[gjm11]

It's not clear to me that, say, $500k of assorted shares + $500k of house is worse than $1M of assorted shares. You've got more in a single asset, which is bad, but you're diversified into more asset classes, which is good.

The picture is a bit different if that $500k is all your assets or even substantially more than all your assets (a common situation for a first-time buyer with a big mortgage). Which suggests you should rent until you've built up substantial investments of other sorts, and then consider buying.

Historically, I think the variability in price of a single house hasn't been any worse than that of, say, a typical index fund. (Disclaimer: I haven't actually checked the figures.)

Of course, all the above treats houses as just another investment. This is a useful perspective, but you're going to be living in your house too, and questions like "can I redesign the bathroom?" and "if there's a flood or an earthquake, am I liable for fixing/replacing everything?" and "am I bothered by the possibility that my landlord might just throw me out one day?" and "can I get up and move somewhere else with minimal hassle?" may be just as important to you as "what is likely to leave me with more valuable assets 20 years from now?".

[JamesBarney]

I think one crucial difference between buying a house and an index fund is people are usually highly leveraged when they buy a house. Example. Assume you 1. Buy house and put down 100k for 500k house. 2. Buy 100k of stock. 3. Both assets drop 20%

Your stock will have lost 20% of it's value and you'll have lost 20k and 20% of your investment in the index fund. Your house will have lost 20% of its value and now at 400k, you've lost 100k of net-worth and 100% of your investment in your house.

[gjm11]

Yup, agreed; that was the point of my second paragraph.