by gruez | 2025-05-12 14:22:39+00:00
>1. If interest rates go down, you can refinance,

I will agree that this could play a massive factor, but it's a massive "if" you're banking on. There's no guarantee that interest rates will dip, and the longer it doesn't dip the worse the math works out for you. Sure, tons of homeowners refinanced during the pandemic, but that was a once in a lifetime opportunity. Moreover stocks also rallied in the same period, which raised the opportunity cost of the equity you have locked inside your home.

> but if they go up, the inflation and appreciation values likely will as well, but your rate is fixed, for (up to) 30 yrs (!!)

No, higher interest rates makes house prices dip, or at least suppresses growth, not the other way around. All things being equal, higher interest rates means higher monthly payments, which means buyers have less buying power in absolute terms. We see this reflected in housing prices after the fed hiked interest rates.

https://fred.stlouisfed.org/series/CSUSHPINSA

>2. It's relatively easy to make improvements while you live there (and capture increased value when you leave)

I reject the premise that making improvements is some sort of positive value activity. If you're staying for a long time, then that 10-year old kitchen remodel isn't going to boost prices much by the time you sell. If you're selling in the near future, then you run into the problem of realtor fees eating into any profits, because moving frequently means such fees can't be amortized over longer periods. In either case there's risk associated with renos. They can be botched or go over budget, and all things being equal as a buyer I'd rather buy a non-renovated house for $x, than pay $x + $50k for a house that the previous owner spent $50k renovating. By all means, do that kitchen reno to make your home a nicer place to live, but don't think it's something that pays for itself.

>3. The calculator assumes that the down payment and cost difference vs renting would be invested, which is fine but ignores psychological realities that prevent this more often than not

Fair point, although I seriously doubt people who do rigorous buy vs rent analysis are the type of people who can only be cajoled to save through a house/mortgage

>The suggestion was mentioned as a 'hedge'. The point being: you don't know what the values entered into the calculator will really end up being. Having some costs locked in can help with concerns around cash flow (and shelter costs are usually a significant percentage of costs overall). It's an "also 'invest'" strategy, so there's a whole lot not included in the calculator here as well

The values could easily work against you as well. For instance if housing costs rise slower than expected. This is a real possibility with the rise of YIMBY in politics and boomers selling up as they retire. Moreover how is parking most/all of your savings in a single asset (ie. your house) considered a "hedge"? Maybe it can be construed as a hedge if your portfolio was all MAANA stocks, but I'm not sure how anyone would think shifting from a globally diversified stock/bond portfolio (ie. a bet on the global economy) to a single house in the US is a "hedge".