"If you rent, you're throwing away your money." That has become a regular assumption when it comes to deciding on whether to rent or buy a home. If that's true, then why does this writer for SmartMoney.com say he will never buy a home? Here are some reasons why I don't think this issue is so clear cut:
1) Buying a house is usually more expensive than you think:
2) More of your money is tied up in this single investment: By investing your money evenly in a variety of things, you can spread out your risk. Don't put all your eggs in one basket.
3) There is of course other ways, usually better ways, to invest your money:
4) Real estate is an investment you live in: This complicates things when you need to move across town, relocated for a job, or sadly because of divorce. It also makes the roof over your head another risk filled investment.
5) Housing prices do not always go up: Here is a video showing what the change in house prices would look like if you could ride them (the end has the data in a simple graph).
To give a real world example, I used this NY Times calculator to see if it would be better to rent or buy this this Philadelphia condo. Using the average mortgage rate and putting 10% ($16,500) down, it is better to rent unless you live there for at least 7 years.
At the end of the day, it's not whether you're throwing money away or not. It's comparing the return you will get on all the money you invest. A home should be a nest, not a nest egg.