“A recent Gallup poll shows that Americans now believe housing is the best long-term investment, beating out stocks, bonds, and gold. They might be right, only because the average stock investor does so poorly that a home may indeed be their best investment. But housing has historically been a terrible bet for people who think it will return more than inflation. To show you what I mean, I have to tell you about my visit to Yale economist Robert Shiller’s office a year ago.
Shiller — who won the Nobel Prize last year— is regarded as the world’s foremost housing expert. He has married historical data with deep insight into human psychology to offer some of the best housing analysis anyone’s ever produced. “If you look at the history of the housing market, it hasn’t been a good provider of capital gains. It is a provider of housing services,” he explained.
By that, he means a home gives you a place to live, a place to sleep, a place to store your stuff. But that’s it. Americans believed — and still believe — that the value of their home will increase above the rate of inflation. And that, Shiller says, is wrong. Debunking the notion that housing is a great investment is one of his favorite topics.”Capital gains have not even been positive. From 1890 to 1990, real inflation-corrected home prices were virtually unchanged.”
“Well, I think you have to reflect on the fact that it’s done it before. Home prices declined for the first half of the 20th century Read more »