> You can effectively buy a $200,000 asset with only putting $40,000 (or even less) down. If you get a 20% appreciation in the asset over a period of time you've doubled your money.
If the price goes down 20% over a period of time, you've wiped out your investment. Free leverage is neutral to expected value, and leverage with interest has a negative impact on expected value.
The real value in residential real estate is the fact that the US government is prepared to spend unlimited amounts of money to make sure you don't lose your shirt. Because something something yeoman farmers. However, that means there's also a unique risk to bear. Just as the goldbug needs a greater fool to want his shiny, so to the real estate owner needs a government in place that will continue to massively subsidize the individual ownership of residential real estate. The US government, today and for the last 7 years, has issued, bought, or guaranteed the lion's share of residential mortgages. Take that away and prices fall dramatically.
