Has Been Stein Seen the Light?

Somebody forwarded to me an article by Ben Stein recently, and I noticed a stark contrast to the tone of the last Ben Stein article I recall reading back in January. I remember thinking when I read the first article that he was missing a key component of understanding housing as an investment. I assumed that he was not ignorant, but rather opted to deliver a streamlined and simplified message to his audience.

In the first article, Stein misses the concept of leverage when discussing return on housing. With leverage, you have to shift the focus to return on investment, not return on asset. I know he knows this, but now you can get an idea of why I had not - until the other day - read another of his articles.

So in the recent article, his tune changes a bit. He isn't as suggestively sour on the financial aspects of house-as-investment, and focuses on pre-paying mortgage debt. But comparing the two pieces provides a great example of the fact that the decision to 'buy the house' and the decision to 'pay off the mortgage' need to be looked at as wholly separate investment decisions. They are totally unrelated. Stein seems ho-hum about buying a house for financial reasons (again, ignores the leverage component), but once you own the home, he suggests liquidity is more important than retiring debt.

I like the direction he is heading in...

John C. Glynn, CMPS

Real Estate Finance & Mortgage Planning

San Francisco Bay Area