what type of cash returns are you getting every month on your primary home?
I get cash returns of about 500 dollars a month, which is how much cheaper it is for me to live in my paid off condo than what the guy next door is paying to rent a near identical unit.
Nice try. That is not a cash return. If I save $500 a month by driving a junker instead of a new BMW I did not get a cash return. But it is nice to spend less money each month.
So if I invest in stocks and end up with an extra 500 a month from dividends its a return, but if I invest in my primary residence and the dividends are paid off in reduced long term living expenses of 500 a month, its not a return? Oh wait...you are right...its a tax free return!
There is also an opportunity cost. If the stock market returns an average of, say, 10% per year on average, and you have spent $500,000 on your house, the theoretical opportunity cost is $50,000 EVERY YEAR. You lose out of $50,000 per year because your money is tied up in a house instead on making you money with investing. On the flipside, you avoid the cost of renting, which can be substantial depending on the RE market where you live. But, houses need maintenance and updating. This also needs to be added into the cost of owning. Plus the risk of being stuck with bad neighbors, sudden unexpected house maintenance expenses, etc. I own my house fully paid off and enjoy living there, but I am not blind to the hidden costs.
The opportunity cost logic is faulty unless the person paid lump sum for the house...otherwise the main thing is that you would have been paying rent anyhow. The only opportunity cost was your down payment, unless your option was somehow mortgage or free house.
Considering that...the average long term appreciation of real estate in the US is 3% a year. If you have 50k for a down payment and throw it in the market and paying rent, your 10% stock gains would be 5k a year and you would be building 0 equity on your rental. Use that same 50k to make a down payment on a 500k house. 3% of 500k, since real estate appreciation is based on the property value and not your equity, is going to yield a return of 15k.
Plus...the "opportunity cost" of a down payment isn't all it appears. Just going off numbers I worked with in the past since that's what I'm familiar with...I put 20k down on a property and ended up with roughly an 800 payment and 200 of it was going towards principal which was going right straight towards equity. 200x12=2400 a year in built equity...or a 12% return on my 20k down payment. 20k in the market at 10% would have been a 2000 dollar return and rent of 9600 would have would have been a 100% loss.
So let's review the numbers for the first year...
rent - 20k+10%=22,000-9600(rent)=12400
own - 20k+2400=22,400-(12*600(portion of mortgage not going towards principal))=15200+1800(3%x60k appreciation)=17k
Oh wait...how did that opportunity cost leave me with a higher net worth?
Plus at some point your mortgage ends...so you won't be building equity in your property any more but your monthly expenses are going to drop significantly, and I don't know about you but anything that either gets my income up or expenses down is something I'd like to do. You mention the hidden costs of ownership...but at the end of the day if you rent your landlord will be paying these hidden costs and passing them on to you so you won't escape them one way or the other unless you find an altruistic landlord who enjoys renting properties out at a loss.
I just cringe every time I hear that opportunity cost argument. It leaves me with the impression that people feel once you put a down payment on a primary residence that money is simply gone and not doing nothing for you anymore, when the fact is that money is still working for you even if the benefits of ownership are not easily recognized on a monthly or quarterly statement like form your 401k or brokerage account. When you are working your monthly budget or calculating your net worth its easy to see the benefits of owning.
Of course I make all these statements under the assumption that you actually compare renting vs buying looking at similar properties, and that you are going to have to pay for a place to live one way or the other, otherwise your best bet for wealth building is to throw your money in the market and go live in a cardboard box.