Last week Michael Luca and Raymond Fisman argued in the Journal’s Review that a house bundles two decisions — where you live and how you invest — and that renting and investing the difference can come out ahead. (Last week’s column here said much the same.) This week the readers wrote back. William Maddox, cleanly: “You can’t live in your stock portfolio.” Matt Manolakis, in full: “Was this written by a landlord?”
The mail splits the way Thanksgiving tables do. Mike G owned homes for 45 years — crawled under them, renovated nearly every room, wired his own circuits — and now rents and couldn’t be happier. Joseph Monroe can’t imagine it: too much stuff, hobbies an HOA wouldn’t allow, and a paid-off California house worth maybe $750K whose property-tax bill, since he bought long ago, is about $1,600 a year. D Hubschman, a finance guy by trade, offers the finished basement: a bad investment to any Realtor, priceless to any parent of two or more kids. His rule of thumb: a choice can cost money without being a money decision.
The 38x question
The sharpest letters are about behavior. Alexander Carver says homeowners’ net worth runs 38 times renters’ — investing the difference works on paper, but people spend it. Bob MacLeod, who coaches young employees on budgets, titled his very first talk “Why renting is better than buying!” and showed them the math — along with the catch that almost nobody has the discipline to invest 100% of what renting saves. Jack Rosen adds the caveat: owners start out older, richer and steadier, so 38x partly compares two different crowds. The real engine, he says, is forced savings.
Hugh M. Boss of Santa Barbara, on the letters page, makes the same point with a twist. Plenty of families who skip buying, he argues, don’t funnel the difference into stocks — it goes to trips and to things that won’t appreciate. A long, fully amortizing mortgage quietly turned each payment into a deposit to net worth. Then cash-out refinancing and interest-only loans handed people a way to take the deposits back.
Our read
This is a Housing (M6) piece with a Behavioral spine. The readers are right about people and a little generous to the house. The forced saving isn’t in the drywall; it’s in the payment schedule — the principal slice of each payment is an automatic transfer from checking to equity that nobody has to remember. That’s why a cash-out refi every few years undoes it as surely as a renter who spends the difference. The owner who keeps pulling equity has opted out of forced savings. A renter can opt in.
So build the renter’s version on purpose (a general principle, not advice for any one household): on the day rent leaves, a second transfer leaves too, into a retirement or brokerage account, sized to the gap between your rent and what owning a comparable place would really cost each month — mortgage, taxes, insurance, upkeep — and revisited at every lease renewal or raise. Owners, the mirror rule: before you refinance, think hard about stretching the clock back out or taking cash for anything that won’t be worth more later. It’s the habit that compounds. Ten minutes setting up that transfer is the umbrella; don’t wait for the drizzle to go looking for it.