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It's been really sad to see people still continue to equate homes with investments like 2008 never happened.

dsfyu404ed 8y ago
Your primary residence is an investment, just not one you can liquidate at will (or at all in some cases) or that you can expect to appreciate. Your 2-N homes are also investments, just riskier ones than they were thought to be previously. Whether people know this or are just blindly parroting outdated advice remains to be seen.
- TheCowboy 8y ago
  A primary residence is not by definition an investment. It is a depreciating asset, but that does not mean it is an investment. The reasons for having one or more homes are not primarily or always to generate a return or income. It is possible to use your primary residence as an investment, but everyone still needs a place to live, so it is also a form of consumption. If you want to consider it an investment by definition, then you should actually explain how it is an investment.
- DINKDINK 8y ago
  An investment is an entity you allocate capital to, to enable wealth creation. e.g. A baker buying an oven. Speculation is allocation of capital to an entity because you believe you or someone else will need it in the future. e.g. A banker buying a baker's oven. A primary residence is at best an investment (you need to live somewhere to earn an income), a second residence is purely speculation. The housing market is highly highly leverage with the median ratio ~= 14:1 [1]. Since small changes to the amount of money inflated by commercial banks and the Federal Reserve can have extreme consequences on prices, it's highly inadvisable to speculate in highly leverage markets. [1] 7% median down payment, 1/.07~=14 https://www.attomdata.com/news/mortgage-and-finance/q3-2017-u-s-home-loan-origination-report/ https://www.attomdata.com/news/mortgage-and-finance/q3-2017-...
- CydeWeys 8y ago
  Your primary residence is not an investment. It's a place for you to live. It usually makes sense to buy even if you would lose money over time simply because you'd likely lose more from paying rent. Being able to sell your house for more than you paid for it at some point in the future is a nice bonus if you were fortunate and it appreciated above inflation over that time period, but this is by no means guaranteed, and you shouldn't count on it. The average American loses money on real estate once you factor in inflation, property taxes, interest, and maintenance. Yes, we hear all sorts of stories about houses appreciating six figures per year in the Bay Area but that is very, very far from the typical American experience.
trhway 8y ago
I bought at the peak, in the Spring of 2008, and so far it has been the best investment I ever did. They dont make new land anymore while population growth continues and more and more money is printed. The changing climate [real as well as political] also makes many places less livable than before. That all makes for strong appreciation at good places.
- babygoat 8y ago
  That's a great anecdote. I was speaking generally, of course.
  - throwawaymath 8y ago
    And generally speaking, the value of real estate trends upward over time. Land and real estate are very legitimate investment vehicles. That fact is not diminished just because they can lose value. All investments can lose value.
jowiar 8y ago
It is an investment, in the sense that you are buying an asset that you may sell in the future. It just may not have a positive return, and you almost certainly want a reasonably diverse portfolio of investments (if a high percentage of your net worth is in one piece of real estate, you don't have a diversified portfolio).

Your primary residence is an investment, just not one you can liquidate at will (or at all in some cases) or that you can expect to appreciate. Your 2-N homes are also investments, just riskier ones than they were thought to be previously. Whether people know this or are just blindly parroting outdated advice remains to be seen.

TheCowboy 8y ago
A primary residence is not by definition an investment. It is a depreciating asset, but that does not mean it is an investment. The reasons for having one or more homes are not primarily or always to generate a return or income. It is possible to use your primary residence as an investment, but everyone still needs a place to live, so it is also a form of consumption. If you want to consider it an investment by definition, then you should actually explain how it is an investment.
DINKDINK 8y ago
An investment is an entity you allocate capital to, to enable wealth creation. e.g. A baker buying an oven. Speculation is allocation of capital to an entity because you believe you or someone else will need it in the future. e.g. A banker buying a baker's oven. A primary residence is at best an investment (you need to live somewhere to earn an income), a second residence is purely speculation. The housing market is highly highly leverage with the median ratio ~= 14:1 [1]. Since small changes to the amount of money inflated by commercial banks and the Federal Reserve can have extreme consequences on prices, it's highly inadvisable to speculate in highly leverage markets. [1] 7% median down payment, 1/.07~=14 https://www.attomdata.com/news/mortgage-and-finance/q3-2017-u-s-home-loan-origination-report/ https://www.attomdata.com/news/mortgage-and-finance/q3-2017-...
CydeWeys 8y ago
Your primary residence is not an investment. It's a place for you to live. It usually makes sense to buy even if you would lose money over time simply because you'd likely lose more from paying rent. Being able to sell your house for more than you paid for it at some point in the future is a nice bonus if you were fortunate and it appreciated above inflation over that time period, but this is by no means guaranteed, and you shouldn't count on it. The average American loses money on real estate once you factor in inflation, property taxes, interest, and maintenance. Yes, we hear all sorts of stories about houses appreciating six figures per year in the Bay Area but that is very, very far from the typical American experience.

trhway 8y ago

I bought at the peak, in the Spring of 2008, and so far it has been the best investment I ever did. They dont make new land anymore while population growth continues and more and more money is printed. The changing climate [real as well as political] also makes many places less livable than before. That all makes for strong appreciation at good places.

babygoat 8y ago
That's a great anecdote. I was speaking generally, of course.
- throwawaymath 8y ago
  And generally speaking, the value of real estate trends upward over time. Land and real estate are very legitimate investment vehicles. That fact is not diminished just because they can lose value. All investments can lose value.

jowiar 8y ago

It is an investment, in the sense that you are buying an asset that you may sell in the future. It just may not have a positive return, and you almost certainly want a reasonably diverse portfolio of investments (if a high percentage of your net worth is in one piece of real estate, you don't have a diversified portfolio).