Michael Burry, who knows a thing or two about the housing market, says that buying a home is usually a mediocre investment.
"I calculated the long-term after tax return on residential real estate over a 50 year adult life is about 4.5% after tax including expected maintenance costs," he said in a Substack post on Monday.
He said that's a similar return to what a "good bond" offers, but housing has "lagged the S&P 500 badly" over the past 25 years, despite experiencing "remarkable" appreciation during that timeframe.
The median sale price of a home sold in the US has jumped by about 140% since 2001, from around $170,000 to $403,000, per the Federal Reserve Bank of St. Louis.
The S&P 500 has surged more than 400% over the same period, from below 1,500 points to above 7,500 points today.
In his Substack post, Burry wrote that houses have become bigger and bigger over the decades, making older homes worth less on average, unless they're on valuable land.
"I've looked at this every which way," he wrote. "The main thing in buying a house is the utility one gets out of owning it, the lifestyle and lifecycle benefits."
In other words, people are unlikely to make much money on their homes, but they might still want to own one to have a stable place to live and raise their families, build communities, enjoy a neighborhood with nice amenities, and grow old in comfort.
Burry is best known for his prescient bet against the mid-2000s housing bubble, which was immortalized in the book and movie "The Big Short." He pivoted from running a hedge fund to writing about his personal investments on Substack late last year.
He's one of several high-profile commentators to underscore the appeal of stocks as investments.
Wharton professor Jeremy Siegel parsed over 200 years of market data to write "Stocks for the Long Run," and found that US stocks gained an average of 7% a year after inflation.
Warren Buffett has touted stocks over other assets such as cash and bonds, which he views as more vulnerable to inflation, and gold, which doesn't generate cash flows or pay dividends.
The legendary investor has also spoken positively about real estate over the years, but he's noted transactions can be complex and stocks are much more liquid.
"Rich Dad Poor Dad" author Robert Kiyosaki famously says a person's home is not an asset but a liability, because instead of generating income for them, it imposes costs such as mortgages, taxes, insurance, and maintenance.
Read next
Theron Mohamed is a London-based correspondent on the Trending team at Business Insider. His coverage spans finance, investing, wealth, markets, and the economy.Theron joined BI in 2019 as a reporter at Markets Insider and rose to the rank of correspondent before moving to the Trending team in 2024. He previously covered tech, media, and telecom stocks for Investors Chronicle magazine and had a brief stint on the Financial Times' Data team. He interned at the Wall Street Journal in New York where he primarily wrote for Heard on the Street.Theron has freelanced for The Independent, The Telegraph, WIRED, and several smaller publications. He holds an undergraduate degree in geography from the London School of Economics, and a master's degree in journalism from Columbia University.Theron often covers Warren Buffett, Michael Burry, Jeremy Grantham and other top-flight investors. He also writes about the world's wealthiest people and shares financial advice from all manner of rich and successful people.Email Theron at [email protected] and follow him on X @theron_mohamed.Expertise
- Corporate finance
- Stocks and investing
- Wealth and philanthropy
- Business history
- US economy
- Warren Buffett and Berkshire Hathaway
Popular articlesAl Pacino says he went from $50 million to broke, joining a long list of stars who've experienced money troublesAn oil tycoon sold his company for $26 billion this year — but died before the deal closedWarren Buffett drinks 5 cans of Coke a day — here's why he switched from Pepsi after nearly 50 yearsMeet the 16 people in the $100 billion club — who are jointly worth more than Amazon or Google'Big Short' investor Michael Burry kept quiet, piled into China tech, and won big with a stock bet in 2024Bill Gates' former assistant is worth $154 billion — and could soon be richer than the Microsoft cofounderHoward Schultz talked about Steve Jobs, trademarking the latte, and Starbucks' problems in a marathon interviewWarren Buffett just made a rare trip to Tokyo. Here's the story of a disastrous sushi dinner that made him swear off Japanese food forever.21 states where recession bells are ringing after unemployment jumpsWarren Buffett is building the Noah's Ark of rainy-day funds. Here's why he's stacked up more than $300 billion.The 'Shark Tank' star Kevin O'Leary warns couples not to combine finances: 'I don't care how in love you are'The Waltons are once again the world's wealthiest family, beating out Gulf royalty and fashion dynasties
