[jstanley]

You're missing that most people are able to buy houses on borrowed money, so their housing investment is effectively levered up 10x or more, at least at the beginning.

It's not a choice between $1m in housing appreciating at 3% and $1m in stocks appreciating at 9%. It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.

[Paracompact]

The borrowed money isn't free from interest. There's no numerical sense in borrowing money at 5%+ interest to fund an investment appreciating at 3%. Some schemes might advantage it further (such as leveraging your mortgage with your retirement funds) but then we might as well also discuss further disadvantages compared to renting, such as upkeep and property taxes.

Back around 2020 when mortgage rates very briefly dipped below 3%, there could have been an argument. But such is no longer the case and not likely to return soon.

This guy breaks down the analysis very cleanly to a first-order approximation, using 2019 figures: https://www.youtube.com/watch?v=Uwl3-jBNEd4

> It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%.

Just to drive the point home: It would be $100k in stocks appreciating at 9% and monthly rent subtracted, or $1m in housing appreciating at 3% and a $900k debt growing at 5%+ interest.

[sdellis]

I agree with your points. You have to take risks in either case, but some risks are easier to do the math on. And yes, fewer home investment opportunities exist as the interest rates go higher. There may be opportunities for higher gain with stocks, but there are also greater risks for loss. At least if you lose some value in a home, it's practical -- you still have a roof over your head or make money by renting it.

[jstanley]

Fair point!

[jandrewrogers]

The problem with leveraged investments is that they can put you deep underwater.

Many people in Seattle that bought $1M leveraged with $100k now own a $800k asset. They've lost twice as much as they invested. They would have been much better off investing that in stocks without leverage.

[defen]

Multiple people in this thread have mentioned the Seattle real estate market going to shit (for sellers) - is that related to tech layoffs or is something else going on? San Francisco's market is just as crazy as ever.

[jandrewrogers]

Seattle real estate has been trending downward for a couple years now. It isn't a single factor but the confluence of several. Initially it was only in some market segments but seems to have spread to most of them now.

The inventory of housing currently on the market is anomalously high and there are relatively few buyers. I know a few people that will be lucky to sell for as much as they paid a decade ago. People who bought during the COVID bubble are underwater.

This feels more like the beginning of a macro trend than a temporary blip.

[pixelatedindex]

Yeah, but rent doesn’t seem to go down that much though. Opportunity cost of moving is real, security deposits are sizable. I wanted to rent for as long as possible but there’s no rent cap and the apartments keep jacking up the rent.

At least now they have some sense to cap the rental raise percent but I’ve had to deal with 15-20% increases before, and not to mention the cost of parking in an apartment.

I probably made a mistake buying but I couldn’t take the bullshit from landlords and all the headaches that come with people wanting more money.

[locusofself]

I don't think the data supports this at all.

Home prices have doubled here since 2014. We are having a modest dip right now.

[strongpigeon]

I think some of it is due to the lay off, some of it due to the supply situation not being as bad as SF (though construction has slowed recently), and a lot of it due to interest rates making "effective prices" much higher.

[ambicapter]

Yeah, but they still have a place to live. If the landlord is losing money on their asset, what's one place they could make up the difference?

[jandrewrogers]

The landlord isn't losing money. Totally different cost basis. The landlord rarely has a carrying cost that is equivalent to the renter buying the same property with a mortgage. It is frequently half that or less.

I've sold a home I lived in to rent something equivalent because the rental rate was a fraction of my carrying costs. Saving the difference in costs added more to my net worth than the appreciation on the property.