Very true. Does this imply that the intrinsic value of owning a house is decreasing over time – if this is the case I suspect that housing doesn’t look like a very good asset 🙂

“the big difference being that you can live in a rental place for 10 years and walk away”

That sort of reminds me of all the foreclosures in the US at the moment – people are just walking away from the houses they own. Sorry state of affairs indeed

Having recently (well, recently as in a few years ago, but I’m well beyond my 20s!) become a homeowner, I can really appreciate the lack of hassle with renting. No maintenance issues to worry about, no need to think about which utility is cheaper, getting permits, or even remotely consider renovating.

As for serial monogamy – the big difference being that you can live in a rental place for 10 years and walk away. Try doing that with a relationship.

It is possible that society would be wealthier, but the individuals involved may not be happier. To some degree people choice to buy a house depends on the value they place on the ownership of the house vs other things.

If this offers them sufficient satisfaction they may be willing to be poorer in the future in order to have the pleasure of ownership – this explains why New Zealander’s seem so happy to bury themselves in debt to own a house 😉

“Renting is associated in my mind with fewer transactions costs.”

That is an incredibly good point. When I read it I could relate to it, thats how I can tell that I really enjoyed it 😉

This is a point that is similar to what I was saying about the flexibility of renting vs owning. I value the ability to move and the fact that I am protected from a natural disaster destroying the house.

Good points everyone 🙂

Renting is associated in my mind with fewer transactions costs. Simplified taxes. Don’t need to worry about hunting down contractors in a possibly foreign city. If you land in a lemon, you can relocate much more cheaply than if you bought the house.

…where’s that Akerlof paper on lemons? Might be relevant.

Maybe at some point, I’m a bit tied up at the moment.

“you might also point out that the interest on a mortgage is equally “throwing money away”.”

Exactly. I’ve heard of people paying $600 a week financing a mortgage, without repaying any of the principal, while people pay $400 a week on rent for the same sort of house.

I wonder if anyone has tried to quantify the ‘intrinsic’ value that people would need to have over a house to justify current house price levels?