Get Rich by Renting, not owning

Here's a great article on why you're better off renting than owning: "Why rent? To get richer. A contrarian's view: Houses don't appreciate any faster than the level of inflation over the long term, so forget about buying a home and put your savings into stocks."

The article makes very reasoned arguments on why money in stocks are better return over long term than home since historically, after accounting for inflation and expenses, stocks return 7% while housing returns a big fat zero (OK, the article says 0.4% which is pretty much zero). That's right: zero percent return on your "investment." I like the Q&A found at the end to dispel some common myths.

I believe that the U.S. bubble housing of the past few years was diversion from the mean and if Japan's bubble history is any indicator, the prices will revert to the mean and will very likely undershoot before it returns to the mean. Just as stock market overreacts and sell below "value," home prices will go below the historically trends before things become normal. When everyone (well, almost everyone) talks about housing being the worst investment ever, you know it is the time to buy homes!

Copyright 2007, DannyHSDad, All Rights Reserved.

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