
A house is a terrible investment (2013) - kaues
https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
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willnz
I realise a stock market index fund will perform better than real estate over
the long term, but not all real estate is the same.

Surely, buying a property in a vibrant city that is growing and is a nice
place to live will likely mean your property value will greatly outpace
inflation in the long term?

We bought a house over 10 years ago for $361k spending $50k of our own money.

We sold it last year for $900k.

I don't think it was a terrible investment...

Could we have got similar returns by investing $50k in the stock market
instead? Remember, the cost to pay off the mortgage is mostly offset by the
fact you would otherwise have to pay rent.

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kichik
That's a very good profit even when accounting for interest (~$144k), taxes
(~$29k) and maintenance (not sure, maybe $10k a year?). Definitely better than
2.5x your $50k with an index fund tied to S&P 500.

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willnz
Even better, I live in New Zealand - we have no capital gains tax here!

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0b0001
The author doesn't really take into account that many people seek stability,
not maximum profit. The article is out of scope for most who consider a house
in favor of renting.

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pseudoramble
True. When this topic comes up in /r/personalfinance or
/r/financialindependence it's usually from the point of view that an
investment is purely a means to make money given some up-front. It
specifically excludes things that people want or need outside of the
investment itself.

Then usually the conversation follows into your point. There are plenty of
other reasons to buy a house. Buying a house with only the intent on making
money is the point they're discussing.

~~~
notacoward
> Buying a house with only the intent on making money is the point they're
> discussing.

Even from that perspective the article manages to miss a critically important
point. Nobody buys a house as an investment and _leaves it empty_ until they
sell it. They buy it and rent it out, so any analysis that leaves out rental
income is a bit of a joke.

~~~
pseudoramble
That makes sense a lot of sense and I agree.

I don't specifically have any reason to try and defend the point of the
article, but it sounds kind of fun anyway. Really I think the article is
taking aim at the notion that buying a home and holding it will mean the owner
makes money, though it doesn't specifically say this.

I believe if you were to ask somebody who was looking to buy a house 20 years
ago they would actually be convinced it was a good way to invest. At least
I've had multiple people of older generations tell me this. Why though? I
believe that was because of the increase in value of homes in the coastal USA
post-WW2 [1]. Home values grew quite substantially between the 1950-2000. I
believe that since people were forced to consistently pay into a mortgage to
own the home, it forced people to put money into a fixed asset consistently. I
suspect it was billed as some kind of weird saving or investment strategy
because of that.

So yeah, you're absolutely right. But I do think that's what this article and
conversations around this point generally are aiming at but forget to mention.

[1]:
[https://www.census.gov/hhes/www/housing/census/historic/valu...](https://www.census.gov/hhes/www/housing/census/historic/values.html)

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midnitewarrior
Knowing you have the largest factor of your cost of living fixed for the next
15 or 30 years is powerful for budgeting and planning. I've lived places where
the increasing rent has pushed me out of my apartment home.

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valenciarose
A house is the only highly leveraged long term asset not subject to margin
calls. In a normal fixed interest mortgage, you can be forced to liquidate
based on inability to service the debt, but not because of depreciation of the
asset. This is neglected in most analyses of relative return.

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RickJWagner
Housing markets can dip, but they won't dip like the stock market dips.
Housing is a lot more stable.

Houses can also return more than inflation, if the local market is favorable.

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davidjnelson
Another aspect I’ve observed is that housing inventory of for sale houses is
of higher quality than rental houses.

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dang
Discussed in 2018:
[https://news.ycombinator.com/item?id=16899376](https://news.ycombinator.com/item?id=16899376)

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dang
Url changed from [https://kaue.me/posts/2019/10/16/jl-collins-why-your-
house-i...](https://kaue.me/posts/2019/10/16/jl-collins-why-your-house-is-a-
terrible-investment-summary/), which points to this.

