patrick.net

Yep, houses return negative rates when you take into account upkeep. And this makes perfect sense. Houses provide shelter, but they produce no goods or services. Meanwhile, like all physical things, they deteriorate.

Under non-bubble conditions, the only way real estate is a good investment is if you can rent it out at a rate that makes the purchase worthwhile, but under those conditions you'll have a hard time finding renters because it makes sense for renters to buy as well.

And then you have to consider the work involved in being a landlord, especially if the people you rent to turn out to be assholes. Are you willing to put up with a lot of frustration?

Every study ever conducted has shown that stocks kill real estate as investment over the long run. It's not even close.

Houses were meant to be lived in, not to be used as sources of income.

Anyone have a clip from CBS in 2004 where they tell their loyal viewers not to miss out on the real estate boom?

cvos says

Anyone have a clip from CBS in 2004 where they tell their loyal viewers not to miss out on the real estate boom

You might have to go back further. I have a Forbes magazine article from 2005 advising six months of savings is especially important given the boom in housing with no fundamental base and its certain decline.

FunTime says

article from 2005 advising six months of savings is especially important given the boom in housing with no fundamental base and its certain decline.

Do you have a link to this article? I distinctly remember the mass media praising the re boom without ever mentioning any impending de-leveraging.

That was the general consensus before 2000.
I mean sure you could always buy in expensive neighborhood that always goes up, but by the time you cashed out in a decade or so, taxes would have ate up all of your profits.

SFace says

"The return on investment for a homeowner should also consider the imputed rental income (meaning the money you save by owning instead of renting), net of all costs. A study covering the period 1952-2005 found that when costs and imputed rental income were included, the real return to homeowners was 6.9 percent, comparable to the 7.3 percent real return for the S&P 500."

TPB says

That was the general consensus before 2000.

True, the housing bubble completely destroyed the rent-saving aspect of buying a house. Perhaps in another five to ten years this principle will return.

However, one must also realize that the analysis of rent vs. buy is comparing the same property or an equivalent one. I find that most people are willing to rent less house than they ultimately buy. When you take this into consideration, the rent vs. buy comparison is more geared towards rent.

Thus, the real motivation for buying a house should be that you want to settle down and live in there, or you have done the math and it makes sense to rent out the house. Flipping a house isn't always a good investment.