RE:"True, tax laws favor home ownership over stock ownership. But in almost all areas of the country, flipping a house every year is not a good way to make money. Remember you have costs; insurance, maintenance, 6%-7% sales commissions when you sell, moving costs. And the hassle. You don't have those costs with stocks. If you have a very, very hot market, it may be profitable, but most places it's not."
Sorry John...your knowledge is just sketchy in the area. While you make a couple points it just hasn't worked out that way, epecially in the last 4-5 years. All brokers don't charge 6-7%. Plenty of discount brokers. You can even go FSBO. Sure, stocks are a lot more liquid but houses right now sell pretty briskly...it's a much more efficient market that you might think.
You are correct about leverage but the tax breaks are what's ending the RE market to the moon.
Sure it's regional but all real estate is "local"
RE:"Funny if totally unrelated story. I used to play golf with an area builder, and he would tell me how financially stupid people were when they built or bought a home. His rap was something like: "Do you have a formal dining room? How many times a year do you use it? Well, you are paying mortgage interest on that room, you are heating it, air conditioning it, paying insurance on it, maintenance, furnishing it, cleaning it... (he could go on with more costs). Everytime you sit down to dinner in that room it costs you about $500. Do you have a formal living room? How many times a year do you use it? ...... It cost you about $1000 every time you entertain in that room. How about guest bedrooms? ...... You could put up your guests in the finest hotel in the area for the same cost, and pay for all their meals.""
Your buddy forgot one thing. People most always buy right up to what they can afford and maybe a little over. Even if a couples dream home includes 4 bedrooms when they only need 2. In your area 30-40 years ago the average new home was maybe 2-3 Br/2 bath, 1200-1500 sq ft. 8 ft ceilings.
Now the new stuff is 3/3 or 4/3 with 10-12ft ceilings, pool jacuzzi...1800-3000 sq ft and more.
Another driving force is absentee ownership. You get that mortgage interest rate deduction on the second home too. Since Congress people often maintain two homes it it any wonder this is law?
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