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I agree and disagree. In most areas, I think it's true that other asset classes outperform real estate. One challenge in the Bay Area is that housing has been g

I agree and disagree. In most areas, I think it's true that other asset classes outperform real estate. One challenge in the Bay Area is that housing has been going up faster than non-housing investments. For example, I just checked the house next door to me on Trulia, and it's up 6X in 20 years. That's an almost 10% annual rate of return. So in fact if you don't own a house, you're probably falling even further behind from your house-owning peers. At least in this area.

overeater 8y ago
So you're saying if you buy a house, you will be making incredible gains. If not, then you will be making gains at least as good as everywhere else. Sounds like win-win to me.
- lpolovets 8y ago
  There are very few assets that return 10% annually for 20 years. It's impossible to know what will happen in the next 20 years, but owning a house in the Bay Area for the last few decades would have been a much better investment than paying a little less for rent and investing what's left over.
  - fjsolwmv 8y ago
    6x in 20years is lower return than stock shares in most of the employers that have been driving up housing prices (for obvious reasons -- those companies' growth are funding the housing price gains)
    - usaar333 8y ago
      Not sure why you are being downvoted, but this is correct. The returns on VITAX far outperformed leveraged housing. (see 3rd final thought at https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...) Besides, 10% is about the long-term S&P 500 average return.
      - hikarudo 8y ago
        Not to mention that by owning you have to pay property tax, which should be considered when comparing investment returns.
    - jfnixon 8y ago
      It is normally a Bad Idea to invest heavily in your employer due to the Putting All Your Eggs In One Basket principle. If anything happens, you lose your job and investments.
- 49bc 8y ago
  But you can’t live in your other investments.
sxates 8y ago
You're under-stating the return. Unlike other investments you can leverage the house with a mortgage. Assuming you put only 20% down you're making 50%/year gains.
- usaar333 8y ago
  Except every year you are paying about 6% of the purchase price in principal and interest and property tax (plus maintenance and water), so the math isn't quite that simple.

overeater 8y ago

So you're saying if you buy a house, you will be making incredible gains. If not, then you will be making gains at least as good as everywhere else. Sounds like win-win to me.

lpolovets 8y ago
There are very few assets that return 10% annually for 20 years. It's impossible to know what will happen in the next 20 years, but owning a house in the Bay Area for the last few decades would have been a much better investment than paying a little less for rent and investing what's left over.
- fjsolwmv 8y ago
  6x in 20years is lower return than stock shares in most of the employers that have been driving up housing prices (for obvious reasons -- those companies' growth are funding the housing price gains)
  - usaar333 8y ago
    Not sure why you are being downvoted, but this is correct. The returns on VITAX far outperformed leveraged housing. (see 3rd final thought at https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-the-bay-area-right-now-9eff37da8d6 https://medium.com/@usaar33/why-you-shouldnt-buy-a-home-in-t...) Besides, 10% is about the long-term S&P 500 average return.
    - hikarudo 8y ago
      Not to mention that by owning you have to pay property tax, which should be considered when comparing investment returns.
  - jfnixon 8y ago
    It is normally a Bad Idea to invest heavily in your employer due to the Putting All Your Eggs In One Basket principle. If anything happens, you lose your job and investments.
49bc 8y ago
But you can’t live in your other investments.

sxates 8y ago

You're under-stating the return. Unlike other investments you can leverage the house with a mortgage. Assuming you put only 20% down you're making 50%/year gains.

usaar333 8y ago
Except every year you are paying about 6% of the purchase price in principal and interest and property tax (plus maintenance and water), so the math isn't quite that simple.