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Wall Street Journal keeps hiding the great success of homes as an investment

Posted by John Reed on

Maybe I need to publish a decryption key so investors can find the truth in WSJ reporter Nicole Friedman's invariably misleading stories.
Today's headline is 'Home Prices Log Seventh Straight Monthly Decline.'

Actually, home prices went up

You know want the story actually says? Home prices for the last 12 months rose 3.8% nationwide (Case-Shiller) and 5.3% (FHFA).
What intellectually dishonest debate tactic did Friedman use to create that "hones suck as an investment" headline? Note the word "monthly."

MONTHLY home price changes!? Who looks at those?

People in the real estate industry never looked at MONTHLY changes in home values. Why not? Because the transaction costs in buying and selling home are so scandalously high that you need to hold the house for three to five years for buying it to make sense. Looking at and talking about and featuring MONTHLY home price changes was invented by Nicole Friedman as a way to make the best investment in America look bad in spite of year after year of steady climbing prices even when stocks and bonds are falling year over year.
Why is she doing this? I am not sure except it appears to be WSJ policy that there is no alternative to investing in stocks and bonds even though they lately suck.

Keeps saying falsely that mortgage rate increases lower home values

She continues her insistence that mortgage rate increases hurt homes as an investment. The truth is that is analyzing homes as if they were Treasury bonds. Those fall in value when market rates rise. But applying bond theory to homes is wrong because they are affecting by a dozen or more variables that do not affect bonds. At present, the salient one is inflation.
Inflation makes home values rise. It also makes the REAL (adjusted for inflation) mortgage balance and mortgage payments fall in terms of purchasing power thereby making your REAL equity increase far more than the home values due also to leverage multiplying your ROE.

This is not the first time mortgage rates rose

Also, don't just look at theory. Look at the empirical evidence. Mortgage interest rates rose far more than recently in the late 1970s and early 1980s---peaking at 16.55%. Did home values fall then? Hell no! They went up.
Nicole does not care. She is apparently the equivalent of a tenured professor. She can spout nonsense week after week and no one nor no evidence can affect her.
Buy a principal residence with a home mortgage now.
An American Principal Residence is the Most Advantaged Investment on Earth: Maximize Yours book

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