I was recently talking to my friend about how houses can be bought on 80% or 90% "margin," with fixed interest rates, in effect, being a giant option on the US dollar, favorable to the real estate owner in times of inflation, when real interest rates can be negative. He thought that was how most people who make money on real estate make money on real estate, although few talk about it this way.

It's an interesting point. If stocks and real estate borrowing were on equal terms (mortgage ~ margin) and both were able to refinance to take advantage of declining rates, stocks would out-perform. But they are not the same. With high loan/value risk is borne mostly by the lender whereas upside goes to the borrower. Even more so now with mandated principal write-downs in the cards.

More generally, what fraction of the very wealthy got that way without taking great advantage of credit-risk differences between lenders and borrowers?


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