I haven't played with the NY times calc, but is the following correct:
Housing prices only keep pace with inflation. America realizes it totally forgot about a few million homes it built, greatly expanding supply. Housing prices rise only 2%. Alice is much, much worse off for buying. In total, buying costs ~$1.75M, where renting would have cost her ~$1.3M. Because her finances were tied up in the house while the home value has gone up so little, Alice has minimal savings. Her daughter receives some financial aid, but takes on hundreds of thousands of student loan debt to go to college.
Yes, in 18 years Alice will spend $1.75M, but she'll also own a big share or all of the house. On the other side when renting she ends owning nothing after 18 years. Or is the calculator taking in consideration the selling price of the house?
Principal is only part of the cash flow. You're also paying for interest, insurance, taxes, and maintenance, which the renter does not, and these are also money down the drain. In my experience, owning a house in many (most?) areas is a losing proposition unless you assume that housing prices rise at an unreasonable rate for a long period of time. However, that's exactly what's happened.
My mortgage (including property tax and insurance) is 1300 of which 700 goes to principal. So the money going down the drain is around 600. A comparable rental would be at least 1500. So basically I can save 800 per month for maintenance. Even if prices don’t go up or even go down this is still a good deal. Especially since rents will probably keep rising while my mortgage will be flat for the next 14 years and then go to 0.
This equation doesn’t work in California where buying makes financial sense only if house prices keep going up. But in a lot of other areas buying a house is a very good deal.
Despite the interest, insurance, taxes, and maintenance when paying a mortgage the majority or at least a big part of your payment goes to pay off the house - so after 15 or 20 or 30 years you own a very expensive house. When renting all the money you pay goes down the drain and in 30 years you own nothing.
Housing prices only keep pace with inflation. America realizes it totally forgot about a few million homes it built, greatly expanding supply. Housing prices rise only 2%. Alice is much, much worse off for buying. In total, buying costs ~$1.75M, where renting would have cost her ~$1.3M. Because her finances were tied up in the house while the home value has gone up so little, Alice has minimal savings. Her daughter receives some financial aid, but takes on hundreds of thousands of student loan debt to go to college.
Yes, in 18 years Alice will spend $1.75M, but she'll also own a big share or all of the house. On the other side when renting she ends owning nothing after 18 years. Or is the calculator taking in consideration the selling price of the house?