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Like all leveraged bets, if it doesn't beat inflation you get destroyed by interest. If we have a crisis like 2008 the leverage works against you. I understan

Like all leveraged bets, if it doesn't beat inflation you get destroyed by interest. If we have a crisis like 2008 the leverage works against you. I understand in certain markets if one is diligent they can be quite profitable as a real estate investor. That is not what I am talking about - I mean the median U.S. home. That's not quite as strong of a case for investment. I'd suggest most buy a home for lifestyle first, and maybe at best a forced savings account second. But huge congrats to those living in areas which have seen incredible growth! Just understand it's not the norm. Now what happened this past year is rather peculiar and it's going to be interesting to see how that unfolds.

arcticbull 5y ago
> Like all leveraged bets, if it doesn't beat inflation you get destroyed by interest. If we have a crisis like 2008 the leverage works against you. This isn't actually relevant because mortgage interest, minus tax credits, is well below inflation. The base case on a 30 year fixed is that you end up ahead just by having the loan. > That is not what I am talking about - I mean the median U.S. home. That's not quite as strong of a case for investment. I'd suggest most buy a home for lifestyle first, and maybe at best a forced savings account second. I'm not sure there is a "median US home" because it's super multi-modal. There's an urban homes, suburban homes and exurban/rural homes. Each will have a different risk/reward profile. > Now what happened this past year is rather peculiar and it's going to be interesting to see how that unfolds. Indeed. By the way, all this is to say, I also do not think that buying a home a guaranteed win by any stretch. You have maintenance/upkeep costs, insurance costs, potentially HOA dues. You lose a lot of flexibility. And potentially most importantly, you lose out on the opportunity cost associated with your down payment. Plus, you have a lot more risk if the market moves against you. Returns are never guaranteed even if you're in a historically appreciating market. There's some great calculators that cover all this to tell you if you should rent or own - and in my early 20s, the calculator rightly said I should not own, even though I was in an appreciating area. [1] [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

arcticbull 5y ago

> Like all leveraged bets, if it doesn't beat inflation you get destroyed by interest. If we have a crisis like 2008 the leverage works against you. This isn't actually relevant because mortgage interest, minus tax credits, is well below inflation. The base case on a 30 year fixed is that you end up ahead just by having the loan. > That is not what I am talking about - I mean the median U.S. home. That's not quite as strong of a case for investment. I'd suggest most buy a home for lifestyle first, and maybe at best a forced savings account second. I'm not sure there is a "median US home" because it's super multi-modal. There's an urban homes, suburban homes and exurban/rural homes. Each will have a different risk/reward profile. > Now what happened this past year is rather peculiar and it's going to be interesting to see how that unfolds. Indeed. By the way, all this is to say, I also do not think that buying a home a guaranteed win by any stretch. You have maintenance/upkeep costs, insurance costs, potentially HOA dues. You lose a lot of flexibility. And potentially most importantly, you lose out on the opportunity cost associated with your down payment. Plus, you have a lot more risk if the market moves against you. Returns are never guaranteed even if you're in a historically appreciating market. There's some great calculators that cover all this to tell you if you should rent or own - and in my early 20s, the calculator rightly said I should not own, even though I was in an appreciating area. [1] [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...