Buying a Home Is Probably Even Worse Than NYTimes/NerdWallet Calculators Imply

The much bigger tax thing this article doesn't consider is the $250k/$500k single/married capital gains exemption on sale of primary residence.

Also: It's a leveraged investment for most people (mortgage). If you put in 20% and your house tripled in value over the last ten years (which is what happened in SF & Seattle afaict), you make an annualized return of 27% (for a whopping 1070% total, i.e. more than 10x), after accounting for your payments (with realtor fees the number is slightly less but not meaningfully). Meanwhile as a renter your rent would likely have at least doubled over the same period, doubling the size of the nonrecoupable leak in your financial hull.

That's 1070% as opposed to 224%, i.e. 10x vs. 2x in the S&P. This is the reality of what has happened over the past 10 years, by the way, I am not using hypotheticals. Do note that home values tripling in price over the last decade is not common, even among these expensive cities, you have to be looking at specific types of housing in "luxury" neighborhoods.

TL;DR: Location matters. A LOT.

1. Many small landlords are not very financially sophisticated and won't factor in all costs when setting rent prices. For example, maintenance costs are often treated as one-time events ("the water heater broke") and not something to build into the cost of owning the home. I have relatives like this, and they generally view the appreciation on the property as their profit.

2. It's not uncommon for "landlords" to be renting out part of the house they're still living in. In these cases the rent can be somewhat arbitrarily related to the cost of the mortgage.

3. More sophisticated landlords often still have to compete with rents set by (1) and (2). At least in some markets.

Selling depends on demographics, the economy, and immigration. I'm in New Zealand where a lot of workers emigrate, and NZ patches that issue up with immigration. I read about €1 houses in Italy and ¥1 houses in Japan and then watch "South Korea is over" https://m.youtube.com/watch?v=Ufmu1WD2TSk

Modelling risks is the hardest part of any investment calculation.

Edit: the future value matters, and we get highly misled by looking at our experiences of historical results (especially don't expect to get the same results as your parent's generation).

Personally, thinking of your house purely as an investment is undesirable. You want to live there joyfully and not have to worry about pleasing the next investors.

The non financial upsides and downsides of your own home are more important than the investment. There are significant upsides and massive downsides: they are hard to balance.

I've rented a lot so I know that too has its advantages and disadvantages.

There are large financial upsides and downsides of your own home too. Geared lending is fantastic and dangerous, domicile taxation issues, regulations, yearly government fees that can screw your retirement. You don't really own your home, you have a license that you can sell. A home is really just a glorified longterm tenancy with two bigger landlords (the bank and your government).

Sell and let someone who can make better use of it (i.e. more readily stomach the property tax) take possession.

Calcified landed gentry just sitting on dirt that appreciates due to the efforts and investments of everyone around them is Bad, Actually.