Jerry - You said: "Let's use $300,000 as an example. So a homebuyer puts 20% of THEIR own money down on this $300,000 house, so that's $60,000. Based on the national average their home will appreciate at 6.8% or gain $20,400 in value. So the homeowner actually had a return on THEIR money of 34%." Forgive me but debt doesn't come free. You are not adding the cost of capital, interest + closing cost, to the $270,000. Furthermore, you can't calculate a return on equity until you net out operating expense. Your 34% ROE is misleading and incorrect. The estimated interest payment on that 260k would be $9,000 per year over 30 years (approximately). Now, you get a deduction for interest so your net interest cost is somewhere around $6,500 per year, on average. Then, add property tax (est. $10,000 / yr), add maintenance (est. $5,000 / yr) and you get what? a carrying cost of over 7% per year. In other words, the true return on equity is not that great. People buy homes because they want to own their piece of the world and as a means to long term forced savings. Point is once someone has to put down more than 10% as a downpayment, the economics get less compelling, fast. As a side note, if you are looking to purchase in a declining market, your equity would be wiped out if prices pulled back as little as 5% to 10% in a year, because the time it takes for housing prices to recover is much longer than marketable securities. Buy because you love the house and don't care about the return on investment as much but there are much better financial investments than housing today. One potential hedge would be to put the same money into housing stocks for 6 months and see what happens to home prices. If in fact the market believes that housing is nearing a bottom, that will be reflected first in housing stocks and you will have actually made money versus watching prices decline for another year before the correction is over.