JFL why are normies so obsessed with owning a home

[AlexBrown84]

seriously

 

[Hard Boiled]

What are the best the wealth appreciating assets you can think of? I personally think semi conductors will be the next gold but only in 30 years time.

 

[fatchadlitecel]

In real estate you use a lot of leverage, for a residential home it's typically 5:1.

You put down 20% on a $1,000,000 home, the initial investment costs you $200,000 cash. Home price appreciation is over the long run approximately 3%, which is 2% the long-run yearly inflation expectation + the 1% yearly population growth expectation.

If your house appreciates 3%, it goes from $1,000,000 to $1,030,000. That's a 3% return on the total value, but because you only invested $200,000 cash, it's a 15% return on investment. To get a similar return on stock indexes you need to use 2:1 or 3:1 leverage or invest in individual stocks which is far riskier. You can also get higher returns by directly operating a business but it requires a lot more effort.

So buying a home is seen as the lowest risk way to get high compounding investment returns. Obviously it's not that simple as you can have recessions and lose your job or the neighborhood becomes run down and the house doesn't appreciate as much, you need to cover the cost of interest and maintenance, etc.

Most people don't conceive of it like this but that's the fundamental reason why it's popular is because of the leveraged returns.

 

[QuantativeAnalyticalBS]

In real estate you use a lot of leverage, for a residential home it's typically 5:1.

You put down 20% on a $1,000,000 home, the initial investment costs you $200,000 cash. Home price appreciation is over the long run approximately 3%, which is 2% the long-run yearly inflation expectation + the 1% yearly population growth expectation.

If your house appreciates 3%, it goes from $1,000,000 to $1,030,000. That's a 3% return on the total value, but because you only invested $200,000 cash, it's a 15% return on investment. To get a similar return on stock indexes you need to use 2:1 or 3:1 leverage or invest in individual stocks which is far riskier. You can also get higher returns by directly operating a business but it requires a lot more effort.

So buying a home is seen as the lowest risk way to get high compounding investment returns. Obviously it's not that simple as you can have recessions and lose your job or the neighborhood becomes run down and the house doesn't appreciate as much, you need to cover the cost of interest and maintenance, etc.

Most people don't conceive of it like this but that's the fundamental reason why it's popular is because of the leveraged returns.

We have too many foreigners in the UK and they're driving up the property market and the cost of rent. Buying a house or even a flat is a pipe dream in the current year.

 

[levotiroxin]

I dont get it.
Getting in debt for 30 years just to have a cube of bricks to shit,sleep and go back to the wagecage.
And not even a nice one

 

[Meeks]

You should only buy a home when you can afford to not live in it