One argument against buying is this:
I'll personalize it. A 65 year old baby boomer just argued to me and my wife that we should buy a house because "it's the best time in history to buy." And the counterargument that sprung to my mind was just to evaluate his own success with owning. (I didn't say this out loud, just thought it.)
He has been making mortgage payments for most of his life. Maybe a few years of renting here and there, but mostly mortgage payments over the past 40 years or so. The longest mortgages are 30 years. And nominal housing prices have soared over this period. So in theory, most people his age should own their house outright by now. But no. In fact, he just refinanced his current house, in which he has about 10-15% equity, into a new 30-year mortgage, on which he will be paying until he is 95!
Somehow, the power of "owning" did not work for him. And he is far from alone. The average % of equity people have in their houses is very small compared to history. Now, he has his own issues, and we can blame a lot of this on general baby boomer profligacy and we can also blame a lot of this on the big housing bubble.
But, the facts are quite shocking. If ownership is such a good deal, 40 years of payments and a tailwind of huge nominal appreciation of house prices over the past 4 decades should have made it incredibly easy for people to own their houses outright. And yet millions and millions of people who benefitted from these tailwinds and made huge payments over very long periods of time did not benefit. And that's before considering the opportunity cost. If they could have saved just $100 a month by renting instead of owning, and invested that over the last 40 years, they'd all be millionaires.
So, what went wrong? I think several things:
1) these bad outcomes are from situations where people borrow from banks. Buying outright saves tons of money in interest payments to banks. If you buy a $200,000 with a mortgage and pay it over 30 years, even with 20% down, you could easily pay twice the purchase price in payments (even more in previous higher interest rate eras). So, even with the opportunity cost, buying outright could be great, but borrowing money you couldn't save and paying a lifetime of interest to a bank creates a big headwind for any "investment."
2) The housing bubble obviously hurt people. Most people who bought anything between 2003-2008 have seen significant losses in equity.
3) The trade up mentality. If over a lifetime people continued to reinvest housing gains in bigger and bigger houses, they never got the benefit of paying off that first house and living rent free in it. They would argue that they captured their investment benefits in a steadily rising lifestyle in successively bigger and better houses. Which is somewhat true. But the problem is that it means that many people who "owned" all along still effectively became new leveraged buyers of big houses in recent (high-priced) years.
4) The way mortgages amortize. The principal paydown is backloaded. In the first 10 years of a 30-year mortgage, owning and renting are similar. Both people are "throwing money away" either on rent or on interest. In the last 10 years o.f a 30-year mortgage, a lot of the payment really does build equity. But if people move after 7 years on average, they never get to the sweet spot of principal repayment. They just rent from banks instead of landlords
5) Transaction costs. Buying and selling houses enriches the real estate industry. The math looks great for owning if you hold for a long time. But if the typical person moves houses every 7 years, it means that they pay 7% of the asset value 4 times during the life of a typical 30 year mortgage or maybe 6 times over a typical working/homeowning life. So that's 28% to 42% of the total value of the house lost to real estate agent commissions. If house prices are going up, those percentages look even higher as a percent of the original purchase prices. And if houses are mortgaged, those percentages look even higher as a percent of the equity in the house. (Example: 20% down, hold for 5 years, pay down principle a bit so you now have 27% equity, sell after 5 years, pay 7% of total value of house, 100% of your principle paydown is GONE--paid to the real-estate agent.)
So, we've got a big historical experiment we can look at. Decades of nominal house price appreciation and declining mortgage rates have left society as a whole with a lower % of equity than we started with. Many people made a killing in real estate, but many did not. Just being an average person, buying a house, moving every seven years, listening to advice from real estate agents, etc....and the reality of homeownership was less good than the promise.
So, it seems to me that average owning is not such a great deal. Real-estate law, taxation, industry structure, etc. all adds up to a big system. And those systems were not designed to enrich the little guy who had no hand in setting them up. Banks, governments, and real-estate agents made a ton of money, and they did it at homeowner expense.
Obviously owning can be great, but I would argue that it has to be done very well to pay off. Maybe it should include:
* Getting a below market price from a motivated seller
* Buying at "a good time" when prices are not too inflated
* Buying without a mortgage, or with a very low-cost mortgage (maybe now IS a good time for that)
* Buying to own for the long-term. Either staying put or being fully prepared to rent out a place rather than letting real-estate transactions eat your gain
* Buy and sell without an agent? Unless the agent can add value greater than his or her fee.
* Negotiating down the realtor % fee
* etc.