This analysis relies on someone to have a mortgage that takes 100% of their salary every month. The general rule was don't buy a house over 3x your annual pre-tax salary. I think it's moved up past that in most places though. Either way, don't buy so much house you can't afford food. I would think that goes without saying.
>Moreover if the fear is your portfolio losing value, buying a house doesn't really mitigate that. Sure, you might still have a house at the end of the day, but that's cold comfort if you paid $2M for a bay area house that subsequently saw its value tank (eg. something like Detroit).
This analysis is an edge case and in no way represents the norm. I'm not sure of any area that has gone from Bay Area prices to Detroit prices in a single lifetime.
>Even in some sort of apocalypse scenario a house isn't obviously better than stocks, because the whole concept of owning a house relies on some sort of functioning legal system.
Another crazy edge case. It's saying don't buy a house because an asteroid might hit. I'm pretty sure that newly non-functioning legal system wouldn't protect your stock portfolio either. If it comes to that, best to invest in bullets and whiskey.
>On the other hand there are very real problems with investing in "bricks / house". It has historical under-performed stocks.
Include paying rent in your analysis comparing it with stocks, particularly after you pay it off. You're sinking $X into a rental property with zero return and zero equity gained. I don't have to pay $2000 to the mortgage ever again and I have an asset that has more than doubled in 20 years, and a place to live that is essentially rent/mortgage free for life. That's a lot of dividends comparatively. Also, rents go up, mortgage payments typically don't, so factor inflation in your rent analysis.
>Moreover a single house provides poor diversification compared to a basket of stocks and its performance is tied to the economic health of your local area.
You shouldn't ever put all your money in stocks. Putting money in real estate, bonds, CDs, cash, etc. is the definition of diversification.
>If you lose your job, there's a good chance that your house won't fetch a high price.
Housing prices are unrelated to an individual losing their job. If you lose your job and haven't saved up enough runway, you could default on your mortgage. You could also not pay your rent. You get kicked out either way, but the bank should cut you a check for the equity you have remaining, minus whatever fees they conjure up.
>All of this makes for a poor risk adjusted return, and it's unclear how "has value to you" counters this.
All of your points were based on invalid assumptions, edge cases, or are irrelevant when compared to paying rent. Buying a house is a long game.