[quote=mixxalot]True and same holds water in real estate. If the market turns cold you can lose that 20% down payment quickly as we saw in the last real estate downturn.

Research is your friend. I read morningstar and the different investment rags. I dislike 401k because they limit fund choices.[/quote]

You can’t live in your stocks.

Think of a primary home as a mixed product.
1. Provides housing
2. Forces you to save
3. If your mortgage + operating cost is already close to rents, the extra mortgage interest deduction (and property tax deduction if you aren’t hitting AMT), is just extra icing on the cake.
4. You don’t have to deal with a pain in the ass landlord or wondering if he’s going to jack up rent next month, or if he’s going to sell the house and make you move.

Your 20% decline in stock is most likely immediate (unless you are one of those people that like to speculate in the short term, and then when you take a 20% bath, your short term speculating suddenly becomes a long term buy and hold investment 🙂 )

Your 20% decline in housing is spread out over the utility of your use of a house as a primary. Also, over a long period of time, if you can cash flow the thing as a rental, even better.

I’m not suggesting you go out a buy a house right now, but I’ll agree renting for an extended period of time in SoCal is a losing proposition with the way rents have been and are going. If you think rents are significantly cheaper, you’re probably not doing an apples to apples comparison. You’re probably pricing a rental house that is less than the house you’re looking to buy. The problem with the rental markets these days is that there are so many people that cannot quality/afford to own, and lending standards are still pretty tight, and the inventory in San Diego is not exactly keeping up, since the majority of the new homes being built are the more expensive $800k+homes.