I think a bigger concern with investing in housing WRT alternatives is this:

Rents don't usually go down, but they often stagnate ESPECIALLY in units owned mom n pop landlords. If your rent doesn't change for 5 years, but inflation is 2%, at the end of the period, your rent has effectively declined by about 10% in real terms. Additionally, you have your 20% down that would be paid for a house, but instead you invest in the stock market that returns 6% annually, at the end of 5 years, you have increased your assets by 33%

If you bought a home, and the home price did not increase for 5 years and you pay the normal 20% down mortgage, %6 closing costs, and 1.5% annual property tax, you're looking at some significant loss of net worth when compared to the rent alternative.

If your timeframe is less than 7 years buying a house is almost always a bad idea because of the risks. As you get over 7 years odds start to get good that you are even after the downturn (that is the loss in value during the downturn is just a loss back to what you paid in the first place), at which point your house payment vs rent is the only difference, and the foregone gains from the down payment investment. As you get over about 10 years you start to need to consider the costs of remodeling a house, but your rent would almost certainly gone up so again you are roughly even other than the down payment investments. As your get over 20 years rent has gone up again, but your house payment has not and so you are starting to catch up on the down payment investment. At 30 yours rent has gone up again, but the house payment is gone and you can really work at that down payment investment difference. At 40 years both retire, the renter has still more rent increases which need to be paid for from that down payment investment. AT 55 years both move to assisted living, the renter just sees another rent increase, while the homeowner sells the house and has a big influx of cash that should take care of rent until they die. Ideally both give their last 20 to the taxi outside the hospital 20 minutes before they die. The renter's highest investment balance was higher than the homeowners, but the renter had larger expenses latter in life and so had a bigger draw down of principal.

There are a number of assumptions in the above. Each that is different for you changes the analysis. In particular it assumes disciplined savings such that rent+savings == house payment + house maintenance + savings. It assumes that house maintenance and remodeling is not making the house more luxurious. Its assumes similar levels of luxury (renters are likely to go for a cheaper apartment and spend the difference in housing luxury on travel).

As always, location, location, location. Different areas have different situations that can make one significantly worse than the other.

Rent has gone down relative to ownership pricing in Seattle, especially lately. Maybe not in an absolute sense, but you have to live somewhere...

I'm from Perth, Western Australia, a city that recently hit 2M population.

There was a massive China-fueled resources boom in the early 2000s that soaked up the available construction capacity (materials and labour) for capital projects like building oil rigs and ports and all the ancillary stuff that entailed.

In 2000 you could buy any number of 1970s houses for <$100k. These were relatively small 3x1s (like 1000-1500 sq ft) but solid. Concrete pad, brick-and-tile (Australia doesn't build timber-framed houses).

By 2006, those same houses now cost $350k. There were articles at the time stating that the cheapest house for sale in the city was $250k.

And all that paled in comparison to what happened at the high end of the market.

Anyway, rents went through the roof.

By 2011, the resources boom had definitely cooled and prices were starting to drop. There were less FIFO (fly-in fly-out) workers and so on. Rents had actually did drop through the middle 2010s, sometimes significantly. I used to rent out a house for $450/week and now I'd be lucky to get $300/week for. Thankfully I'd long since sold it.

So yes, rents can go down.

"During the housing crisis, for example, rent went UP because as people became evicted there was higher demand for rentals."

Went down for at least 1BRs in Silicon Valley. Apartments that were renting for $2000+ in 2007 were going for $1700 in Q4 2008 and $1400 in Q2 2009.

Granted and that's why I made a caveat about the specific markets I've lived in. While I know HN is very Silicon Valley centric, for people who live outside that bubble Silicon Valley is generally viewed more of an anomaly than a market bellwether.

I'd be curious if there's any evidence as to why rent went down in SV. For example, did the lack of credit affect the venture capital necessary for start-ups and ultimately lead to less demand in housing?

Mostly people moving out. Silicon Valley has an unusually high number of transients in the U.S; when there's a downturn and people lose their job, domestic migrants tend to move back to their parents in other states, or at least go somewhere cheaper. A lot of people lost their job in 2009.

This is also why the rental market was more affected than the housing market: people who owned homes (particularly expensive single-family homes) had already put down roots in the area, and if they were foreclosed upon (and many were), they were replaced by other people who wanted to put down roots but had kept their jobs. The lower-end condo market softened significantly, though, because it draws from a similar demographic as the rental market.

FWIW, I've both seen rent stagnant and I've seen it go down. A lot depends on your local markets.

> I acknowledge this was a black swan event though.

How is something that happens regularly a black swan event?

https://www.wikiwand.com/en/List_of_recessions_in_the_United...

Sorry, I could have been more clear. I didn't mean that a recession is a black swan event, but that the specific nature of the housing crisis is considered a black swan.

More concretely, a recession is more predictable and to be expected while the failure of the mortgage-backed security market (and the broader consequences) less so.