If you bought a San Francisco house with a mortgage when the city’s housing market bottomed out in 2011, chances are it has paid off better than a slew of all-cash investments ranging from Facebook stock to gold.
The cash return on a house bought with a 20% down payment in 2011 more than quadrupled by 2016, according to Paragon Real Estate Group, which published the comparison on Thursday as part of its monthly market report.
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To calculate, the brokerage looked at the median cost of a house in San Francisco in 2011, roughly $660,000, and determined that a 20% down payment plus closing costs put a buyer’s initial cash investment at roughly $152,000. If sold today at the median house price—now $1.095 million—net proceeds after taxes would equal $667,000. That’s a cash return of 339%, according to Paragon.
That’s not to say it was a bad decision to invest in Silicon Valley, either.
By 2016, you would have doubled your money on a share of Apple stock purchased in 2011. A share of Google (Alphabet) grew 163% in that same time. And if you bought all-cash shares of Facebook during its 2012 initial public offering, you would have seen a 174% return, according to Paragon’s analysis.
The comparison is a "somewhat lighthearted, but we believe accurate, look at how various 2011 investments would have played out through 2016," Patrick Carlisle, Paragon’s chief market analyst, wrote in the report.
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As for other assets, you have yet to double your 2011 investment if you bought a diversified index like the S&P 500, which grew 76% between 2011 and 2016. The Shanghai Index got you a pretty pitiful 9% return.
Facebook and Google significantly outperformed San Francisco houses if buyers paid all cash for the home in 2011. In that case, without the benefit of leverage, a house buyer hadn’t quite doubled their money by 2016. The asset performed better than the S&P 500, but not quite as well as Apple stock.
"If you bought gold or soybeans in 2011, you really should have sold them a couple years ago at the height of the commodity price boom," Mr. Carlisle said. By 2016, you would have lost roughly 18% on gold, and a whopping 23% on soybeans.