Quote:
Originally Posted by OMG!WTF!
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.
Yes I was working off the assumption that living rent free in a paid off house is a good idea.
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.
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But there is the other issue that I can borrow $500K for a mortgage, pay 3% interest, and then if my house appreciates at a rate >3% I am essentially getting free RoR on money I did not have.
I can't borrow $500K to invest in the stock market at 3%. I would agree 100% if my options were "What to do with $500K CASH", but for the majority of people this is not an option or the question that applies to them.