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Old 08-01-2017, 01:09 PM
 
Location: California
1,424 posts, read 1,397,969 times
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Obviously leverage completely skews returns on individual purchases, but I thought the 4th chart in this article is really interesting. The S&P 500 index is up 8.03% on an annual basis since 12/31/1996 through today. The only area in the Bay Area that has beaten that return is San Francisco SFR. Everything else has underperformed.

Put differently, if you had bought a generic house in San Mateo county for all cash in 1996, you would have done BETTER if you had instead put it in a generic S&P mutual fund (obviously not accounting for fees and taxes)

Interesting point is how much worse RE has done in the US as a whole as compared to the stock market. But even CA RE has underperformed the market. Another myth busted - that the stock market is a casino and RE is the sure thing.

I think this shows that even though RE might seem really expensive, it really has increased slower than what is considered the easiest and most vanilla way for people to invest - a broad equity index. The issue with affordability comes from the fact that wages have not kept up with the expansion of corporate earnings (the driver of the S&P) and the price of housing. THAT is the problem. Not the price of housing

Housing appears to be fairly valued.

my main point is that when people say stuff like "My parents bought a house for 250k and mine costs 1.5 mil" they see those two prices and think bubble. While in reality, from pure price appreciation, it has barely kept up with the market.

The real cause of low affordability is not that houses are too high. It is that wages have grown slower than corporate earnigs (aka the S&P)

https://www.paragon-re.com/trend/bay-area-market-survey

Last edited by HappyinCali; 08-01-2017 at 01:33 PM..
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Old 08-01-2017, 01:19 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
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One thing to consider is that the stock market is an investment and they compare it to real estate that people live in and not buy as an investment.
The numbers would look quite different if they counted only investment real estate that collected rents
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Old 08-01-2017, 01:25 PM
 
Location: California
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Quote:
Originally Posted by aslowdodge View Post
One thing to consider is that the stock market is an investment and they compare it to real estate that people live in and not buy as an investment.
The numbers would look quite different if they counted only investment real estate that collected rents
Yes. It is a fair point. There are nuances for sure. But my main point is that when people say stuff like "My prents bought a house for 250k and mine costs 1.5 mil" they see those two prices and think bubble. While in reality, from pure price appreciation, it has barely kept up with the market.
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Old 08-01-2017, 03:06 PM
 
600 posts, read 460,528 times
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Quote:
Originally Posted by HappyinCali View Post
Yes. It is a fair point. There are nuances for sure. But my main point is that when people say stuff like "My prents bought a house for 250k and mine costs 1.5 mil" they see those two prices and think bubble. While in reality, from pure price appreciation, it has barely kept up with the market.
So if CA real estate has under-performed, then TN real estate market must be trash. Since you can buy 20 homesfor the price of 1 in CA. lol
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Old 08-01-2017, 03:33 PM
 
Location: California
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Quote:
Originally Posted by taimaishu View Post
So if CA real estate has under-performed, then TN real estate market must be trash. Since you can buy 20 homesfor the price of 1 in CA. lol
yes, it is bad. the chart shows that the appreciation for the US is only 3.3%
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Old 08-01-2017, 03:35 PM
 
4,367 posts, read 3,181,491 times
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Originally Posted by HappyinCali View Post
yes, it is bad. the chart shows that the appreciation for the US is only 3.3%
It's also essential shelter.
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Old 08-01-2017, 03:54 PM
 
Location: SoCal
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Quote:
Originally Posted by HappyinCali View Post
yes, it is bad. the chart shows that the appreciation for the US is only 3.3%
The caveat is you bought it with cash. Who would do that? It's leverage 20/80. Plus you have to live somewhere.
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Old 08-01-2017, 04:17 PM
 
3,445 posts, read 2,657,339 times
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Originally Posted by NewbieHere View Post
The caveat is you bought it with cash. Who would do that? It's leverage 20/80. Plus you have to live somewhere.
agree 100%. they should compute the appreciation/return on the DP
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Old 08-01-2017, 04:23 PM
 
Location: California
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Quote:
Originally Posted by payutenyodagimas View Post
agree 100%. they should compute the appreciation/return on the DP
That was addressed in the post. Literally in the first sentence. I will say it again.

my main point is that when people say stuff like "My parents bought a house for 250k and mine costs 1.5 mil" they see those two prices and think bubble. While in reality, from pure price appreciation, it has barely kept up with the market.
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Old 08-01-2017, 04:59 PM
 
Location: San Diego
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I bought in 98 and my home has actually done better than my stocks but beach property just took off more.
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