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# A Home Is a Lousy Investment

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A Home Is a Lousy Investment [#permalink]

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16 Jul 2011, 22:06
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Expert's post
Interesting article in this week's WSJ: A home is a lousy investment (doubt many are homeowners here) but nevertheless...

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Status: Getting ready for the GMAT
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Re: A Home Is a Lousy Investment [#permalink]

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29 Sep 2011, 04:57
Very interesting article bb.
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Re: A Home Is a Lousy Investment [#permalink]

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30 Sep 2011, 08:41
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,
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!
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Re: A Home Is a Lousy Investment [#permalink]

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02 Oct 2011, 22:59
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, 22:59
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