This calculator has been around for a while, but they keep improving it and I recommend it all the time. It is surprisingly feature-rich – what do you guys think?
Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn’t buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.
You’re looking at it the exact right way. Risk is a two sided-coin. If the local housing market does well, you can make out like a bandit. If it doesn’t, you can lose a lot of money.
No different than owning $500K worth of share in a public company.
Nothing wrong with buying a house, but people should be careful not to have their net worth all tied up in a single asset (house or not). The one rule I’ve heard is 90 minus your age. When you’re young is OK to have a high percentage of your net worth in a house, but not when you’re getting close to retirement. Too risky.
Strange that they buried the most important factor way down at the bottom of the 3rd page of “Advanced” options.
At its core, the whole rent vs buy economic decision boils down to comparing your expected returns investing in the housing market to your expected returns investing in the market in general. The rest of the factors in that calculator are just there to help you arrive at the conversion factor.
Since it’s pretty much impossible to determine what the stock market and housing markets are going to do, it’s probably best to base your home buying decision on something more rational. Such as “Do I want to own a house?”
For me, the answer to that question is quickly arrived at by asking a few of your homeowner friends what they did last weekend, and what they plan to do next weekend. The answer will invariably revolve around some form of maintenance on the house.
Like it or not, buying a house gives you a new full-time hobby. Lots of people like that hobby, and that’s why they have houses. If gardening and cleaning gutters don’t sound like fun to you, there are plenty of other ways to invest your money that are less hands-on.
Are there any alternatives to it, does anyone know?