(heavily adapted/paraphrased/quoted from 28 Feb 2006 Berkshire Hathaway Chairman Letter by Warren E. Buffett) The explanation begins with a fundamental truth:

(heavily adapted/paraphrased/quoted from 28 Feb 2006 Berkshire Hathaway Chairman Letter by Warren E. Buffett) The explanation begins with a fundamental truth: With unimportant exceptions, such as foreclosures (in which some of a seller's losses are borne by creditors) the most that a real estate investor, in aggregate, can earn between now and Judgment Day is what the market, in aggregate, earns. True, by buying and selling clever or lucky, investor A may take more than his share of the pie at the expense of investor B. And, yes, all investors feel richer when prices soar. But an owner can exit only by having someone take his place. If one investor sells high, another must buy high. For owners as a whole, there is simply no magic-- no shower of money from outer space-- that will enable them to extract wealth from their homes beyond that created by the markets themselves. Indeed, owners must earn less than their markets earn because of "frictional" costs. And that's my point: These costs are now being incurred in amounts that will cause homeowners to earn far less than they historically have.