Good commentary on "Optimism bias in the analyst community" which is blatant and wide spread. Bottom line - do your OWN research and heed analyst commentary with a HUGE grain of salt - always!
“Lost its cool.” “Some very funky stuff.” Economics has more in common with literature than I realised. A surprising amount seems to come down to taste 👀😅
I needed to rent sometimes when relocating. Every six months my rent cost increased, significantly. it was either pay the increase or the cost of moving. If I want to change something in the house I do not need to seek permission. Landowners are often very slow if fixing problems.
My house has increased in value. I bought the house with 2012 dollars and a 3% interest rate. The house is now valued with 2026 dollars. Yes, tph price of my house is going up, if nothing else, to stay with inflation.
The one major problem with your analysis on investing in stock being a better return than buying a home is that people are HORRIBLE at investing cash in hand...they spend it.
If I own a home, I HAVE to pay my mortgage every month for fear of losing said home...it is forced "savings"...and yes, in reality, some people (read MOST) need that!!
Interesting analysis, but it hinges on some aggressive assumptions, particularly a consistent 10% investment return and perfect investing discipline by the renter. It also ignores strategies many homeowners actually use: refinancing, moving to a 15-year mortgage, converting a home into a rental, or leveraging equity for future investments. Real estate returns aren't just appreciation; they're also leverage, forced savings, and optionality. It's a more complicated comparison than "stocks beat housing."
In London back in 2011, I was given an ultimatum on my rental apartment:
-Buy it for 2,000,000 pounds or move out.
I moved out. The owner spent a ridiculous amount of money "fixing it up". It sold 2 years later for 2,750,000.... That new owner basically gutted the apartment and spent 500,000 to renovate it...
This apartment was a 4th floor walk up!!! on a Garden Square!
-Great location, very large apartment with the roof as an outdoor space. So, it was worth a lot.... but that much???
Still, it was a walk up!
It just sold for 2,350,000.....
13 years, 500,000 in renovations.... and a 400,000 capital loss!
Once the excessive deficit spending is curbed by higher rates or sensible politicians (which will never happen...), the prices people pay for real estate will deflate and prices will look silly....
Sell side ratings and price targets are a farce. The analysts are generally well meaning but the incentives for that business are such that there is no reward for genuine research…only for flattering CEOs and winning mandates.
Good commentary on "Optimism bias in the analyst community" which is blatant and wide spread. Bottom line - do your OWN research and heed analyst commentary with a HUGE grain of salt - always!
“Lost its cool.” “Some very funky stuff.” Economics has more in common with literature than I realised. A surprising amount seems to come down to taste 👀😅
I needed to rent sometimes when relocating. Every six months my rent cost increased, significantly. it was either pay the increase or the cost of moving. If I want to change something in the house I do not need to seek permission. Landowners are often very slow if fixing problems.
My house has increased in value. I bought the house with 2012 dollars and a 3% interest rate. The house is now valued with 2026 dollars. Yes, tph price of my house is going up, if nothing else, to stay with inflation.
The one major problem with your analysis on investing in stock being a better return than buying a home is that people are HORRIBLE at investing cash in hand...they spend it.
If I own a home, I HAVE to pay my mortgage every month for fear of losing said home...it is forced "savings"...and yes, in reality, some people (read MOST) need that!!
Interesting analysis, but it hinges on some aggressive assumptions, particularly a consistent 10% investment return and perfect investing discipline by the renter. It also ignores strategies many homeowners actually use: refinancing, moving to a 15-year mortgage, converting a home into a rental, or leveraging equity for future investments. Real estate returns aren't just appreciation; they're also leverage, forced savings, and optionality. It's a more complicated comparison than "stocks beat housing."
In London back in 2011, I was given an ultimatum on my rental apartment:
-Buy it for 2,000,000 pounds or move out.
I moved out. The owner spent a ridiculous amount of money "fixing it up". It sold 2 years later for 2,750,000.... That new owner basically gutted the apartment and spent 500,000 to renovate it...
This apartment was a 4th floor walk up!!! on a Garden Square!
-Great location, very large apartment with the roof as an outdoor space. So, it was worth a lot.... but that much???
Still, it was a walk up!
It just sold for 2,350,000.....
13 years, 500,000 in renovations.... and a 400,000 capital loss!
Once the excessive deficit spending is curbed by higher rates or sensible politicians (which will never happen...), the prices people pay for real estate will deflate and prices will look silly....
Alas, it may take a long time....
-D
Sell side ratings and price targets are a farce. The analysts are generally well meaning but the incentives for that business are such that there is no reward for genuine research…only for flattering CEOs and winning mandates.