Short answer, probably not.
Robert Shiller points out in his book Irrational Exuberance that inflation-adjusted U.S. home prices increased 0.7% per year from 1940-2004. Whereas U.S census data from 1940-2004 shows that the self-assessed value increased 2% per year. Apparently there is a common misconception that a house is a great investment. In actuality, your expected return on your home should equal inflation plus a mere 0.7%! U.S. stocks on the other hand have averaged an inflation adjusted return of 7% per year since 1950. [U.S stock return source]
But what about the tax benefits of a house mortgage? Yes, interest on your home mortgage is tax deductible; however, there are additional costs associated with owning a home that, in my opinion, outweigh the benefits. Most significantly, owning a home may limit your ability to relocate. Home ownership means you are tied to a single asset (your home) in a single regional housing market. As we have seen, the only free lunch in investing is diversification and home ownership provides zero. If you were unfortunate enough to buy a home during a “bubble” as outlined in the graph above, you will likely not be able to sell that home until the market recovers which could take many years/decades. I have many friends that tragically bought a house in 2004-2006 and are now wed to the job market in their town because they cannot sell their house/apartment and incur the subsequent loss.
So rent forever? Well, I'd rent until you know for sure you will be in a certain labor market for at least 5 years. I'd also have realistic expectations about my return which, if the last 100 years is any indicator, should approximately equal the rate of inflation or ~2% per year.
