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Because, at least in the US, except for the '08 crash housing has ALWAYS gone up. Historical Graph: http://www.calculatedriskblog.com/2017/01/corelogic-house-p

Because, at least in the US, except for the '08 crash housing has ALWAYS gone up. Historical Graph: http://www.calculatedriskblog.com/2017/01/corelogic-house-prices-up-71-year-over.html http://www.calculatedriskblog.com/2017/01/corelogic-house-pr... Now, it hasn't (and hadn't) gone up as quickly as the stock exchange, but it typically is a safe place to park your equity and let it grow. And especially during the height of the bubble and currently, it's growing in value rather quickly, so people (perhaps influenced by HGTV) started viewing it as not only a safe investment but one that, with a little DIY work, could be a rather fast growing investment! EDIT: added graph/article

nommm-nommm 10y ago
Why Your House Is Not An “Investment”... a true investment requires more than the prospect of an increase in value. https://www.moneyunder30.com/why-your-house-is-not-an-investment https://www.moneyunder30.com/why-your-house-is-not-an-invest... * A house has a more important primary purpose * A house can’t be an investment if you never plan to sell it * Thinking of your house as an investment can lead to equity stripping * The carrying costs of a house are too high for it to be an investment * Your house won’t generate cash flow * Price appreciation is the magic ingredient, but it’s not guaranteed I'm not actually arguing against home ownership, I am a home owner myself. A primary home (for most people) should be thought of more as a commodity item.
- thedufer 10y ago
  > A house has a more important primary purpose Aren't houses purchased for the intent of renting them out investments? This would argue that they are not. Seems to be proving too much. Despite the title, this section of the article is actually about how illiquid houses are. Which, again, proves too much - old bonds are also extremely illiquid, but no one says they aren't investments. > A house can’t be an investment if you never plan to sell it I buy plenty of VFINX that I don't intend to ever sell. I buy them for the dividends (incidentally, the same reason I would buy a house). > Thinking of your house as an investment can lead to equity stripping This says that thinking of your house as an investment leads to poor decisions, not that it is wrong. Sure, maybe it does, but that's a completely different argument. > The carrying costs of a house are too high for it to be an investment The carrying costs of a house are typically negative, unless you conveniently forget that a house covers a short position and is thus paying you back (in the form of covering your rent). Which the article does. > Your house won’t generate cash flow Again, it is covering a short position. It saves you from paying rent, which is mathematically identical to forcing you to continue paying rent but paying you the same amount. > Price appreciation is the magic ingredient, but it’s not guaranteed This is true of all investments.
  - nommm-nommm 10y ago
    >Aren't houses purchased for the intent of renting them out investments? Those are investment properties which is a different thing than we are talking about. We are talking about a primary residence bought to live in. Yes, some investments are illiquid, I have some personally, but its stupid to have your entire portfolio in illiquid assets. >I buy plenty of VFINX that I don't intend to ever sell. I buy them for the dividends (incidentally, the same reason I would buy a house). A house doesn't provide dividends. Unless you are talking about investment properties, which, again, isn't what we are talking about here. >The carrying costs of a house are typically negative Doubtful. Very, very, few people are going to spend as much on rent as they would a house. Houses have a way of eating away at your money in a way renting does not. The carrying cost of my house is certainly not negative. Of course, "you have to live somewhere" muddles the water a little bit. But its designed to get you to think about your house as more "somewhere to live" rather than "something to build wealth." >This is true of all investments. Which is why we diversify, to minimize risk. The American mindset is "buy a house because your house will make you rich." So people overspend on houses neglecting any other investments or savings in the process. That's the real problem.
    - thedufer 10y ago
      > A house doesn't provide dividends. Unless you are talking about investment properties, which, again, isn't what we are talking about here. A house pays you by saving you rent, which as I pointed out farther down is mathematically indistinguishable from renting it to someone else and continuing to pay rent (although this is muddied a bit by tax laws that care about whether the owner is also the tenant). > Very, very, few people are going to spend as much on rent as they would a house. This can only be true if you're not comparing similar housing - like, yeah, if I buy a house twice as big as the one I was renting I've lost money. But if you're comparing like for like, this assertion implies that investment properties are a net loss. It's a bit curious how those rental companies stay in business. I agree with most of your responses, though. But they are all arguments that your house is a _bad_ investment, which is different from it not being an investment at all.
jcranmer 10y ago
One of the principle causes of the '08 crash was that financiers thought they found a free lunch: there's no way a geographically-diverse portfolio of real estate could crash in value, right?
FireBeyond 10y ago
"(perhaps influenced by HGTV)" Oh, yes. "So before we reno'ed your house, it was worth $300K. We put $50K into renovations and it's now worth $400K!" Just like ... "magic". Now I know this is simplistic, as the value of an actual improvement which has had the planning, effort and time in does have a premium over the pure investment. But some of this was farcical, and lead many to believe they could do the same.

nommm-nommm 10y ago

Why Your House Is Not An “Investment”... a true investment requires more than the prospect of an increase in value. https://www.moneyunder30.com/why-your-house-is-not-an-investment https://www.moneyunder30.com/why-your-house-is-not-an-invest... * A house has a more important primary purpose * A house can’t be an investment if you never plan to sell it * Thinking of your house as an investment can lead to equity stripping * The carrying costs of a house are too high for it to be an investment * Your house won’t generate cash flow * Price appreciation is the magic ingredient, but it’s not guaranteed I'm not actually arguing against home ownership, I am a home owner myself. A primary home (for most people) should be thought of more as a commodity item.

thedufer 10y ago
> A house has a more important primary purpose Aren't houses purchased for the intent of renting them out investments? This would argue that they are not. Seems to be proving too much. Despite the title, this section of the article is actually about how illiquid houses are. Which, again, proves too much - old bonds are also extremely illiquid, but no one says they aren't investments. > A house can’t be an investment if you never plan to sell it I buy plenty of VFINX that I don't intend to ever sell. I buy them for the dividends (incidentally, the same reason I would buy a house). > Thinking of your house as an investment can lead to equity stripping This says that thinking of your house as an investment leads to poor decisions, not that it is wrong. Sure, maybe it does, but that's a completely different argument. > The carrying costs of a house are too high for it to be an investment The carrying costs of a house are typically negative, unless you conveniently forget that a house covers a short position and is thus paying you back (in the form of covering your rent). Which the article does. > Your house won’t generate cash flow Again, it is covering a short position. It saves you from paying rent, which is mathematically identical to forcing you to continue paying rent but paying you the same amount. > Price appreciation is the magic ingredient, but it’s not guaranteed This is true of all investments.
- nommm-nommm 10y ago
  >Aren't houses purchased for the intent of renting them out investments? Those are investment properties which is a different thing than we are talking about. We are talking about a primary residence bought to live in. Yes, some investments are illiquid, I have some personally, but its stupid to have your entire portfolio in illiquid assets. >I buy plenty of VFINX that I don't intend to ever sell. I buy them for the dividends (incidentally, the same reason I would buy a house). A house doesn't provide dividends. Unless you are talking about investment properties, which, again, isn't what we are talking about here. >The carrying costs of a house are typically negative Doubtful. Very, very, few people are going to spend as much on rent as they would a house. Houses have a way of eating away at your money in a way renting does not. The carrying cost of my house is certainly not negative. Of course, "you have to live somewhere" muddles the water a little bit. But its designed to get you to think about your house as more "somewhere to live" rather than "something to build wealth." >This is true of all investments. Which is why we diversify, to minimize risk. The American mindset is "buy a house because your house will make you rich." So people overspend on houses neglecting any other investments or savings in the process. That's the real problem.
  - thedufer 10y ago
    > A house doesn't provide dividends. Unless you are talking about investment properties, which, again, isn't what we are talking about here. A house pays you by saving you rent, which as I pointed out farther down is mathematically indistinguishable from renting it to someone else and continuing to pay rent (although this is muddied a bit by tax laws that care about whether the owner is also the tenant). > Very, very, few people are going to spend as much on rent as they would a house. This can only be true if you're not comparing similar housing - like, yeah, if I buy a house twice as big as the one I was renting I've lost money. But if you're comparing like for like, this assertion implies that investment properties are a net loss. It's a bit curious how those rental companies stay in business. I agree with most of your responses, though. But they are all arguments that your house is a _bad_ investment, which is different from it not being an investment at all.

jcranmer 10y ago

One of the principle causes of the '08 crash was that financiers thought they found a free lunch: there's no way a geographically-diverse portfolio of real estate could crash in value, right?

FireBeyond 10y ago

"(perhaps influenced by HGTV)" Oh, yes. "So before we reno'ed your house, it was worth $300K. We put $50K into renovations and it's now worth $400K!" Just like ... "magic". Now I know this is simplistic, as the value of an actual improvement which has had the planning, effort and time in does have a premium over the pure investment. But some of this was farcical, and lead many to believe they could do the same.