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Originally Posted by mrkajz44
If you are going to attack the "truism" that real estate always goes up, then I would argue that "the market always goes up" is also a truism. The ability for the market to crash is just as possible as real estate crashing. Easy to look in hindsight and say the market went up 6% per year so you would have been better to invest in the market than real estate. Maybe over the next 10 years the market will remain flat and housing prices increase by 20% - then which one was the better investment?
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Yes but the stock market crashing and the housing market crashing are entirely different things. I can plan my losses in the stock market. If I'm comfortable losing 5k I can exit with a loss of 5k and move along. When you buy a house does anyone think about how much they're comfortable losing? And does anyone have a realistic exit strategy when the market goes down? No they don't. You need to be willing to lose much much more in the real estate market than the stock market. Time/inflation can kill your investment as easy as save your investment. Liquidity is a valuable commodity.
Another difference is you can't short sell a house when the real estate market goes down. I guarantee you when the stock market does correct or hopefully crash, there will be some of the easiest money to be made you've ever seen.
The 6% return I suggested is much less than the actual return over the last ten years. If you say anything more than 6% though the money guys here get jumpy. If you bought the SPY before the crash in 2007 you've earned 100% without any maximizing strategy. If you bought in 2009 you've seen 200% return. But I'm trying to even out the average house price with an average return in the market, both likely being lower than the mean.
Ultimately you're correct. If you think the real estate market will go up, then you should buy houses. But I have no strategy to determine that other than hoping for a great return.
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Is this about buying a house with cash vs. investing the money then?
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Yes I was working off the assumption that living rent free in a paid off house is a good idea.
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edit: Are you sure about the average house price in Calgary being $500k in 2007?
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Yes. In 2007 the average house price touched 500k. As well the stock market touched 1300 so I was using the relative highs of each not the average. The average price for the year was less.