I have to be reading this wrong. Is it just tracking the value of the S&P 500 vs the value of an average house? Does it assume that unless you buy a house you have no housing costs?
Yes, you're reading it wrong. It is not just tracking S&P 500 vs the average house value. It does not assume that would ever have no housing costs. The calculators in question model housing costs, rental costs, mortgage rates, and all the rest of it.
It says itβs based on buying: mortgage, taxes, and income from selling the appreciated asset after XX years / renting: rent, and income from taking the difference from rent vs buy and putting it in the markets.
> "For those unfamiliar, these rent/buy calculators attempt to estimate the cash flow over XX years for renting vs buying a home. For buying, this is the down payment, mortgage, taxes, etc, and then crucially selling the appreciated home after XX years. For renting, this is mostly rent, but also crucially investment income from investing the money that would have gone into the mortgage/down payment. When I recalculate these numbers, all I'm doing is saying that the default home appreciation rate and the investment appreciation rate should be updated in the tool, and showing the result of that."
When you buy a home, you pay a down payment you counterfactually could have invested (and any difference in rent vs. mortgage can be invested). The article is just saying the calculators skew towards buying by underestimating investment growth and overestimating housing appreciation.
