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A Home Is a Lousy Investment

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Affiliations: UA-1K, SPG-G, HH-D
Joined: 04 Dec 2002
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Location: United States (WA)
GMAT 1: 750 Q49 V42
GPA: 3.5
WE: Information Technology (Hospitality and Tourism)
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A Home Is a Lousy Investment [#permalink] New post 16 Jul 2011, 21:06
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Interesting article in this week's WSJ: A home is a lousy investment (doubt many are homeowners here) but nevertheless... ... re_twitter

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Status: Getting ready for the GMAT
Joined: 01 May 2010
Posts: 66
Location: United States (NJ)
Concentration: Strategy, Operations
GPA: 3.26
WE: Supply Chain Management (Consumer Products)
Followers: 0

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Re: A Home Is a Lousy Investment [#permalink] New post 29 Sep 2011, 03:57
Very interesting article bb.
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Joined: 30 Sep 2011
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Concentration: Strategy
GRE 1: 1390 Q620 V770
WE: Engineering (Manufacturing)
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Re: A Home Is a Lousy Investment [#permalink] New post 30 Sep 2011, 07:41
Interesting little article, but keep in mind that this comparison really only holds up if you are buying a second home, imo. If you're buying your primary residence, then there is no comparison, as you will stop having to pay rent, and that translates to a huge analogous gain. The article states,
So a dollar used to purchase a median-price, single-family California home in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. The same dollar invested in the Dow Jones Industrial Index would have been worth $14.41 in 2007, and $11.49 in 2010.
What isn't stated is that the same dollar, spent on renting your apartment in 1980 is worth $0 in 2007 and 2010, and wasn't available to be put into the Dow anyway.

Just wanted to point this out because I've seen other discussions where people don't realize that a primary residence is still a great 'investment', compared to renting!
Joined: 27 Aug 2011
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Schools: Cornell (Johnson) - Class of 2013
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Re: A Home Is a Lousy Investment [#permalink] New post 02 Oct 2011, 21:59
Interesting observation by my co-worker:
there's a securitized form of almost all investments.

If you're staying at a place medium term or longer, renting can be compared apples to apples with buying.
The amount of rent is equivalent to a mortgage (plus taxes, association fees, maint., etc) on a depreciating property. The portion of your payment that would have counted toward equity is paid to the landlord instead. (Same point Hammbo made.) This comparison assumes a low down payment but with FHA and even conventional mortgages today, down payments can be very low (<5%).

I've seen some sites index the cost of buying vs cost of renting by city/region. The devil is probably in this detail.
Re: A Home Is a Lousy Investment   [#permalink] 02 Oct 2011, 21:59
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