[pbk1]

> if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term.

citation needed? genuinely curious - are there studies about long-term returns from housing vs. other asset classes (namely public equities)?

[saurik]

I did a Google search for "long-term returns from housing vs. other asset classes" (purposefully using exactly what you typed here to show how easy this is) and found a ton of references showing this is an overly-strong (and even somewhat "debated") claim but (as far as I am concerned) right enough for a discussion forum (and remember a lot of people aren't in a good mental position to own stocks but have to live somewhere anyway and so might as well own a house).

https://seekingalpha.com/article/4242070-in-long-run-house-w...

> This mix of comparable returns (Finding 1) with lower volatility (Finding 2) leads to one of the research's most puzzling, but fascinating, discoveries: over the very long run (circa the last century), housing earned a superior risk-adjusted return than equities. Sharpe ratios for the asset summarise this fact; note too that the pattern is consistent across countries.

[enragedcacti]

My understanding is that it shakes out to a couple of things:

1) while not beating the S&P, historical returns on real estate are pretty good and less volatile

2) There are a number of significant tax advantages to home ownership

3) you can't live inside a stock. Building equity instead of paying rent is a good thing

4) you can rent it out, making it pay for itself while accruing value as long as you are willing to add your own labor

It's hard to put that all into a chart since (2) and (3), and (4) are personalized and partially mutually exclusive and the tax landscape is always changing.

[kelnos]

> Building equity instead of paying rent is a good thing

That depends heavily on your goals. I hear this a lot, but it always reads to me like people think equity just magically happens when you buy a home (with a mortgage). No, you have to put money into it monthly, and a portion of that goes to pay of principal, which builds equity.

Whether or not putting that money into a large, fixed, illiquid asset (versus stocks/bonds) is a good idea... well, it depends. Personally, if I could get an interest-only mortgage with a reasonable interest rate (for my primary home), I would probably go for it. I personally don't care all that much about building equity, and I'd rather free up that cash for other investments.

Of course, many people would use the option of an interest-only mortgage in order to buy even more house than they can afford, instead of for the purposes of freeing up cash, and then end up in dire financial straits, as we saw in the 00s.

Also, re: paying rent vs. building equity: yes, I do have a larger space than when I was renting, but I am also paying more than my last rent, in property tax + mortgage interest + HOA dues. That's money that's just as equivalently "thrown away" as if I was just renting. I don't regret this decision, but let's not pretend that renting is throwing away money, and owning is perfect use of money.

[ClumsyPilot]

Mortgage is the only type of leverage that an average Joe can get cheaply. Any attempt at getting a 'normal' loan will be met with insane interest rate.

That's the main reason why housing market is what it is.

[mrep]

What? You can get get cheapish credit for just about any asset as long is it secured by something whether that be a house, car, boat, rv... What do you consider a 'normal' loan? Unsecured ones?

[frumper]

> That depends heavily on your goals. I hear this a lot, but it always reads to me like people think equity just magically happens when you buy a home (with a mortgage). No, you have to put money into it monthly, and a portion of that goes to pay of principal, which builds equity.

I feel like you're missing that you have to put money into a place to live monthly anyway and in the past decade the equity is built up through home value appreciation. My area has been seeing 7-10% increases for quite some time. That equity increase far outstrips what principle I'm paying off.

[thaeli]

Owner-occupied is kind of a special case, too, because you've got to live somewhere. You could be paying $X to rent, or $X+Y as a mortgage plus upkeep, so the additional "investment" you're making is just $Y. In some cases rents are so high that, especially if you stay in one place a long time, you're actually paying $X-Y to own, so there's a positive return every month in addition to the equity you're accruing. Yeah, this is a horribly broken system, but it does seem to be how things work.

[lisper]

No, there aren't, because it isn't true. Residential real estate underperforms equities [1].

[1] https://jai.pm-research.com/content/23/2/111

[abigail95]

Does this account for the subsidy, tax advantages and leverage available in real estate vs equities?

[beiller]

There is a lot of research suggesting that housing is not the best investment compared to equities. Many people conflate leverage with real-estate investment. If you apply the same leverage to equities they will far and away outperform real-estate. Try S and P 500 calculator with dividend reinvestment to get an idea. In my opinion, if real-estate out-paces equities or other forms of investment, then we barrel towards a world where no one can afford to save for shelter any more which doesn't make sense, but that's just my opinion. Unfortunately, real-estate is still a profitable investment, and small piddly fed rate hikes won't change that any time soon.

[ClumsyPilot]

> There is a lot of research suggesting that housing is not the best investment compared to equities.

And yet most retail investors loose money. My family managed to lose money both by investing in bonds and by investing in index fund - quite of an achievement. They never lost money in real estate.

The reason should be obvious -> most people understand what is a house and how it works, they understand the city they live in and good VS bad areas. Most people don't udnerstand the stock market.

[bradfa]

Local to me, real estate investment really only works if you're a landlord and the rent is your income. Buying then selling or flipping homes has not historically been a profitable endeavor. If you timed things just right for COVID, maybe you made a good return, but otherwise in history prices have been rather stable and increasing only similar to inflation for decades.

Surely there are markets where flipping houses is extremely profitable, but it's not all markets.