Quote:
Originally Posted by Slava
If you bought Ford or Office Depot at the bottom last March you are up by about 1200% if memory serves. I'm just not sure that anyone would walk into the bank, put down $25,000 for a $450,000 loan and invest it all into either of these stocks at that point. For some reason that stirkes people as being totally ridiculous, yet the very same idea invested into one house seems like a great investment plan. One of the quirks of human psychology I suppose.
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This. I think the biggest difference between real eatate and stock/bond/money market, etc investments psychology is due to the fact that pretty much everyone has experience in buying/renting/building a residential property. Real estate gives people a tangible asset that they seem to think they have enough of a connection to feel comfortable or knowledgeable enough to invest in.
Whereas in reality most people are just leveraging multiples of their net worth in one asset in one market that has a history of much lower historical returns, has very little liquidity and adds refinancing risk.