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This is funny, because I consider OP's house to be obnoxiously expensive, let alone all the newer homes they mention.
There are MANY calculators out there as to how much house one can afford, and personally I think most of them over-estimate the amount. But based on very rough numbers, you could spend about 3x to 4x your yearly salary on a house. So to afford a $500k house, one "should" be in the $150k/year range. To afford a $700k house, one should be in the $200k/year salary range.
Personally I think both those numbers are bonkers and rather live well below my means than be house-poor.
The reason there are just so many expensive homes is that people are terrible at personal finances. They don't mind being in debt and then there is the awful FOMO mentality that is helping drive home prices up for no good reason. Add in the fact that for years now new home construction has simply not kept up. There were homes being built, of course, but many of them were on the top end of the market because local town governments rather get the taxes for ten $10M homes, rather than force developers to build 50 $250k homes. So there is so much blame to pass around.
It's not FOMO, it's financial sanity. If I pay rent for another thirty years, I have nothing to show for it except a period of non-homelessness and years more of rent to come. If I pay a mortgage for the same amount for thirty years, I'm rewarded with a house for the rest of my life and no more mortgage - and I can resell the house when it no longer suits my needs, or give it to a younger family member
It's not that simple. It is mortgage+insurance+maintenance
Rent is just rent.
You MAY be able to resell the house if the location is somewhere people want to live in several decades. All it takes is a major economic source to dry up. A military base closing, a factory shutting down, etc can wreck your property value.
The vast majority of people live in or around major cities. Those aren't going to evaporate. The kinds of towns that exist only to support a single resource like you mentioned are so few and have so small a population that you could close and relocate half of them to other towns and cities across the country without them even noticing the increase.
Tell that to the home owners whose equity is wiped out when the factories were offshored or the base closed.
The point is, there are no guarantees. Buy vs rent depends on a person's circumstances. Buying has risks. People have lost lots of money by buying at the wrong time (like 2008) or the wrong place.
Markets don't always go up. Market prices can be very disconnected from reality as we have seen with many bubbles throughout the years.
My point is that we can't say "but what about the 1%!?" and end a discussion about the value of investing in buying the place you live based on that 1 counter argument. That's how you get republicans and rampant unregulated capitalism destroying the lives of the many to benefit the few.
It was a lot more than 1% in 2008. In the US, 1% is 3 million people.
This discussion about renting vs owning and the overall real estate market are related but not the same thing.
My point is, owning isn't always the best option, it has risks that vary depending on location, it isn't always the best financial moving.
Always and never are rarely true. As I said in another comment, the ideal situation is a variety of housing options available for buying or renting.
Back in 2007, I was working on a contract that could have had me moving on short notice, in a housing bubble. Buying would have been insane in that market and I would have lost a few hundred k. Even if it wasn't a bubble, buying would have put me in a worse situation than renting due to transaction costs, interest, insurance, taxes, and opportunity costs. I own now.
I say 1% as hyperbole as while I can't say what portion it is, it's small and shouldn't be a show stopper.
Other than in very rare circumstances, unless the govt. or your employer is paying your rent, buying should NEVER be worse than renting. The fact that more and more people don't even have the option, even when a mortgage would actually work out way cheaper than rent, is insane. I don't know the US market, but where I live a mortgage is cheaper or about the same as paying rent, after insurance & maintenance, basically everywhere.
Taxes on the purchase are a 1-off cost that might add up to a few month's rent, it stings but it doesn't change the math. Sure you have to pay interest, but at least a portion of your repayments is going permanently towards your financial future. Paying rent you may as well be handing that money your landlord and watching them burn it for all the return you would ever see from it. There's no scenario where paying rent very long term should be better for anyone.
ETA: taxes here are annual. So you are paying about 1-2 months rent per year in taxes. Another in insurance. Add in 1k for a real estate lawyer to process the transaction. Mortgages have up front fees that can cost a few months rent. It takes a while to recoup all those costs. Buying an average home will cost upwards of 5-10k for all of the upfront expenses. They also tend to come with an abomination known as an HSA that eat 1-5k per year. I pay around 7k per year in taxes, insurance, and HOA costs. If you don't have a large enough down payment, add PMI. You can also shell out thousands up front for points that reduce interest rates.
I agree with you here. A healthy housing markets should have a variety of housing available at reasonable costs. For rent and sale. In the US, the causes of that are euclidean zoning, NIMBYism, and under regulated capitalism.
That explains a lot of the disconnect. Buying with minimal risk isn't feasible in a lot of places in the US.
In the US, it isn't uncommon for smaller cities to be economically dependent on one particular thing, like a base, university, factory, agriculture, mine, etc. West Virginia is a great example. Their economy is pretty dependent on coal. This is why their democratic senator tends to vote with Republicans on matters that would interfere with coal mining. If the next federal election is a massive slide towards Democrats, the WV economy will be devastated unless they come up with a way to replace coal mining. The real estate market would absolutely tank. Anyone that bought in the previous 5 years would regret it.
A place being devastated economically due to a closure happens. The US is large, so there might not be any other major economic source for 75+km. Even if there are, the distance will in all likelihood cause a large decline in real estate prices.
A house in any particular areas value depends on decisions by the federal government, state government, local government, a school board (school districts effect real estate prices here), and sometimes a corporation. Any one of those entities could (and has) turn a 400k house into a < 300k house in very short order. It happened almost nationwide here in 2008 due to the removal of financial market regulations.
Maybe where you live these kinds of risks aren't common, in that case buying is going to make more sense in more cases. In the US, buying in an area without economic diversity is a lot more risky than a lot of people realize.
Another issue in the US is housing types. A lot of areas have apartments for rent or 3+ BR SFH to buy. A single person would have a massive opportunity cost and take on unnecessary HVAC costs, etc buying in these areas. Renting a 1BR or studio would be a much lower monthly cost. Renting and investing the difference would be a better move in most cases.
Buying should generally be a better option when someone plans to stay in an area for while. I won't say always though. Some parts of the US I would never buy real estate.
Am I starting to make more sense?