Ray Dalio Says Avoid Real Estate — Here’s Why He’s Wrong

Ray Dalio has been sounding the alarm lately. His message? Real estate isn’t worth the risk. Rising interest rates, taxes, and illiquidity make it a poor investment, he argues — and investors should stay away.

On paper, his caution might sound convincing. After all, the S&P 500 has outperformed housing in the last two years. But short-term returns don’t tell the whole story. The fact is, real estate has created more millionaires than any other asset class in America — and the ultra-wealthy know it. From billionaires using cash-out refinances to institutional giants like Blackstone pouring billions into single-family rentals, the richest players continue to double down on property for one reason: it works.

Real estate offers advantages you simply can’t replicate in the stock market: leverage, tax breaks, cashflow, appreciation, and a hedge against inflation. It’s not just about numbers on a spreadsheet — it’s about building tangible, generational wealth.

And that’s why Dalio’s three main criticisms — interest-rate sensitivity, taxation, and illiquidity — fall flat when you look at how real estate really works for everyday buyers and long-term investors alike.

Interest Rates: Dalio’s Critique vs. Reality

Dalio argues that real estate is too sensitive to interest rates — that when borrowing costs rise, property values suffer more than they benefit from inflation. On the surface, that sounds logical: higher mortgage payments can dampen demand.

But here’s where he’s wrong. Yes, mortgage rates are higher than they were a few years ago. But interest rates are cyclical — equity is permanent. Homebuyers in the 1980s paid double-digit rates and still built fortunes as property values doubled and tripled.

In fact, the average home price in the US has still gone up since 2022 while rates have been around 7% because demand continues to outpace supply in many parts of the country, such as South Florida, New Jersey, and Connecticut. Prices did fall in overheated markets like Austin, Nashville, and Phoenix where ultra-low rates lured investors and homebuilders to overproduce. As rates climbed, investor demand dried up and companies like Opendoor added to the oversupply by dumping inventory — a dynamic that was specific to those hot spots, not the national market.

The rate you buy with today is not the rate you’re stuck with forever. Refinancing is always an option. What isn’t negotiable is the purchase price of a home. In many Texas markets, like Austin, Houston, and San Antonio, prices have cooled and sellers are offering concessions. Buying now means locking in value while inventory is high and competition is low — and refinancing later when rates fall.

“Easily Taxed”: Why Real Estate Is a Tax Shelter, Not a Burden

Dalio calls real estate “easy to tax.” But the reality is the tax code in the United States is written to reward homeowners and investors.

• No capital gains tax on primary residences: Homeowners can exclude up to $500,000 of profit (for couples) when they sell their primary residence. That’s tax-free wealth creation — something you don’t get with stocks, crypto, or bonds.  And while this is not enacted yet, there may soon be no cap at all on the amount of home-sale gains you can shield from taxes — thanks to proposals from MJT and President Trump that could expand these benefits. (See our article on no tax on home sales for details.)

• Cash-out refinances: Billionaires and everyday homeowners alike use this strategy. Instead of selling, they pull out equity through a refinance — and borrowed money isn’t taxable. This is one of the quiet secrets behind many fortunes.

• Deductions and depreciation: For investors, mortgage interest and depreciation create even more tax shields.

Far from being overtaxed, real estate is one of the most tax-advantaged investments you can own. even further.

Illiquidity: A Flaw or a Feature?

Another critique is that real estate is “nailed down” — you can’t move money in and out easily. But it’s not always as illiquid as critics claim. Buying smart means selling easy: if you choose a well-located home with strong features and amenities, it can often sell quickly. On the other hand, chasing a so-called deal in a less desirable area or a property with major issues can make it harder to liquidate. Location and quality matter — the right house in the right neighborhood will almost always attract buyers.

Liquidity for real estate might be overrated when it comes to real estate. It tempts investors to sell at the wrong time. Real estate forces discipline. You can’t panic-sell your house during a downturn the way you might dump your stock portfolio. Instead, you ride through cycles — all while your property appreciates and generates rental income if you hold it as an investment. And if you do need cash along the way, you don’t always have to sell — homeowners can often access their equity in less than 30 days through a HELOC or cash-out refinance, giving them flexibility without giving up ownership.

And for those who do want liquidity? Modern platforms like REITs, crowdfunding, and fractional ownership allow exposure to real estate without direct ownership headaches.

The Power of Leverage: Multiplying Wealth the Smart Way

What sets real estate apart isn’t just appreciation — it’s leverage. This is where the game changes.

If you put $100,000 into stocks, you own $100,000 worth of stocks. But put that same $100,000 into real estate with a 20% down payment, and you control a $500,000 property. As that home appreciates, you benefit from the full value, not just your initial cash.

This is the foundation of generational wealth. As we break down in our article on leverage, real estate uniquely lets you use borrowed money to accelerate returns — and unlike margin investing in stocks, mortgage leverage is stable, common, and protected.

And leverage isn’t limited to mortgages. Buying real estate by leveraging your assets without paying cash is possible through asset depletion mortgages, which allow you to qualify using your portfolio rather than income. For crypto investors, crypto-backed mortgages offer a way to buy property without liquidating holdings and triggering capital gains.

These tools expand the reach of real estate wealth-building far beyond traditional borrowers.

Why Real Estate Creates More Millionaires Than Any Other Asset

The data doesn’t lie: real estate has created more American millionaires than any other investment class. Families who bought modest homes in the 1990s are sitting on hundreds of thousands in equity today.

Even the biggest players know it. Institutional investors like Blackstone and Invitation Homes have poured billions into housing — not because they like fixing leaky faucets, but because they know the math works.

When you own real estate, you’re on the same side of the trade as the wealthiest investors in the world.

Housing: Both Inflation Hedge and Lifestyle Asset

Real estate does double duty. It’s an inflation hedge — property values and rents typically rise as the cost of living does. But it’s also a lifestyle asset. Unlike a stock certificate, a home provides shelter, stability, and pride of ownership while it grows in value.

Renting may feel flexible, but it means you’re paying down someone else’s mortgage. Ownership means building your own equity every month.

Conclusion: Don’t Sit Out the Greatest Wealth Builder

Ray Dalio’s concerns are worth noting and considering when you're buying a home— but they’re the concerns of a billionaire who can't relate to how the average American lives. For most Americans, the path to wealth is simpler: buy real estate, hold it, and use leverage and tax strategies to your advantage.

Today’s market is favorable for buyers: more inventory, more negotiating power, and sellers offering concessions. Real estate remains the clearest path to financial security and generational wealth.

Work with a mortgage broker who understands how to structure financing — from traditional loans to asset depletion and crypto-backed strategies — and you’ll see why buying a home is still one of the smartest moves you can make.