The best online rent-versus-buy calculator I have found is the one created by the New York Times [1]. As others in this thread have already noted, in suburban-to-urban population densities, the cost of shelter is in the dirt, not the improvements. The wisdom of embedding wealth into dirt in a highly technologically-developed economy where the value chain is much, much more abstracted away from the dirt is lost upon me. Bidding up the cost of dirt just seems to me an easy way to factor away any incremental new wealth created by those living on and paying for the dirt.
Even lots of programmers here on HN eagerly brag up "good buys" they made on their houses, characterized as "good" because the house "went up in value".
Personally I want my house to drop in value, as long as it doesn't drop faster than my repayments, and as long as other properties in the area also drops: I want to be able to trade up cheaply.
As for the "wisdom of embedding wealth into dirt": Long term, if property values drop, so what. You lose a little bit on your purchase vs. renting in that case, but you get massively cheaper housing from then on if you opt to switch back to renting and/or the value for money will be massively better if you decide to trade up to a bigger house. But if property values rises dramatically, owning a property is a very effective hedge against seeing your living costs skyrocket. See it as insurance.
In that respect people do make good buys when the house goes up value: It means they largely locked in their housing costs at a lower rate and their insurance is paying off.
"In that respect people do make good buys when the house goes up value: It means they largely locked in their housing costs at a lower rate and their insurance is paying off."
No, the rent vs buy question is a lot more complicated than that. Renting can be and often is financially better even over the long term when house values are appreciating at historic rates, or even faster. As just a couple more factors to consider, property tax and maintenance costs go up as property appreciates and along with inflation, respectively. Remember that renters don't make any downpayment, and that that money and early term savings over mortgage can be invested in assets that tend to grow at rates much faster than house values.
And the rent vs. buy issue that's hard to resolve is for comparable homes being rented or owned. The fact of the matter is that many people buy more home than they need, when they could have happily been renting a smaller home, and trade up only when necessary, skewing answer more toward side of rental being more cost-effective. (You could do this with a house, too, but people tend to buy more house than the need at the time, perhaps partly b/c of practical difficulties of selling a house and the large commissions that get paid to brokers.)
Interesting the calculator includes utilities and tax bills as costs for the buyer but not the renter. Is this common in the US, for all bills to be included? In Europe here, once you factor in the additional costs of council tax and all utilities, the cross-over period reduces to about 4 years, as many people have commented previously.
It looks to me that the calculator is expressing the following rental situation: you rent from a landlord that includes for example, water and sewage utilities as part of the monthly rental fee. The fair way to account for this rental situation for the equivalent buying scenario is to add the true cost of those utilities to the buying scenario because when you look at buying the equivalent, you will have to pay for those utilities, and thus lengthening the break-even point when compared to renting.
Even lots of programmers here on HN eagerly brag up "good buys" they made on their houses, characterized as "good" because the house "went up in value".
[1] http://www.nytimes.com/interactive/business/buy-rent-calcula...