The example I cited here is not just a hypothetical one. It reflects exactly what happened in parts of California within the last couple of years. Once this buy/rent comparison became as heavily skewed as I've shown, a number of smart financial advisors began telling their clients to sell their homes at inflated prices and move across the street into identical homes at a much lower monthly cost.
I own my own home outright, and the mortgage (a fixed mortgage) was in the same ballpark as what I had been paying to rent an apartment at the time I bought my house.
Over the years, that mortgage stayed the same, and the cost of that apartment has gone up every year. If I'd stayed in the apartment, I'd probably be paying at least 4 times what my mortgage cost me per month.
Except that I don't have a mortgage any more, I just have this house that has increased in value by at least 4 times over the same period.
If buying my home would have been a matter of real estate speculation to me rather than just owning my own home, and especially if I'd recently bought into the hyper-inflated Cali housing market, I'd be crying now too.
But I own my own home, I'm debt free - no mortgage, loans or outstanding credit card debt - and not counting real estate that I own, my 7-figure fortune is in my financial portfolio. And 399 days from today, I'm going to retire and reap the benefits of the modest lifestyle I've lived for the last 30 years.
Happy New Year!