There’s a Reason Margin Requirements are 50%.

If you want to borrow money from your stock broker to buy more stocks, he can only lend you one times as much stock as you already own. For example, if you have 100 shares of IBM and want to buy more, but don’t have the money, your broker can only lend you 100 more shares or less. Among the many reasons individuals are limited by the amount of times they are allowed to “leverage up” their investment in equities, is because the government decided, after the 1929 stock market crash, that some people often make detrimental investment decisions. Assuming that the government, in this particular case, was basically correct in their assessment of some people’s decision making abilities, it would seem that their still exist people, regardless of history, that cannot make rational decisions – poor decisions are universal and enduring. In other words, people have and will continue to make poor investment decisions. Although the government stepped in to limit the stupid decision making consequences associated with buying stocks, but not with real estate, that doesn’t mean stupid decision making consequences associated with buying real estate can’t exist.