Michael Burry: Homes Return 4.5%, Lag Stocks Badly

Burry, who ran a hedge fund before pivoting to writing about his personal investments on Substack late last year, joins a line of high-profile stock advocates. Wharton professor Jeremy Siegel parsed over 200 years of market data for "Stocks for the Long Run" and found that U.S. stocks gained an average of 7% a year after inflation. Warren Buffett has touted stocks over cash and bonds, which he views as more vulnerable to inflation, and gold, which doesn't generate cash flows or pay dividends. Buffett has spoken positively about real estate over the years, he has noted transactions can be complex and stocks are much more liquid.

"Rich Dad Poor Dad" author Robert Kiyosaki has argued that a person's home is not an asset, it is a liability. Instead of generating income, it imposes costs such as mortgages, taxes, insurance, and maintenance.

The math Burry laid out reinforces a long-running debate about housing as an investment. For most Americans, a primary residence is the single largest purchase they will make. The 4.5% after-tax return Burry cited is roughly in line with long-term corporate bond yields, well below the equity market's historical returns. The gap matters for retirement planning: a family that put $100,000 into the S&P 500 in 2001 would have roughly $500,000 today. The same amount invested in a home, even with leverage, would have grown to about $240,000 at Burry's estimated return.

Burry's calculation includes maintenance costs, which many homeowners underestimate. The rule of thumb among financial planners is to budget 1% to 2% of the home's value annually for upkeep. On a $400,000 house, that is $4,000 to $8,000 a year, a drag that stocks do not carry.

Still, the utility argument carries weight. Homeownership offers stability, tax benefits from mortgage interest deductions, and a hedge against rent inflation. For many households, the non-financial returns outweigh the mediocre investment math.