Double in 9 years is like 8% annually which is roughly equivalent to putting it in index funds.

But you only put 20% down.

Let's say your 100k house is now 200k. Your initial down payment is 20k. When you sell your getting much more than 8% compound interest

they also ignore the fact you are saving in rent, and you can also rent out your spare rooms (I did).

My house was and still is very affordable and it was one of the best investments I have done.

they are not mutually exclusive objectives once you consider everything.

You're also paying mortgage interest, taxes and maintenance costs. The formula isn't straightforward but owning a home is rarely a better strategy than renting and buying stocks.

Homes appreciate on average 3-5%, where as the money saved on rent - taxes, interest, and maintenance is somewhere between 3-5%.

that's 6-10% (which is about the best you can expect from stocks over the long run)+ the other benefits of owning a home. I for one rented 2/3 of my rooms for an additional 12k$/year income (60k over 5 years).

There are 0 down loans.

Well, historically, but not in the past 9 years. Last 9 years S&P 500 return is ~13.9%.

Both housing and market returns have been abnormally high.

You're forgetting that most people don't purchase their house in cash. OP received the gain on the value of the house, which is much higher than the actual cash outlay as the down payment. Feel free to ask your stock broker to purchase $125k worth of stocks for only $12.5k cash.

(obviously ignoring all selling costs, realtor fees, stamp/transfer taxes, interest payments, etc.)

If you're going to count leverage in real estate returns, the equivalent comparison is margin in stock market returns. You absolutely can purchase $125K in stocks for $12.5K cash if you're willing to buy them on margin (subject to margin requirements, which are often 50% for retail brokerages but can be as low as 3% for hedge funds etc.) Mortgage and margin loan interest rates are even comparable.

The reason people don't buy stocks on margin is because there is risk entailed: if the stock goes down, you can get a margin call, get your whole position liquidated, and lose everything. There is an analogous event for mortgages: if you fail to make your mortgage payment, the bank takes possession, liquidates your investment, and you lose everything. This risk is often glossed over with mortgages because it's a socially-acceptable way to purchase a house, but it's still there. Many people who did precisely this in 2004-2007 faced exactly this consequence in 2009-2010, and are still digging out from the wreckage of ruined credit, lost downpayments, and a home that was repossessed.

> You absolutely can purchase $125K in stocks for $12.5K cash [...]

This isn't quite right. You can only get 2x leverage on your margin account for overnight holds (i.e. long-term investment.) The maximum leverage federally allowed is 4x, and you have to liquidate half before the end of the trading day (to go back to 2x) otherwise your broker will automatically liquidate half of your position.

http://www.finra.org/investors/day-trading-margin-requiremen...

If you buy E-mini S&P 500 futures, your effective overnight leverage can be up to 22x. You could put part of your money in short term bonds to avoid such extreme leverage.

There are also 3x leveraged ETFs you can hold overnight.

Of course, this means you aren't directly owning stocks.

True, but with owning the property I have equity in addition to the value increase.

Where I live monthly leases tend to be more expensive than what I pay per month for mortgage and taxes which would also be a loss. That said there is money to be made mortgaging residential real estate and leasing it out.

The only loss to ownership is that you are less portable. It takes more time and money to relocate.

Difference is the built in tax advantages in RE.

I don't know about you, but my index funds are purchased through contributions to my tax-free savings account. I can contribute up to $5500 per year and I pay no taxes whatsoever on any capital gains from the equities in the account.

What do you do after you reach the $5500 contribution limit? For many here, that's probably before the calendar turns to February.

You diversify. And real estate may not provide the greatest returns in many circumstances, but it is a diversification, and it has some excellent tax benefits.

if RE market craps out around the time the stock market craps out, its not much diversification in the face of downside risks…

If.

You can’t protect yourself against a global calamity where everything suddenly correlates.

But look at what happened during the crash of 2000 where stocks and housing market went opposite ways for a nice example to the contrary.

Ah yes, and then less than a decade later, if you were lucky enough to still be paying off your multi-decade mortgage, they went down together and those ill-liquid paper gains were wiped out and then some (along with people loosing "their" homes, or now paying a mortgage on house whose value had declined). With our global debt fueled recovery, if turns out be when.

Being in cash, short the market, or UST's would have been better.

Nobody ever said that the RE and the stock market are always decorrelated. But it's undeniable that they sometimes are decorrelated.

That makes the RE market a way to diversify your investments. Nothing more, nothing less.

There's no silver bullet that will protect you under all circumstances.

IOW: I have no idea what kind of point you're trying to make.

My point is that, sure, RE market is a way to diversify ones investments, but it is no longer a good way like everyone has blindly assumed it is because of the underlying conditions influencing risk assets in markets.

If people think de-correlated upside, and correlated long tail downside is a suitable portfolio strategy, then I can't help but take the other-side of that trade… enjoy the slight premium while it lasts, because I'll take it back and then some when it blows up in your face.

So put the multiplier adjusted cash on long positions on index futures and set it to roll contracts over from the front month x time before expiry?

Am I reading you correctly? You found a 2,900 sqft property in the bay area, 9 years ago, for 129k? Or is there a zero missing, and you meant to write 1.29M?

Because if it was really 129k, that's a factor of ~20 times cheaper per square foot than current residential real estate around Cambridge, MA right now.[1]

[1] https://www.trulia.com/real_estate/Cambridge-Massachusetts/

Not a chance. I read it that way too, but just a nonsequiter. OP likely lives in someplace in Texas.

You read the post incorrectly. The GP did not buy in the Bay area, but in some other "top 15 city."

S&p 500 is also worth about double what it was 9 years ago…