When Should You Buy a Home?

Tyler Cowen with an economic perspective about buying a home:

My view is that Americans are more likely to overrate the value of buying a home, if only because they underestimate the probability of divorce. It is also harder for them to imagine career opportunities in other geographic areas, plus many people overestimate the historic returns to real estate.

I can't think of comparable biases that would favor renting, especially in our sub-prime, not so liquidity constrained age, which in my view has been dented only temporarily.

An alternative approach is to see the buy/rent decision as equal in value for the marginal buyer, and ask where you stand relative to the market margin. Since this would be Jeff's first home he is probably young and that also suggests renting.

Here is a good post on home ownership rates. Here is a good Arnold Kling post on real estate.

Read my manifesto for renting post and more related thoughts.

If I had purchased a home while living in Orlando, chances are I doubt I would have traveled as much as I have nor would I have come back to school for my PhD and JD. I would have also probably been more cautious with some of my career choices. (The risks I was able to take changing companies twice helped increase my income substantially.) Renting also made the lifestyle transition back to grad school much easier and freed up significantly more income for saving, spending, and giving.

If I had purchased a home as soon as I was able, I would have probably had a higher net worth by now. On the other hand, I expect my future earning potential and/or job satisfaction after school to be much higher than it had been.

On the whole, the trade-offs of renting rather than owning have been well worth it for me.