OK, put your thinking caps on for this one. A family friend posted this analysis of home economics on his own website, running math on some ideas that have been whispering from the back of my mind over the last year regarding the hollowed concept of home equity. Read it first, and then come back.

Now let’s try the numbers with our former house in Fort Worth. We bought it for $130k, putting 10 percent ($13k) down plus about $4k in closing costs. We financed the rest with a 30-year note at 6 percent and a 15-year note at 6.25 percent, making a monthly payment of $735 with an average of $155 toward principal and $580 toward interest. On top of that, we paid about $4k annually in property taxes and $1k for insurance, which saved us some money each April in tax deductions. So for that time, our total housing costs (including down payment but not counting the small improvements we made or any utilities) were about $59k.

After 3 years and 4 months, we sold the house for $130k, same as we paid for it. The sale occured after the market had begun to sour, and our area was flooded with existing homes for sale and desperate builders who wanted to build new ones. From that sales price, we had to pay off our mortgages, pay our realtor 6 percent, and pay closing costs, netting us a grand total of about $9600. Yep, we lost all the equity we’d added via mortgage payments plus some of our down payment. So our total cost of homeownership from start to finish was about $60k.

Compare that to the cost of staying in our fabulous apartment in Euless during that time. Our rent was about $750/month plus $100 annually for insurance. Total cost would have been a little over $30k, and that’s completely ignoring the difference in gas costs and time spent driving. Granted, the apartment had half as much space and no yard, and we couldn’t paint the walls or grill on the patio. But it cost about half what the house did, required no yard work, and if something broke, we made a phone call and got it fixed for free.

Don’t get me wrong. I’m not saying buying a house is a bad idea. It gives you some great advantages, such a yard for kids to play it, extra privacy, freedom to customize, etc. As an added bonus, if you stay long enough to pay it off (which seems rare these days), you won’t have to worry about a mortgage or rent payment anymore, although you’ll still have property tax, insurance, and upkeep. However, the common argument that owning is infinitely better than renting doesn’t seem to hold true in all cases, at least from a financial perspective. If we ever buy again, and I do assume we will, we’ll plan to stay there for MANY years and finance it over no more than 20 years. That way we’ll have a greater chance of at least getting our money out of the house once we sell.

Here’s the bottom line: whether you rent or buy, you’re almost certain to have significant housing costs with little to show for them beyond a roof over your head. You’re either “throwing your money away” on rent or “throwing your money away” on interest, property taxes, insurance, closing costs, and realtor commissions.