eternitus

Economic Conditions Force 27% To Put Homeowner Plans on Hold

Unbelievable... renting costs about half as much as owning in coastal markets... meaning if you pay 10k in rent, you effectively built 10k of equity by not owning. Of course, this is why many people will remain poor... they think it is worth paying twice as much for something that barely keeps pace with inflation. Somehow, the realtors can pull off the deception.

Just How Terrible Is Housing as an Asset Class? Roubini Weighs In

Friend,
You seem nice but are nonetheless largely wrong. Shelter is a must for any family, not homeownership (Did you know that more Germans rent their houses than purchase?).

Housing is a dreadful investment under normal conditions, barely keeping pace with inflation over the very long run, despite draining an enormous amount of money from the "owner" in the form of property taxes, maintenance and generally interest expense.

In the current climate, with such substantial differences in the dollar cost of renting and owning, it is much easier to build equity saving and investing the difference (in my case 100% of my rent payment) than it is owning a home, which is more likely to depreciate or stagnate in value than anything else, barring an unlikely rise in incomes in general.

However, that is not the type of investment Dr. Roubini is talking about. He is speaking of capital investment as referenced in economics. In such usage, economic participants make capital investments to improve the productivity of factor inputs (basically to improve the productivity of a worker), which makes us all richer. After shelter is provided for everyone in sufficient quantity, housing produces zero economic benefits for us. Generally, building McMansions does nothing to improve the economy, as Mr. Roubini says. That capital would have been put to better use in R&D or building infrastructure, which would benefit us today instead of sitting idly, as houses are currently doing.