I can:
... I’m all for rethinking renting. The key point ... is one that I’ve made to many of my friends thinking of buying houses: buying a house is colossally stupid investment according to the investing textbook, because you are taking on a high degree of leverage and putting more than your net worth not only into a single asset class, but into a single structure on a single piece of land. What makes it sensible, sometimes, are the mortgage interest tax deduction (an extremely regressive subsidy) and the fact that in many places you may want to live there are few viable rental alternatives, so you have to buy.
I think this misses a few key points. First being, in many places the mortgage payments you'd be making would be comparable to rent payments anyway, and you're likely going to get more space, if that matters to you. And if you're going to be spending the money anyway, why not spend it on something that at least has the possibility of making you money in the long run. Something you own.By Jesse, at 7:18 PM
I think the error of the thinking is that it is an investment. A house is a place to live, first and foremost, and barring strange times, owning property is rarely a bad thing.
If I were not in NYC, I'd much rather being paying mortgage payments then rent. Rent vanishes and has zero chance of a return, ever.
Plus with a house you can more easily have fun doing house work, yard work, have pets, etc, without dealing with landlords. Though homeowners associations can be a bit nuts, from what I gather.
The key I think, is not to buy something out of your means, expecting your means to get better, or banking on a house vastly increasing in value.
Rent pays for services in addition to a place to live - specifically, someone to fix stuff when it breaks. I don't like fixing things. And houses break a lot.By Dr. Brazen Hussy, at 7:37 PM