One thing you're not considering is that buying a home ties you down to a particular area. With the jobs market the way it is, jobs for life a mythical thing for most people, and major structural shifts in employment, buying a house is not really an option for most people. Also, I'm not sure there's that much credit availability for consumers wanting a mortgage and it'd certainly involve a major upfront deposit.
That's a valid point and I'll follow up with a future post about the economics of buying, but to realize a return on a home you need a time horizon of 5 years. With the shift to more urban life, I don't think that 5 years is an unrealistic amount of time to live in one place. In major metropolitan areas, there are often plenty of alternative jobs available and people tend to be tied down due to family obligations.
To get to a $3k/month payment on a 500k apartment unit, the author assumes that people have $100,000 in cash to drop on a down payment. People renting often don't have that much cash on hand and are already trying to pay their school loans.
Yes, that is an assumption I make in the article. A 20% downpayment is going to be the minimum that you would need for any bank to approve you for a mortgage. Many readers either have that cash in their bank account or the ability to get help from (extremely) generous parents.
You have completely ignored the effect falling interest rates have had on buying power and thus nominal home prices.
Absent something extraordinary, watch out when rates rise. Affordability will be crushed quickly, and absent rising incomes, prices will have to fall.
One could argue we'll see a Japan-style era of low rates, but in your article you're urging folks to "Buy now before it's too late!". If rates spike suddenly, this will be a very, very bad time to be long such a levered investment.
If you have the income to support a $3k/mo housing cost you should be saving enough to afford a $100k downpayment in a few years. Also, as another poster pointed out, it probably qualifies for an FHA loan with much lower down payment.
One thing I don't see you accounting for is the increased transaction costs of ownership -- I live in the kind of place you're encouraging people to buy apartments, on a rent-controlled month-to-month lease. If change jobs or have a kid and want to relocate, I can do so with ~45 days notice, a moving truck, and no risk.
But if I own I either need to sell or rent out my unit, both of which are expensive up-front and dependent on future market conditions, at a time where I am likely at a cash-flow low point in my personal finances. Even if it's good in the long-run, conditions may not be good at the moment I need to move.
It's possible that the upside of ownership is strong enough to be worth it anyway, but the risk and reward would have to be quantified a little better for me to want to take the jump.
tl;dr: Just because buying housing is a good investment for Wall Street doesn't mean I should buy myself a place to live in.
