Thursday, November 15, 2007

Yun Makes Misleading Investment Comparison

“Home buyers in it for the long haul nearly always come out ahead in building wealth. Given the leverage in purchasing a home, the average return on a 5 percent downpayment over 10 years is usually three to five times greater than stock market returns,” he said. “When people compare investment returns, they often overlook the power of leverage in the housing market.”

Yun said a $10,000 downpayment on a median-priced home, at a typical appreciation rate of 5 percent, would be worth $110,000 after 10 years. That same amount invested in the stock market for the same amount of time, assuming 10 percent annual appreciation, would be worth $23,600. “That’s why housing is the best long-term investment most families ever make – the longer you own, the better your investment,” he said. ( 11/12/07)

Yun you are intentionally misleading. Stocks don't require monthly mortgage payments, yearly taxes or maintenance costs. Housing units do. Lawrence 'paid misleader' Yun cannot and should not be trusted.


bostonbubble said...

He also should have added: 1) past performance does not guarantee future results and 2) leverage also amplifies risk.

Josette M. Berroteran said...

Lawrence Yun is absolutely right in a normal appreciating housing market. However, the U.S. is at the PEAK of a steep declining housing market. I know he just got promoted and I’m very happy for him. Nevertheless, he owes the public, as Chief Economist, to be OBJECTIVE and show more character!

L. Yun will gain more overall respect for himself and the NAR if he starts forecasting accurate data. Only time will determined how L. Yun and the NAR will be remembered in our history books?

Josette M. Berroteran said...

The Essence of Character:

Your true character is revealed by the clarity of your convictions, the choices you make, and the promises you keep. Hold strongly to your principles and refuse to follow the currents of convenience. What you say and do defines who you are, and who you are… YOU are forever!

Anonymous said...

L. Yun - I love it! The allusion to L. Ron Hubbard is quite apropos. They both made a living brainwashing people.

DaveO said...

What if instead of putting $10,000 down, I put $100,000 down? Assuming the house increases by $100,000 in ten years by Yun's example (which is in a normal market, not today's screwed-up market), you'd have $200,000 in equity 10 years later, which is only a 100% return on the original $100,000.

Better yet, as a reflection of reality now, I put down $10,000 on a house in 2005 but the house is worth $50,000 less in 2015 (which is totally possible). Then I have a -400% return on the original $10,000. Leverage works both ways, and considering the unsustainable rise in prices in bubble areas, prices are going to come down and leverage will suck on the way down.