[MattKing]

Diapositivo, your calculations are ignoring a very large factor - risk.

The purchase of a home hedges the risk (borne by a renter) of rising home values and hence, rising rent. There is value in having one's housing expenses relatively fixed for a number of years, as provided by a mortgage. Further, in assuming your investments will be profitable, you also dismiss the risk of your skill in choosing investments that will (as you do recognize in the case of land) go up, down, or stay the same.

There is another thing to be said for real estate - they ain't making any more of it.

In addition, Diapositivo's calculations assume that the market includes a good supply of rental stock.

In our corner of the world, it is cheaper for many people to buy then rent, if they have the requisite down payment (minimum 5%). That is due to the fact that rental properties are in short supply.

We don't have access to mortgages with terms of 25 or 30 years here - 5 years is as long as the government mortgage insurance programs will cover. We use approximately the same 25 - 30 year amortization periods (the interest compounding is calculated slightly differently).

The current competitive mortgage market makes it relatively easy to get a 3% rate on your 5 year term, 25 year amortization fixed mortgages.