I’m right behind you on this one. I think the reason that housing is so misunderstood is two-fold. It’s kind of mash between bad human math and some pervasive but incorrect sales logic (not far off the myth of the value of diamonds).

“Property values will definitely go up, it’s not like we’re making any more land”
“A home is great investment, renting is just throwing your money away”

We’ve all heard the sales pitch and tons of people have bought into it. Of course it helps that the last like 15 years have been great for real estate, b/c no one likes to attribute their own success to simple luck.

The other aspect here is that people are simply bad at the type of holistic long-term math that is required to correctly evaluate the value of a house. Property has the capacity to appreciate in value, but it also has a ton of downward forces: property taxes, maintenance costs, large overhead for sales costs (and low liquidity when you need it). The low liquidity can cost you even more money by “locking in” your location, so there’s definitely a “mobility cost”. Plus inflation tends to cramp the numbers even more.

And the truth is, people are simply bad at calculating all of these numbers, even on a small scale. Heck, look at cars. How many people complain about the cost of new tires and general repairs or engine problems? Why? Didn’t they know the car was going to need new tires eventually? I don’t trust people to know the outstanding maintenance costs required on their home (just to keep it from depreciating), b/c I don’t even trust them to know these numbers for their cars.

Hey, if you bought your place in 2000 for 100k and sold it today for 112k, how much money did you make? It’s only seven years right? Average person says “Hey, I made 12%”, the 3% of the population that actually understand that the person lost money (between opportunity costs and inflation) don’t seem to be connecting with the other 97%.

And really, who calculates “mobility cost”? Tons of people never plan on changing zip codes.

The illusion of home ownership as prosperity will continue to remain prevalent as long as people are bad at math and banks are making great money handing out mortgages (last couple of years aside). But hey, somebody has to be paying the interest on my investments

I mean honestly, is financial wealth tied to having your own home? I think that sort of thinking is what led us to this mess. Heck, if I can rent from now until the end of time (albeit, they are nicer than your average rental home) – I’m more than content. As long as the home is nice, spacious, and affords me the standard of living I desire – then what is wrong with renting a nice house on a standard lot?

People in the 1990’s equated financial prosperity to owning a home. Which simply isn’t true. But they could get a home, and in their mind – they were prosperous. Which led us to the current mess.