7 ms·

I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades. It does go down once i

by sytelus 11y ago

I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades. It does go down once in a while but it comes roaring back in relatively short time. Even when dropping, it rarely goes below 25% protecting most of the principal. This is about the only item that had massive inflation in past 7 years. I think what is happening is real estate is becoming currency just like what gold was used to be. In economics, you can make anything a currency which cannot be manufactured easily and is available in quantity that is very hard to grow. Economists are puzzled why the tons of money poured in to system through QEs isn't producing any inflation. I think QEs are indeed producing massive inflation but it all goes in to real estate. Funds like Blackstone eventually ends up with significant chunk of QE money and guess what is their major investment activity these days? The easy "inexpensive" money is the best way to inflate real estate. It's a like you eat a lot but only your waist is accumulating all the fat and you wonder why your hands and feet remain so thin. I suspect this trend will continue because people are realizing real estate is more safer currency that can be relied upon as opposed to stocks or anything else. The safety is derived from the fact that, in worst case, it can be rented to generate better than interest returns or physically be used. This assumption can only be violated if interest rates grows a lot beyond rent income and thus in high inflation. However overall economic inflation cannot happen if all the surplus keeps landing in real estate. So it seems like virtuous self locked cycle.

mixmastamyk 11y ago
> I think there is something else going on in real estate. It is supported, subsidized, and protected by the government at almost any cost, with the result that average-income people can no longer afford a home in desirable areas.
- qubex 11y ago
  If people were really being priced out eventually San Francisco would fizzle out as a centre for innovation and the interest would move elsewhere. It probably isn't going to happen any more than high prices in New York failed to price out banks and bankers.
  - mixmastamyk 11y ago
    It's not the rich that gets priced out.
    - qubex 11y ago
      Of course not: that's the very definition of ‘rich’ — having greater spending power than others.
      - mixmastamyk 11y ago
        > It probably isn't going to happen any more than high prices in New York failed to price out banks and bankers.
- ProAm 11y ago
  And is backed by a permanently growing population, where land is finite.
JumpCrisscross 11y ago
> I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades Home prices only started rising, in real terms, after WWII [1]. This appears to be driven by people wanting to drive more income to buying land, i.e. treating land as a superior good. Growing government intervention is also likely a cause. I'd caution against extrapolating two generations encapsulating post-World-War and -Cold-War booms too far. [1] https://www.dallasfed.org/assets/documents/institute/wpapers/2014/0208.pdf https://www.dallasfed.org/assets/documents/institute/wpapers...
yggydrasily 11y ago
The "something else" is money laundering (i.e., all-cash purchases with zero oversight). Thankfully, the US government is finally starting to crack down on this stuff: http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxury-real-estate.html http://www.nytimes.com/2016/01/14/us/us-will-track-secret-bu... But so far it's only in other cities. I'm hoping this will spread to the rest of the USA and then we won't have so many foreign criminals buying land with suitcases full of ill-gotten cash, driving up prices.
- bduerst 11y ago
  Hopefully as the USD strengthens against the Yuan and Ruble, you'll start to see less international property laundering. Maybe even some will start to sell, putting supply back onto the market and lowering prices.
  - abcampbell 11y ago
    I am not sure this is how that works.
    - bduerst 11y ago
      Which part?
      - abcampbell 11y ago
        Chinese investors are putting money into SF real estate with the goal of exporting capital to safer havens. Were China to choose to depreciate their currency (especially at a faster rate than they are currently) this could lead to an acceleration in attempts to export capital. It's not clear which way this linkage works (at least to me)
        bduerst 11y ago
        The Chinese launderers are putting into SF property. In August 2015, 35% of new property in CA was bought by the Chinese (80% in Irvine alone). If the Yuan weakens to USD, the Chinese have less buying power in the U.S. for laundering, and existing launderers will be incentivized to pull out (sell).
disposition2 11y ago
Not to simplify it but chances are there is more gold in the ground, real estate is the one commodity that is truly finite. Granted, people can always build on unbuilt land but that in turn requires infrastructure, etc to support a new community or residence. For this reason, it being finite, I wish the US government would set some restrictions on allowing business and foreign investments to purchase residential real estate. It is hard enough (San Francisco seems like a large part of the rest of the US on steroids) for working people to purchase these days...having empty homes bought by non-residents just sit waiting until the prices are forced (due to said) to rise is only going to exacerbate the situation.
- qubex 11y ago
  Those purchases “by business or foreigners” transfer cash to the seller and be up in the economy anyway. Homeowners who sell do so because it is in their interest to do so, the restriction you propose would be Pareto-inefficient.
  - sytelus 11y ago
    Or is it? The money flowed in real estate will most likely immediately get used to buy other houses and there by inflating homes even further. I don't think anyone sells their home and uses the proceeds to buy some stock - the proceeds goes almost always immediately to buy other home. It's like you live in a village, a traveler pays you $100 for a goat which was suppose to be only $10. Then you realize goat is so valuable so you use your $100 to buy two goats from neighbor for $50 each. Now your neighbor realizes what's going on and he uses his new money plus some more buy more goats - all in anticipation that everyone needs goat and prices will keep going up. The virtuous cycle starts and sooner or later major portions of people's money keeps changing hands in form of million dollar goats. Very little of that money might actually get used for other purposes like building the hospital or school because those things don't deliver investment returns like a goat does.
- vinceguidry 11y ago
  > real estate is the one commodity that is truly finite This is untrue in both the literal and figurative senses. In the literal sense, real estate isn't just land, other properties of land, such as mineral or air rights, can also be created, bought, and sold. You can build up and sell condominiums. You can build down. You can dredge land out of the ocean. Eventually you'll be able to build out in space. In the figurative sense, people make this claim to assert that real estate is becoming rare, and therefore intrinsically valuable. While certain markets definitely are this way, like NYC penthouses, the asset class as a whole is much like it's brethren in this regard. Value is in the eye of the beholder, trends develop rapidly and can bolster or devalue individual properties at breathtaking rates.
jusben1369 11y ago
To be fair only some economists thought QE would be inflationary. Many understood it would not. And why would you call real estate a currency and not an asset class? Most of your comments indicate you think it's a highly attractive asset class vs really a currency.
- qubex 11y ago
  Currency is a class of asset. A currency is an asset that maintains value, is highly liquid (fungible), and can serve as a unit of account. Of the three criteria, “real estate” as described by the OP only falls short in the third instance. Hence it is as “currency-like” as certain more traditional components of the monetary supply. This is unusual since real estate is typically not very liquid, or at least wasn't considered to be liquid ‘enough’ and typically earns rates of return (net of maintenance) and had high opportunity costs (much how cigarettes in POW camps can only serve as currency if the prisoner decides not to actually smoke them, homes owned by those who dwell in them are not available for liquidation).
  - deleted 11y ago
    [deleted]
  - theseatoms 11y ago
    Real estate is highly liquid? Compared to what? You'd be hard pressed to find many economists (or other well-informed individuals) who would consider real estate a currency. Though at some point we're just debating semantics. Edit: Also, real estate is extremely non-fungible, as individual instances of the asset class are not easily interchangeable.
    - Jtsummers 11y ago
      And unless you have dozens or hundreds or thousands of acres, you can't subdivide it effectively. Let's say your property is worth $100,000. How do you get only $50,000 worth of value out of it? You have to sell the whole thing, do you then convert the remaining $50k to some other real estate? I suppose you can take out a second (third/fourth/fifth) mortgage on it for the desired value, but then you're stuck paying back that loan. So the property hasn't really provided you any direct value, just collateral to back your debts. It's a value store, but hardly a currency.
johnrob 11y ago
There may be another link between QE and housing: I suspect a large motivator of QE was to avoid deflation, which could have caused a large number of foreclosures. So the notion of QE propping up home prices might have been the intended effect. Edit: this also seems in accord with your notion of housing as a currency. If dollar inflation is tied to home prices, then to allow prices to drop is to deflate the dollar - something our government won't allow. So home prices have to be protected as a form of anti-deflationary measures.
- treebeard901 11y ago
  I agree that one intended effect of QE was to reinflate the housing market. One problem was homes being way overvalued. After prices somewhat balanced out, the problem was a lack of credit available for most people wanting to buy into the market. So many changes have happened over the past few years to the U.S. and global economies that I seriously question the understanding behind modern inflation and deflation. We have been fighting a deflationary spiral since 2008 and it seems like we have almost run out of ammo.
roymurdock 11y ago
> I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades. It does go down once in a while but it comes roaring back in relatively short time. Even when dropping, it rarely goes below 25% protecting most of the principal. This is about the only item that had massive inflation in past 7 years. This is incorrect. The median new house price in the US hit a pre-recession peak in March 2007 of $262,600. In Nov 2015, the price was $305,000. An investment in a theoretical "median real estate" fund would have returned 16.4% over the 7 year period. [1] An investment in the S&P500, say through SPY or the Vanguard ETF (if it had been available pre 2009) would have returned 27.9% over the same period, or 53.1% if you had reinvested your 5.0% annualized dividends. [2] At a more granular level (using Zillow data) - the median housing price in San Francisco over the same period increased from $786k to $1.12m for a return of 42.4%. Cambridge, 47.0%. Manhattan, 66.6%. San Diego? 3.5%. Boise? -12.6%. St. Louis? -22.9%. Detroit? -49.6%. Did you know that the median sales price of a house in Detroit is currently $38.4k? --- > In economics, you can make anything a currency which cannot be manufactured easily and is available in quantity that is very hard to grow. Economists are puzzled why the tons of money poured in to system through QEs isn't producing any inflation. I think QEs are indeed producing massive inflation but it all goes in to real estate. Funds like Blackstone eventually ends up with significant chunk of QE money and guess what is their major investment activity these days? The easy "inexpensive" money is the best way to inflate real estate. Economists are (for the most part) in agreement that QE is not causing inflation due to a lack of aggregate demand. Here is an article [3] in which Brad DeLong (UC Berkeley, Keynesian-adherent) agrees with Joseph Stiglitz (Nobel Laureate, voted 4th "most influential" economist in the world today) when he makes the following assertion: The economics of this inertia is easy to understand, and there are readily available remedies. The world faces a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity...The only cure for the world's malaise is an increase in aggregate demand. Far-reaching redistribution of income would help, as would deep reform of our financial system -- not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs. [4] --- What does this have to do with the higher real estate prices in urban centers? I believe that what is truly happening is that many are flocking to a decreasing number of cores (usually around universities that churn out well-educated but low-paid graduates) for fewer aggregate job opportunities in select sectors: finance, tech, entertainment, business services (consulting, HR, accounting, etc.), and services (food, drinks, nail salons, etc.). This has happened in a relatively short amount of time as the employment market is generally more fluid and less regulated than the housing market, which is restricted and regulated in the extreme in high-demand, high-price markets. It takes 2-3 years for an org to restructure its work force, but it takes decades to make meaningful changes to the way a city is built. [1] https://www.census.gov/construction/nrs/pdf/uspricemon.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf [2] http://dqydj.net/sp-500-return-calculator/ http://dqydj.net/sp-500-return-calculator/ [3] http://www.huffingtonpost.com/brad-delong/global-economic-depression_b_8924596.html http://www.huffingtonpost.com/brad-delong/global-economic-de... [4] http://www.huffingtonpost.com/joseph-e-stiglitz/world-economy-2016_b_8908560.html?utm_hp_ref=world http://www.huffingtonpost.com/joseph-e-stiglitz/world-econom...
mrfusion 11y ago
I like your theory a lot. What are your thoughts on why gold isn't playing this role? Gold is actually down.
- sytelus 11y ago
  I think gold prices are impacted by its industrial use as well. So when that component drops, prices goes down. Another component of gold investment is to compensate for inflation which is also down except in real estate. Yet another component of gold investment is to hedge against short term loss in stock markets which was also down because of tremendous gains in S&P. The real estate is a different beast: There is no industrial component and no short term hedges. Also unlike gold, real estate can generate passive returns in form of rents.
- prostoalex 11y ago
  Gold is the instrument of choice for growth investor with inflation fears (i.e. it's rumored to hold its value when inflation speeds up). It is not free to own in large quantities, as one must incur additional storage and security costs. Real estate is the instrument of choice for income investor with inflation fears (i.e. if all goes bad, you can still rent it out, and that rent will still bring something). Through successful lobbying it's relatively cheap to own if you buy in a state with low property taxes.
  - mrfusion 11y ago
    There's a gold etf that's easy to own.
    - prostoalex 11y ago
      Yeah, I guess I skipped over the fact that a home has property taxes and insurance/maintenance costs that would add up. I think the key is the optionality of real estate for income purposes. In a down market real estate can still generate some monthly cashflow, the only way one could do it with gold ETF is lend out the shares to short-sellers.

by sytelus 11y ago

mixmastamyk 11y ago

> I think there is something else going on in real estate. It is supported, subsidized, and protected by the government at almost any cost, with the result that average-income people can no longer afford a home in desirable areas.

qubex 11y ago
If people were really being priced out eventually San Francisco would fizzle out as a centre for innovation and the interest would move elsewhere. It probably isn't going to happen any more than high prices in New York failed to price out banks and bankers.
- mixmastamyk 11y ago
  It's not the rich that gets priced out.
  - qubex 11y ago
    Of course not: that's the very definition of ‘rich’ — having greater spending power than others.
    - mixmastamyk 11y ago
      > It probably isn't going to happen any more than high prices in New York failed to price out banks and bankers.
ProAm 11y ago
And is backed by a permanently growing population, where land is finite.

JumpCrisscross 11y ago

> I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades Home prices only started rising, in real terms, after WWII [1]. This appears to be driven by people wanting to drive more income to buying land, i.e. treating land as a superior good. Growing government intervention is also likely a cause. I'd caution against extrapolating two generations encapsulating post-World-War and -Cold-War booms too far. [1] https://www.dallasfed.org/assets/documents/institute/wpapers/2014/0208.pdf https://www.dallasfed.org/assets/documents/institute/wpapers...

yggydrasily 11y ago

The "something else" is money laundering (i.e., all-cash purchases with zero oversight). Thankfully, the US government is finally starting to crack down on this stuff: http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxury-real-estate.html http://www.nytimes.com/2016/01/14/us/us-will-track-secret-bu... But so far it's only in other cities. I'm hoping this will spread to the rest of the USA and then we won't have so many foreign criminals buying land with suitcases full of ill-gotten cash, driving up prices.

bduerst 11y ago
Hopefully as the USD strengthens against the Yuan and Ruble, you'll start to see less international property laundering. Maybe even some will start to sell, putting supply back onto the market and lowering prices.
- abcampbell 11y ago
  I am not sure this is how that works.
  - bduerst 11y ago
    Which part?
    - abcampbell 11y ago
      Chinese investors are putting money into SF real estate with the goal of exporting capital to safer havens. Were China to choose to depreciate their currency (especially at a faster rate than they are currently) this could lead to an acceleration in attempts to export capital. It's not clear which way this linkage works (at least to me)
      - bduerst 11y ago
        The Chinese launderers are putting into SF property. In August 2015, 35% of new property in CA was bought by the Chinese (80% in Irvine alone). If the Yuan weakens to USD, the Chinese have less buying power in the U.S. for laundering, and existing launderers will be incentivized to pull out (sell).

disposition2 11y ago

Not to simplify it but chances are there is more gold in the ground, real estate is the one commodity that is truly finite. Granted, people can always build on unbuilt land but that in turn requires infrastructure, etc to support a new community or residence. For this reason, it being finite, I wish the US government would set some restrictions on allowing business and foreign investments to purchase residential real estate. It is hard enough (San Francisco seems like a large part of the rest of the US on steroids) for working people to purchase these days...having empty homes bought by non-residents just sit waiting until the prices are forced (due to said) to rise is only going to exacerbate the situation.

qubex 11y ago
Those purchases “by business or foreigners” transfer cash to the seller and be up in the economy anyway. Homeowners who sell do so because it is in their interest to do so, the restriction you propose would be Pareto-inefficient.
- sytelus 11y ago
  Or is it? The money flowed in real estate will most likely immediately get used to buy other houses and there by inflating homes even further. I don't think anyone sells their home and uses the proceeds to buy some stock - the proceeds goes almost always immediately to buy other home. It's like you live in a village, a traveler pays you $100 for a goat which was suppose to be only $10. Then you realize goat is so valuable so you use your $100 to buy two goats from neighbor for $50 each. Now your neighbor realizes what's going on and he uses his new money plus some more buy more goats - all in anticipation that everyone needs goat and prices will keep going up. The virtuous cycle starts and sooner or later major portions of people's money keeps changing hands in form of million dollar goats. Very little of that money might actually get used for other purposes like building the hospital or school because those things don't deliver investment returns like a goat does.
vinceguidry 11y ago
> real estate is the one commodity that is truly finite This is untrue in both the literal and figurative senses. In the literal sense, real estate isn't just land, other properties of land, such as mineral or air rights, can also be created, bought, and sold. You can build up and sell condominiums. You can build down. You can dredge land out of the ocean. Eventually you'll be able to build out in space. In the figurative sense, people make this claim to assert that real estate is becoming rare, and therefore intrinsically valuable. While certain markets definitely are this way, like NYC penthouses, the asset class as a whole is much like it's brethren in this regard. Value is in the eye of the beholder, trends develop rapidly and can bolster or devalue individual properties at breathtaking rates.

jusben1369 11y ago

To be fair only some economists thought QE would be inflationary. Many understood it would not. And why would you call real estate a currency and not an asset class? Most of your comments indicate you think it's a highly attractive asset class vs really a currency.

qubex 11y ago
Currency is a class of asset. A currency is an asset that maintains value, is highly liquid (fungible), and can serve as a unit of account. Of the three criteria, “real estate” as described by the OP only falls short in the third instance. Hence it is as “currency-like” as certain more traditional components of the monetary supply. This is unusual since real estate is typically not very liquid, or at least wasn't considered to be liquid ‘enough’ and typically earns rates of return (net of maintenance) and had high opportunity costs (much how cigarettes in POW camps can only serve as currency if the prisoner decides not to actually smoke them, homes owned by those who dwell in them are not available for liquidation).
- deleted 11y ago
  [deleted]
- theseatoms 11y ago
  Real estate is highly liquid? Compared to what? You'd be hard pressed to find many economists (or other well-informed individuals) who would consider real estate a currency. Though at some point we're just debating semantics. Edit: Also, real estate is extremely non-fungible, as individual instances of the asset class are not easily interchangeable.
  - Jtsummers 11y ago
    And unless you have dozens or hundreds or thousands of acres, you can't subdivide it effectively. Let's say your property is worth $100,000. How do you get only $50,000 worth of value out of it? You have to sell the whole thing, do you then convert the remaining $50k to some other real estate? I suppose you can take out a second (third/fourth/fifth) mortgage on it for the desired value, but then you're stuck paying back that loan. So the property hasn't really provided you any direct value, just collateral to back your debts. It's a value store, but hardly a currency.

johnrob 11y ago

There may be another link between QE and housing: I suspect a large motivator of QE was to avoid deflation, which could have caused a large number of foreclosures. So the notion of QE propping up home prices might have been the intended effect. Edit: this also seems in accord with your notion of housing as a currency. If dollar inflation is tied to home prices, then to allow prices to drop is to deflate the dollar - something our government won't allow. So home prices have to be protected as a form of anti-deflationary measures.

treebeard901 11y ago
I agree that one intended effect of QE was to reinflate the housing market. One problem was homes being way overvalued. After prices somewhat balanced out, the problem was a lack of credit available for most people wanting to buy into the market. So many changes have happened over the past few years to the U.S. and global economies that I seriously question the understanding behind modern inflation and deflation. We have been fighting a deflationary spiral since 2008 and it seems like we have almost run out of ammo.

roymurdock 11y ago

> I think there is something else going on in real estate. This is the only asset class with significantly above average gains for decades. It does go down once in a while but it comes roaring back in relatively short time. Even when dropping, it rarely goes below 25% protecting most of the principal. This is about the only item that had massive inflation in past 7 years. This is incorrect. The median new house price in the US hit a pre-recession peak in March 2007 of $262,600. In Nov 2015, the price was $305,000. An investment in a theoretical "median real estate" fund would have returned 16.4% over the 7 year period. [1] An investment in the S&P500, say through SPY or the Vanguard ETF (if it had been available pre 2009) would have returned 27.9% over the same period, or 53.1% if you had reinvested your 5.0% annualized dividends. [2] At a more granular level (using Zillow data) - the median housing price in San Francisco over the same period increased from $786k to $1.12m for a return of 42.4%. Cambridge, 47.0%. Manhattan, 66.6%. San Diego? 3.5%. Boise? -12.6%. St. Louis? -22.9%. Detroit? -49.6%. Did you know that the median sales price of a house in Detroit is currently $38.4k? --- > In economics, you can make anything a currency which cannot be manufactured easily and is available in quantity that is very hard to grow. Economists are puzzled why the tons of money poured in to system through QEs isn't producing any inflation. I think QEs are indeed producing massive inflation but it all goes in to real estate. Funds like Blackstone eventually ends up with significant chunk of QE money and guess what is their major investment activity these days? The easy "inexpensive" money is the best way to inflate real estate. Economists are (for the most part) in agreement that QE is not causing inflation due to a lack of aggregate demand. Here is an article [3] in which Brad DeLong (UC Berkeley, Keynesian-adherent) agrees with Joseph Stiglitz (Nobel Laureate, voted 4th "most influential" economist in the world today) when he makes the following assertion: The economics of this inertia is easy to understand, and there are readily available remedies. The world faces a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity...The only cure for the world's malaise is an increase in aggregate demand. Far-reaching redistribution of income would help, as would deep reform of our financial system -- not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs. [4] --- What does this have to do with the higher real estate prices in urban centers? I believe that what is truly happening is that many are flocking to a decreasing number of cores (usually around universities that churn out well-educated but low-paid graduates) for fewer aggregate job opportunities in select sectors: finance, tech, entertainment, business services (consulting, HR, accounting, etc.), and services (food, drinks, nail salons, etc.). This has happened in a relatively short amount of time as the employment market is generally more fluid and less regulated than the housing market, which is restricted and regulated in the extreme in high-demand, high-price markets. It takes 2-3 years for an org to restructure its work force, but it takes decades to make meaningful changes to the way a city is built. [1] https://www.census.gov/construction/nrs/pdf/uspricemon.pdf https://www.census.gov/construction/nrs/pdf/uspricemon.pdf [2] http://dqydj.net/sp-500-return-calculator/ http://dqydj.net/sp-500-return-calculator/ [3] http://www.huffingtonpost.com/brad-delong/global-economic-depression_b_8924596.html http://www.huffingtonpost.com/brad-delong/global-economic-de... [4] http://www.huffingtonpost.com/joseph-e-stiglitz/world-economy-2016_b_8908560.html?utm_hp_ref=world http://www.huffingtonpost.com/joseph-e-stiglitz/world-econom...

mrfusion 11y ago

I like your theory a lot. What are your thoughts on why gold isn't playing this role? Gold is actually down.

sytelus 11y ago
I think gold prices are impacted by its industrial use as well. So when that component drops, prices goes down. Another component of gold investment is to compensate for inflation which is also down except in real estate. Yet another component of gold investment is to hedge against short term loss in stock markets which was also down because of tremendous gains in S&P. The real estate is a different beast: There is no industrial component and no short term hedges. Also unlike gold, real estate can generate passive returns in form of rents.
prostoalex 11y ago
Gold is the instrument of choice for growth investor with inflation fears (i.e. it's rumored to hold its value when inflation speeds up). It is not free to own in large quantities, as one must incur additional storage and security costs. Real estate is the instrument of choice for income investor with inflation fears (i.e. if all goes bad, you can still rent it out, and that rent will still bring something). Through successful lobbying it's relatively cheap to own if you buy in a state with low property taxes.
- mrfusion 11y ago
  There's a gold etf that's easy to own.
  - prostoalex 11y ago
    Yeah, I guess I skipped over the fact that a home has property taxes and insurance/maintenance costs that would add up. I think the key is the optionality of real estate for income purposes. In a down market real estate can still generate some monthly cashflow, the only way one could do it with gold ETF is lend out the shares to short-sellers.