For this discussion, I'm going to waive away the maintenance costs on a SFH, as they are immaterial for the size of the homes in SF regardless of what the value is determined to be by an arms length transaction.
Conversely, someone like Interactive Brokers is going to liquidate your holdings with extreme prejudice if the securities collateral declines below what their risk management feels comfortable with (other brokers are going to call you and perform a margin call).
You also can get way more leverage with real estate loans versus margin loans or pledged asset lines.
I'm mainly responding to provide helpful context to others. Not for a typical pedantic thread where we are already agreeing with each other but just squabbling over semantics.
I would say this is the primary savings grace for real estate investors and homeowners. They get to build equity in so many scenarios that it works out for them and lets them maintain access to low cost capital, against the equity they build up.
So although housing prices don't necessarily increase faster than the S&P500, and that there are many local variables in play, the same 7% increase YoY can really be a 140% increase YoY, while you are also renting out the home for more cashflow.
Liquidity of the housing market has vastly improved over the last 5 years, mostly due to new kinds of lenders and underwriters in the market, with the current year being even more liquid than ever.
The downsides of real estate haven't gone away. Like maintenance and physical presence needed, which is difficult for an individual as the portfolio expands. The physical presence demand - or the need to make it economical for there to be someone else maintaining the property - means that it is difficult to come up with the downpayment for real estate in areas you would actually like to live in, but are fully capable of renting in. So the barriers of entry stay where they are.