Depressing real estate values

For some odd reason, I ended up browsing through real estate listings tonight, and I saw that a 2-bedroom unit in my building is listed for $15,000.  Now, when I clicked for details, the description claimed the price was $25,000, so this is likely to be a typo.  For comparison, a studio unit is listed for $13k.  Regardless of typographical errors, this does not bode well for my 1-bedroom unit.  Despite having made a 20% down payment and being nearly four years into a ten-year mortgage, I’m probably still under water.

Making things worse, it’s not even clear that sales are even happening at these prices.  I don’t know how to directly access past sales data, but the $25k 2-bedroom unit appears to have been listed since April 25!

I can see how owning a home is a good investment; you needed a roof over your head anyway, why not get in on the appreciation of the asset?  I was going to mention the tax shield, but I think individuals enjoy the income tax benefits from a margin account with a brokerage as they do with mortgages.  If I understand homesteading correctly, homeowners pay less property tax than renters indirectly pay through their rent.

I have the impression that home values generally have low volatility relative to the stock market, but is that a fair comparison?  Owning a single home is an undiversified investment that is typically levered 5 to 1 or higher.  Making a similar commitment in the stock market — investing a multiple of your annual income in a single stock — is virtually unthinkable.  Houses never declare bankruptcy, but they do burn down.  Both events can be protected against with various forms of insurance.  The comparison really depends on specific numbers, but I don’t see home ownership as an investment panacea.  If I was on the upswing, I would probably feel like whistling a different tune, but it would be foolish to measure the reward without also considering the risk.  If owning vs. buying can be assumed a wash financially, then the real deciding factors should be non-financial.

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