Why One Real Estate Millionaire Is Sitting Out the Market
Graham Stephan, a successful real estate investor and YouTuber, recently urged caution with buying homes. In his video “Do NOT Buy A House! (Warren Buffett’s Final Warning),” he explained that today’s prices and mortgage rates make real estate deals unprofitable. Since 2020, home prices have jumped nearly 24%, and mortgage rates have risen from 2.7% to around 7%. As a result, new purchases often yield little to no cash flow.
Stephan says his current rentals still work only because he bought them years ago with low-rate mortgages. “At today’s prices, none of this would be feasible,” he said. Instead, he’s now investing in index funds, citing lower hassle and better returns. With the S&P 500 up over 60% since 2021, he argues stocks offer more value, flexibility, and liquidity compared to today’s tough housing market.
Stephan’s warning, paired with Buffett’s stance, is giving buyers reason to pause.
Why Buying Still Makes Sense for Investors and Homebuyers
While rising interest rates and high prices have narrowed margins, real estate still offers key advantages that stocks can’t replicate—especially when purchasing a primary residence or residential rentals.
Hedge Against Inflation: Real estate is a hard asset. Mortgage payments are fixed, but rents and property values tend to rise with and greater than inflation. Over time, you gain pricing power and equity growth that’s tangible and tax-advantaged.
Control & Forced Appreciation: Unlike index funds, you can add value to real estate through renovations, improved management, or better marketing. Especially with rentals, there’s room to boost NOI through hands-on strategy. Stocks don’t offer this control.
Depreciation & Tax Benefits: Depreciation shields rental income from taxes, and primary homeowners get capital gains exemptions (up to $250k/$500k) after two years of ownership. For higher-income earners, this can significantly outperform index fund tax efficiency.
Leverage & Wealth Building: With 20–25% down, you control 100% of the asset. Even modest appreciation delivers strong returns on invested capital (ROI), especially when paired with loan paydown from tenant rent. Stocks can’t be financed this way.
Lifestyle or Mission Fit: For owner-occupants, buying a home means stability, creative freedom, and long-term savings over rent. For small investors, buying locally provides a clear mission: improve housing, create community, and build lasting income.
Chilled Homebuyer Sentiment
Homebuyer confidence has taken a hit. According to recent surveys, only about 20% of consumers believe it’s a good time to buy a home—just slightly above the all-time low of 14% in late 2023. That means nearly 80% of Americans are hesitant to enter the market, largely due to record-high home prices and mortgage rates nearing 7%.
This caution is showing up in the data. Home sales in 2023 dropped to multi-decade lows, and over 75% of potential buyers say they’re waiting specifically for lower rates. As homes sit longer on the market and price cuts increase, the slowdown is reinforcing itself.
Investor sentiment is also shifting. A January 2025 Bankrate survey found more Americans now prefer stocks (27%) over real estate (24%) for long-term investing—a reversal from recent years. High entry costs and rate pressure have made real estate less appealing, while stocks offer more flexibility and easier access.
Cryptocurrency remains niche. Despite media hype, only 6% of respondents chose it as their top long-term investment, and over three-quarters said they aren’t comfortable with crypto. Even with growing interest in digital assets like Bitcoin, most Americans still favor the relative familiarity of stocks and real estate.
Residential Real Estate vs. Stocks vs. Bitcoin
With Buffett and Stephan favoring stocks over real estate—and crypto continuing to stir debate—it’s worth comparing how these three asset classes stack up today.
Residential Real Estate:
Housing is typically a slow-and-steady asset, historically appreciating around 4–5% per year. Its big advantage is stability—home prices don’t swing daily like stocks or crypto. Even during market volatility in 2022, home values dipped only slightly before resuming their climb. But that doesn’t make real estate risk-free. The 2008 crash saw values plunge 27%, and today’s high prices and interest rates limit short-term upside. Over-leveraged buyers could be exposed if the economy weakens.
Stocks:
The stock market offers higher long-term returns—around 10% annually on average—but with more volatility. The S&P 500 fell over 10% in just two days in April (due to the tariffs, of course). Stocks are also liquid and easy to diversify, which is why investors like Buffett prefer them. But investors must tolerate wild swings and avoid panic-selling during downturns. Real wealth is built by staying invested over the long haul.
Bitcoin (and Crypto):
Bitcoin delivers massive upside—but with extreme volatility. From $5K in 2020 to nearly $69K in 2021, then down 65% in 2022, then rebounding 50% in 2023, to 109k in January 2025—its price history is a rollercoaster. Institutional and governmental adoption underscores Bitcoin's transition from a volatile, speculative asset to a recognized store of value and strategic reserve. While volatility remains a characteristic of the cryptocurrency market, the growing integration of Bitcoin into corporate and national financial systems suggests a maturing asset class with increasing legitimacy.
