More of a person's compensation is coming from stock options instead of bonuses and salary increases. Forrest Pafenberg, director of real estate finance research for the National Association of Realtors, concedes the dramatic asset shift represents greater access to investment vehicles, but not at the expense of housing. A home remains shelter both from the elements and less robust economies. Housing has performed well over 20 to 25 years, easily outpacing inflation. It would be stupid to take the value out of a home for day trading.
Diversification is best Perhaps, but market corrections in the housing market can be disastrous.
Now booming, Silicon Valley recovered from a particularly nasty recession that cost some homeowners as much as 40 percent of the value of their home. Those home owners could have better weathered the storm with a cache of stock market investments to balance their portfolios. Ask anyone who bought in the peak of 1989 and had to sell in the early 1990s. Their losses were magnified by the fact that you had a leveraged investment. You lost not only your 20 percent down payment, but all the transaction costs to buy and to sell.