Homes Versus Stocks: You Can't Live in Your Portfolio
Robert Bridges says that house prices increased on average 3.6% per year between 1980 and 2010. An owner with 20% down has only that 20% as his invested equity ("," op-ed, July 11). Precisely because it is only 20% with the balance of 80% borrowed, the increase in equity over the period is five times 3.6%, or 18% per year, a far greater return than the stock market.</br></br>The vital issue of leverage is fundamental to the consideration of investment yield and cannot be ignored if we wish to obtain meaningful results. For the stock market to beat real estate for the average investor, as Mr. Bridges suggests, it would be necessary to borrow on margin, which few retail investors successfully do, or successfully pick individual stocks which beat the Dow Jones Industrial Average for 30 years, which still fewer investors manage to do.</br></br>Richard Bailey</br></br>Real Estate Broker</br></br>Claremont, Calif.