[funksta]

Leverage is great when prices are increasing, but not when prices are moving in the opposite direction. The recent 40-year trend of decreasing interest rates lulled a lot of people into the belief that real estate leverage is an unalloyed good.

[brabel]

> I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k.

Well yeah, in the last 20 to 30 years in most countries the story has been the same. My parents bought a house in Brazil in the early 90's for 30k and we're now selling it for 400k. My relatives in Australia bought a house in Adelaide for 400k around 5 years ago. Prices exploded there and it's now around 700k. They got 300k dollars in a few years while actually earning less than that in salaries over the same period.

On the other hand, me, in Europe, managed to lose money on a house I bought 10 years ago because I overpaid (at the time it was really hard to buy as competition was huge) and after COVID, prices in my region fell 20% and never recovered... Also, I invested too much on a new building in the property which people in this country don't actually value a lot, so the investment did not pay off.

But before that I had made 60k on an apartment in just 2 years. So, while I know too well that the housing market can be unpredictable, I would continue to bet on it going up in most markets since the conditions which made prices increase have not changed.

[tmnvix]

> I would continue to bet on it going up in most markets since the conditions which made prices increase have not changed.

I think they have. As mentioned above, the past 40 year trend of declining interest rates appears to be at an end. It was the most significant factor in rising prices in my opinion.

[bombcar]

You also have to factor out inflation over those periods of time, as often it turns out the return is relatively anemic, but the time periods are long.

[at-fates-hands]

>> Leverage is great when prices are increasing, but not when prices are moving in the opposite direction.

This.

I worked for a medium sized company in the early aughts. It was a family owned business. The eldest brother was the owner and we often had lunch and he would tell me that once I make x amount, then I should buy this kind of real estate. When you get to this xx amount, then buy this kind of real estate. Fuck the stock market, only real estate goes up in value every year like clockwork. At the time he had several rental properties and three or four houses located all over the country.

That was until 2008.

Its funny, I ran into him at an architecture conference a few years back and one of the first things he said to me was, "Remember that real estate advice I was giving you? You can completely ignore that now!" and we both had a good laugh about how drastically the market had changed since 08'.

[schumpeter]

Sounds like your friend did something wrong with his investments. I had rentals before 2008, and bought more during the crash in South Florida for pennies on the dollar. It was a great time to buy.

[hardtke]

In some states (California being one) the original mortgage on a house purchase is non-recourse. This means that the bank cannot come after your personal assets in the event of default. Yes your credit gets dinged but the leverage of a home loan is fundamentally different than a margin loan in the stock market.