Land is an asset, but if there's a house on it, it is an unproductive asset that you pay property taxes on.
The building is an asset, but you also pay property taxes on it, and in the US, about 60% of "home owners" have a mortgage on which they are paying interest and principle. Furthermore, it is a deteriorating asset that must be maintained and updated in order to hold value, and that has continuing operating costs such as sewer, water, electric, etc. that may otherwise be bundled into rents.
Complicating the economics is the fact that lots and houses are very non-standard and hard to value and the fact that when selling it the transaction costs will be about 10% of the selling price. Consequently if your mortgage is 60% of the selling price, you will lose 25% of your equity.
Psychologically, homes are more like jewelry, since people have strong likes and dislikes which depend on fashion, and people get attached to the pieces that they have.
True, but the practical utility of owning versus renting a house is pretty equal. Owning a house has the added utilities of allowing for social signalling through personalized home improvements and selective social group membership, also associated with educational opportunities for the children.
Also control of your life and certainty in your Costs. Landlords can kick tenants out via renovictions etc, raise rents as much as they can, and never improve the space. If you are renting are you sure you can stay there for 5 years, 10 years, 25 years?
I think if your time horizons are longer than 5 years the certainty of owning would also provide some value. I have been a tenant, am a landlord for 4 units, and a home owner.
All properties are partnerships which makes it easier to deal with operations and maintenance.
I “own” my home (ie pay a mortgage), but being worried about being kicked out of my place wouldn’t be a deciding factor. You can always move and rent somewhere else easily in most of the country.
We bought a house for a lot of reasons, but one was an inflation hedge. We don’t have to worry about our home prices increasing except for property taxes and insurance.
The building is an asset, but you also pay property taxes on it, and in the US, about 60% of "home owners" have a mortgage on which they are paying interest and principle. Furthermore, it is a deteriorating asset that must be maintained and updated in order to hold value, and that has continuing operating costs such as sewer, water, electric, etc. that may otherwise be bundled into rents.
Complicating the economics is the fact that lots and houses are very non-standard and hard to value and the fact that when selling it the transaction costs will be about 10% of the selling price. Consequently if your mortgage is 60% of the selling price, you will lose 25% of your equity.
Psychologically, homes are more like jewelry, since people have strong likes and dislikes which depend on fashion, and people get attached to the pieces that they have.