The Real Estate Dilemma

Here's a dilemma:

Consumers feel now is the worst time to buy real estate. Consumers now feel real estate is the best investment you can own.

If you think people buy a house to live in, and don't consider it an investment - consider the psychological dynamic of house values. When your house you bought for $300,000 is now worth $500,000 it isn't that different than seeing a stock portfolio grow from $300,000 to $500,000. (or vice versa) and in some years real estate goes up and stocks go down (or vice versa).

The house is an investment because it requires a decision about the location of your money, and that decision impacts your net wealth. That's what investments do. The housing investment happens to be less liquid and provides a lot of other benefits a typical investment doesn't provide.

When thinking about housing, the decision should be about both the location, location, location of the house, and the financial decision around the location, location, location of your money.

Hat tip - Neil Howe @HoweGeneration