An argument I’ve always heard in favor of buying real estate is that it is subject to less volatility. Is this really true though? Theoretically, the housing index is less volatile but these are individual houses we are talking about. Versus a basket of stocks, each correlated but not completely with each other, surely individual real estate purchases are more risky?
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It's probably seen as less volatile because your real estate doesn't have daily price tag on it like a publicly traded stock does. Many large RE owners don't really know how much their properties are worth on a day to day basis.
Just because the direction has been "up" does not mean the behavior of the US housing market in the last 3 years hasn't been anything but volatile.
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