A Home Is a Lousy Investment

bb · **Posted:** Sat Jul 16, 2011 10:06 pm

Interesting article in this week's WSJ: A home is a lousy investment (doubt many are homeowners here) but nevertheless...

http://online.wsj.com/article/SB1000142 ... re_twitter

nosferatudracon · **Posted:** Thu Sep 29, 2011 4:57 am

Very interesting article bb.

Hammbo · **Posted:** Fri Sep 30, 2011 8:41 am

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,

Quote:

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!

segfault · **Posted:** Sun Oct 02, 2011 10:59 pm

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.

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A Home Is a Lousy Investment

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