3 ms·
>Real estate is one of the best ways to make long-term wealth The long-run real returns to real estate are essentially zero. TINSTAAFL. The only reason it's
by idiot_stick 10y ago
>Real estate is one of the best ways to make long-term wealth
The long-run real returns to real estate are essentially zero. TINSTAAFL.
The only reason it's "profitable" for the average person is because the financial system allows for easy leverage (home mortgages). Take away that subsidization and real estate is just another asset class with no advantages.
>Homes in many regions of California have increased 3-4x since 1996
And many random stocks have increased 3-4x since 1996. So what?
- pg314 10y agoIf the long-run real returns are zero, they will also be zero with leverage (assuming you can borrow at a zero real intrest rate). Leverage is only an advantage if your return is higher than your cost of borrowing.
- idiot_stick 10y ago>Leverage is only an advantage if your return is higher than your cost of borrowing. Which it is for housing, and many other investments. Only the bank won't lend you $500,000, backed by the government, to buy stocks. My qualm with the OP was the implication that real-estate has outsized returns. Unless you're taking advantage of a home mortgage, there's nothing significant about real-estate returns. Of course most of us here are of the generation that saw nothing but rising house price (except for that one time where they didn't, but that's an anomaly, right?)