Should You Buy A House?

Megan McArdle ponders the question:

I spent some time this weekend traipsing around open houses with my sister, who is hoping to someday soon experience the burdens joys of homeownership.

Prices certainly don't seem to be coming down much in my neighborhood, the U Street Corridor. Smallish two-bedroom houses are listed for $595,000 and up. Since the rent on a similar place would be something over half the monthly mortgage payments and taxes, without taking maintenance into account, I think it is fair to say that the market is still pricing in quite a bit of expected capital appreciation in the house.

Is that reasonable? Not too long ago, I saw Suze Orman on television, urging people not to sink money into their 401(k)s, but instead plow that money into a house. A house, almost everyone I know tells me solemnly, is the best investment you can make.

But as Robert Shiller, the Yale economist, has pointed out, this is a very new idea. For most of history, a house was simply a very long-term durable good, which, like cars and refrigerators, began depreciating the day it was finished. Why do we think differently now?

Read the whole thing.

Here is my renter's manifesto and more thoughts on renting and on buying a home. Also, see this cool video showing changes in housing prices as though they are a roller-coaster ride.