How housing became the world’s biggest asset class

Re:How housing became the world’s biggest asset class by tenpies on Wednesday January 22, 2020 @10:09PM (#22124475)

This cannot be understated. You can conceivably get a house with 5% down. There is no other instrument that allows a retail investor to get 20X leverage - especially at that price. Even leveraged ETFs are basically capped at 3X because anything else is too volatile and was deemed a market hazard.

Now imagine a 20X ETF that invests in a single property, with high maintenance costs, extremely low liquidity, zero diversification, and high transaction costs. That is basically what some of these mortgages are.

It is absolutely intoxicating when the asset price goes up and I am not surprised in the least that people love it as an investment. Even if it explodes, you walk away and your losses are minimal. You only risked 5% of the price and sure you made some payments along the way, but the risk asymmetry completely rewards being as reckless as possible.

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Re:How housing became the world’s biggest asset class by rainyMammoth on Thursday January 23, 2020 @03:21AM (#22125820)

Completely agree with this. Homeowner usually understand very little about investing. As you said it is intoxicating when it goes up a 5 or 10% a year but pretty much invisible if it goes down or stays flat (since the mortgage is seen as an alternative to rent).

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